The Current State of the Long-Term Care Insurance Market

Presented to:

Federal Advisory Committee on Insurance

U.S. Department of the Treasury

By 

Marc A. Cohen, Ph.D.1

February 22, 2018

1 Professor and Co-Director LeadingAge LTSS Center @UMass Boston and 

Research Director, Center for Consumer Engagement in Health Innovation 
Purpose

• Provide background on need for long-term services 

and supports (LTSS) and why insurance is appropriate 

way to address need

• Characterize the current market in terms of products, 

customers, insurers and financial performance

How did we get to where we are?

• Put forward ideas on how to increase role of private 

insurance and prospects for growth

2
The risk of needing assistance to perform two or more activities of 

daily living sometime after age 65 is significant

3

Source: Favreault & Dey (2015), Table 1 in Anne Tumlinson Innovations presented 

to SCAN Foundation, 2016 

https://www.thescanfoundation.org/sites/default/files/financing_longterm_care_chartpack_092016_final.pptx
The LTSS risk is highly skewed among those with a high need

4

Source: Ann Tumlinson Innovations based on Favreault & Dey (2015) Table 1. 

https://www.thescanfoundation.org/sites/default/files/financing_longterm_care_chartpack_092016_final.pptx

48%

27%

12%

14%
5

$91,100

$182,000

$138,000

$0

$40,000

$80,000

$120,000

$160,000

$200,000

Lifetime Expected

Costs for Males

Lifetime Expected

Costs for Females

Lifetime Expected

Costs

Excluding costs associated with family caregiving, 

someone turning age 65 today and needing care in the 

future is high (2015 dollars)

Source: ASPE Issue Brief on LTC Financing, July 2015, 

https://aspe.hhs.gov/basic-report/long-term-services-and-supportsolder-americans-risks-and-financing-research-brief
6

Because utilization is skewed, so too is the 

distribution of costs

Source: Favreault & Dey (2015), Table 5 in Anne Tumlinson Innovations 

presented to SCAN Foundation, 2016 

https://www.thescanfoundation.org/sites/default/files/financing_longterm_care_chartpack_092016_final.pptx
Medicaid and Families will pay the most for elders 

with significant needs

Medicaid, 

34%

Out of pocket , 

52%

Private Insurance, 

3% Other Public, 

11%

Medicaid Out of pocket Private Insurance Other Public

7

Source: Favreault and Dey, 2015. https://aspe.hhs.gov/basic-report/long-termservices-and-supports-older-americans-risks-and-financing-research-brief
Reliance on Medicaid financing is problematic

• Most who need care spend what little income and assets they have 

before accessing the social safety net (Medicaid)

 Obtaining eligibility through spend-down is threat to many individuals’ 

financial security

 Encourages some people to transfer or shift assets to obtain eligibility

• Waiting lists and access limits for home and community-based care

• Less flexibility in service provision

• States struggling with budget pressure

• Medicaid financing of LTSS is the fastest growing budgetary item for 

many state budgets

8
Reliance on Families alone is becoming more difficult

• Roughly 25 million of today’s seniors will need LTSS services (paid and unpaid) and 

total costs will exceed $2.5 trillion over next 10 years

• Family caregivers currently provide 37 billion hours of care at an economic value 

about $470 billion1 -- > 6x the amount paid by public payers

• The family caregiver network is experiencing unprecedented challenges due to:

 Smaller family size;

 The increasing employment mobility of children;

 Strains associated with “sandwich generation”

 Many elders currently have significant unmet need

 Number of people needing significant assistance will grow by 149% from 

6.3 million to 15.7 million in fifty years.

