The Face of Long-Term Care

Many predict that we are on the precipice of a renaissance in long-term care. Factors that drive this prediction include the hike in interest rates, states designing their own public programs based on taxing employees and employers, demographic shift to an older population, post-COVID focus on health and wellness and technology advances.

When we started in this insurance market segment in the early 2000s, about 140 companies offered long-term care insurance products. Today, there are about a dozen. Six offering traditional standalone products. And six offering some form of hybrid products – a combo of life or annuity products with a rider. Some of the riders address critical illness. Others are bona fide long-term care riders.

We’ve seen rate increases for new applicants in all product designs. We’ve seen rate increases for inforce policyholders from most traditional carriers on old legacy policies. And we’ve seen fluctuating costs both up and down for hybrid products. The industry has been fluid. Interest rates contribute to the ups and downs.

There are about 13 states that are in some stage of designing their own long-term care programs following Washington State’s lead. That state’s program is now set to roll out on July 1, 2023. It has had setbacks. There was such an avalanche of applications to avoid the impending taxation that most insurance carriers suspended sales in the state until after the imposed deadline. California and Minnesota are next up.

For years industry pundits, think tanks, and other institutions have pronounced that the long-term care challenge can only be met through a combination of public and private programs. Those with private insurance will be better able to afford quality care than those relying on public programs. Nothing new here. Hopefully, other states will design better programs and involve industry leaders instead of relying on politicians with no long-term care experience.

Isn’t it interesting that many states designing their own programs don’t allow a deduction or credit for LTC insurance premiums on state taxes? There is a significant disconnect between what consumers want and reality. Where are the incentives to consumers?

Additionally, states have not integrated public and private services that could lower costs. Services like Area Agency on Aging are not well-known in many communities.

We think the biggest competitor to long-term care expense planning is Medicaid. The government will take care of us. But with Medicaid being the fastest growing line item on most states’ budgets, states are trying their hand at designing new programs.

A solution might be to allow 100% of premiums to be tax deductible on state and federal taxes. This would probably save states tons of Medicaid money in the end. Another solution could be to allow qualified funds to fund premiums without penalties and taxes. SECURE 2.0 is a start but doesn’t go far enough. Where are the incentives to consumers?

We already have a caregiver shortage. We’re an aging population. As baby boomers grow older, more and more will need care. And more and more caregivers will be needed. Here we have a classic economic equation – supply and demand. Wages must increase along with the importance of valuing caregiving. 

Women become the default caregivers. Figures from 2021 indicate 38 million women were caregivers and provided five years or more on average. Unpaid family caregivers’ economic value was estimated at $600 billion. And involuntary turnover due to caregiving affects organizations in hiring and retaining talent.

There are only four kinds of people in the world those who have been caregivers, those who are caregivers, those who will be caregivers, and those who will need caregivers. – Rosalyn Carter

Even with the increased focus on health and wellness following the pandemic, only 10% of Americans aged 50 and older own long-term care insurance.

Perhaps one of the most interesting developments is the use of technology to modernize some areas of LTC and increase efficiency. For example, ChatGPT, Fitbit, and ElliQ. New customized strategies for aging are offered through Assured Allies that integrate science, technology, human touch, and financial innovation.

We might be on the precipice of new interest, options and innovation in long-term care, but the need for long-term care expense planning remains an integral component of financial planning.