Every day between now and 2029 an estimated 8,000 to 10,000 Americans will turn 65. Of those individuals, 70% will need some form of Long Term Care (LTC). Out of these expected costs, Medicaid and Medicare are paying 70% of the overall costs, individuals are paying 23% out of their own pockets, while LTC is only paying around 3%. Medicare does provide individuals with 100 days’ lifetime coverage in a Skilled Nursing Facility, while Medicaid, the largest payer covering nearly half of the Long Term Care costs, requires individuals to spend down the bulk of their assets before providing any additional coverage. This means that outside of your home, you can’t have more than $2,000 to $3,000 in assets to qualify for LTC assistance under Medicaid. To reach this level, individuals will need to cover their costs until they have exhausted nearly all of their assets, which isn’t a place we want to imagine ourselves at that point in our life.
State and Federal governments have been looking for ways to cut back on reliance of Medicaid for meaning LTC expenses are being pushed back to the individuals. That leaves a huge gap in LTC expenses. It seems as though our LTC needs may end up being a greater burden to our loved ones through either providing the care, asset depletion, or even through laws that require family members to bear the cost of Long Term Care expenses in certain circumstances. Calculate your LTC costs by using this calculator by GenWorth.
It’s clear that the need for this coverage is great.
However, this is not what we are seeing in the market right now. In 2015, there were only 100,000 LTC policies purchased. This means that, on average, individuals purchased LTC policies 10 days out of the year to cover their needs, leaving no policies were purchased on the remaining 355 days.
So what are LTC insurers doing to close this gap? What’s the market doing to help provide options to individuals looking to defray these future costs?
It appears that there has been a significant exodus of LTC insurers from the marketplace lately. Most recently John Hancock, one of the largest insurance provider of LTC coverage, stopped issuing new policies as of 12/1/2016. Other major LTC providers still remain in the market, but we are seeing significant premium increases of their policies, to scale back the number of policies sold. Carriers were also looking to reduce historical compounding from 5% down to 3% or less as interest rates had dropped so low.
To adjust to these market pressures, new products have seen a rise in popularity. These include Group LTC coverage, Life Insurance with a LTC rider, as well as annuities with LTC riders. As opposed to regular LTC insurance, these options can have many functions and often are less restrictive.
Another reason for the reduction in the number of LTC policies written over the past few years may have been due to consultants focusing on navigating the Affordable Care Act for their clients. Given the building need for LTC services, it is as important as ever for individuals to become “planners” for future needs down the road, before healthcare needs come into play! Also, some industry experts feel than individuals need to evaluate their LTC needs 2 or 3 times in their lives, not just one, as needs continue to change.
If you have questions about solutions for your employees’ Long Term Care needs, please reach out to your HCW consultant to discuss potential solutions.