9 1 Also includes care to those less than age 65 with need
Leveraging Insurance: nature of LTSS risk suggests insurance, 

whether private, public, or a combination makes most sense

6.7 5.8 5.6 4.0 3.6

43.3

51.5

67.5

46.1

39.3

17.8 17.8

0

10

20

30

40

50

60

70

80

2015 2010 2005 2000 1995

Months of care

Year of Sale

Nursing Home Coverage

# Months covered by savings

# Months covered by insurance policy

Average length of claim for closed NH claims (2011)

10

Source, NAIC, 2016. 

http://www.naic.org/documents/cipr_current_study_160519_ltc_ins

urance.pdf
Current LTC Insurance Market
Current Industry Parameters (2015)

Parameters Values

Policies In-force (individual and group) 7.2 million

Earned Premiums $12.0 billion

New Claim Reserves $10.1 billion

Cumulative claims paid 1992-2012

Cumulative claims incurred 2013-2015

$75.6 billion

$26.8 billion

Number filing new claims 79,000

Number of In-force Claimants 268,000

Average Claim Reserve $127,000

Note: Number of inforce for life and annuity products with accelerated long-term

care benefits is about .5 million. 

Source: NAIC LTC Insurance Experience Reports for 2012 – 2015, LIMRA 2018.

12
Number of Individual and Group Insured Lives has been 

relatively flat since 2008

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015

1,704

3,697

2,601

4,130

4,497

5,612

6,404

6,894 7,115 7,186 7,360 7,251 7,149

13

Source: NAIC LTC Experience Reports 1993-2016
Annual Sales of Individual LTC Insurance Policies have been 

declining since 2002

380

500

420

609 600

698

754

362

300

283 253

254

129 104

91

0

200

400

600

800

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015 2016

Note: LifePlans analysis based on AHIP, LIMRA and LifePlans sales surveys, 

1990-2018. Beginning in 2009, LTC Partners data for annuitants included in 

counts.

14
Group sales declining more rapidly than individual sales

300 283

253 254

129

105

184

210 192

143

22 17

484 493

445

397

151

122

0

100

200

300

400

500

600

2006 2008 2010 2012 2014 2015

Individual Group Total

Note: Estimates based on AHIP, LIMRA and LifePlans sales data and analysis. 

Beginning in 2009, LTC Partners data for annuitants included in counts.

15
Bright spot: Combination products are growing in the market 

(thousands of policies in force)

72

191

229

265

305

347 336

200 213 219 225 230

235 244

0

100

200

300

400

2009 2010 2011 2012 2013 2014 2015

Individual Life and Annuity products with accelerated LTC

Group Certificates for Life and Annuity Products with Accelerated LTC Benefits

16

Sources: NAIC Long-term care Experience Exhibit Reports, 2010-2015 
17

$0.6 $0.6 $0.8 

$1.5 

$2.2 $2.4 

$2.6 

$2.4 

$3.1 

$3.6 

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

2007 2008 2009 2010* 2011 2012 2013 2014 2015 2016

Source: LIMRA’s 2013 Life-Combination Sales Survey 18. Premium is Total Premium 

(Recurring + Single Premium). 2010 first year to include Life-Chronic Illness riders. 

Life-combination product sales have grown significantly --

$3.6 billion in premium
Annuity-Long-Term Care Combination Products

(Sales dollars in millions)

$285 

$210 

$260 

$440 

$470 $480 

$0

$100

$200

$300

$400

$500

2011 2012 2013 2014 2015 2016

18

Source: LIMRA, 2018
Purchase Considerations by Product Type

Most important Reason for Purchase of 

Stand-Alone Policies

Primary Reasons for Individuals would 

consider Life/Combo Policies

Protect assets and leave an estate (36%) Benefits will be paid even if LTC expenses 

are not incurred (36%)

Guarantee Affordability of Services (23%) More economical use of current assets 

(36%)

Protect Living Standards (14%) Concern that LTC costs will deplete/exceed 

savings (35%) 

Avoid Dependence (13%) LTC Insurance on its own is too expensive 

(29%)

Other Reasons (13%) Can’t afford two separate policies (28%)

Will not receive sufficient support from 

public programs (24%)

Will not qualify for stand-alone LTC 

insurance (7%)

19

Source: LIMRA/LIFE Barometer Study 2016 for combination products and 

AHIP, 2017 for stand-alone policies
Younger, wealthier and employed individuals are buying stand-along policies

20

Characteristic 2015 2010 2005 2000 1995 1990

Average Age 61 59 61 65 69 68

%> 70 9% 23% 16% 40% 49% 42%

% Married 75% 69% 73% 70% 62% 68%

Median Income $109,781 $99,772 $62,500 $42,500 $30,000 $27,000 

% > $50,000 82% 77% 71% 42% 20% 21%

Median Assets $317,363 $291,884 $275,000 $225,000 $87,500 N.A.

% > $75,000 86% 82% 81% 77% 49% 53%

% College Educated 69% 71% 61% 47% 36% 33%

% Employed household 68% 69% 71% 35% 23% N.A.

Source: AHIP, 2017, https://www.ahip.org/who-buys-long-term-careinsurance
Policy Characteristics 2015 2010 2005 2000 1995 1990

Policy Type

Nursing Home Only 0% 1% 3% 14% 33% 63%

Nursing Home & Home Care 100% 95% 90% 77% 61% 37%

Daily Benefit Amount for NH 

Care $159 $153 $142 $109 $85 $72 

Daily Benefit Amount for Home 

Care $152 $152 $135 $106 $78 $36 

Nursing Home Only Elimination 

Period .......... 85 days 80 days 65 days 59 days 20 days

Integrated Policy Elimination 

Period 93 days 90 days 81 days 47 days 46 days --------

Nursing Home Benefit Duration 3.8 yrs. 4.8 yrs. 5.4 yrs. 5.5 yrs. 5.1 yrs. 5.6 yrs.

Partnership Policy 45% 28% N.A. N.A. N.A. N.A.

Inflation Protection 75% 74% 76% 41% 33% 40%

Annual Premium $2,772 $2,283 $1,918 $1,677 $1,505 $1,071

Characteristics of Individual LTC Policies Bought: 1990 -2015

21

Source: AHIP, 2017, https://www.ahip.org/who-buys-long-term-care-insurance
Premiums are rising, but largest increases for youngest and oldest

22

$919 $1,177 

$1,528 

$2,146 

$1,213 

$1,487 

$1,829 

$2,581 

$1,877 

$2,003 

$2,341 

$2,604 

$2,255 

$2,759 

$3,294 

$3,949 

$2,624

$3,255

$3,945

$5,241

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Age 55 to 64 Age 65 to 69 Age 70 to 74 Age 75+

1995 2000 2005 2010 2015

Source: AHIP, 2017, https://www.ahip.org/who-buys-long-term-care-insurance
The share of LTC sales to the middle market age 40-69 is declining

40%

4%

55%

31%

3%

66%

0%

25%

50%

75%

Middle Income Low Income Upper Income

2010 2015

23

Note: Low income <33% of income distribution; Middle income = 33% - 66%; Higher income = >66%

Source: LifePlans analysis of AHIP Buyer Data, 2011 and 2015 and Social Security 

Administration, Income of the Population Age 55 and Over 2010 and 2014. 

https://www.ssa.gov/policy/docs/statcomps/income_pop55/2014/sect03.pdf
Most LTC claimants are well served by companies when it 

comes to claims payments

• Data suggests that roughly 95% of all claims are paid.

• About four in five claimants (78%) found it easy to file a claim

• Greater than 90% felt policy benefits were meeting current care needs, 

were satisfied with the amount of coverage purchased, and 86% knew 

what their policy covered. 

• Majority of claimants felt that in absence of policy they would have to 

go with less care (71%) and rely more on family (64%).

• About 90% of claimants felt their policy enabled them to receive higher 

quality care.

24

Source: DHHS, 2008 https://aspe.hhs.gov/basic-report/private-long-term-careinsurance-following-admission-cohort-over-28-months-track-claim-experienceservice-use-and-transitions AHIP, 2016. https://www.ahip.org/wpcontent/uploads/2016/09/LifefePlans_LTC_2016_9.19.16.pdf
RECENT CHALLENGES AND 

OPPORTUNITIES 

25
Trends in factors affecting profitability have been very 

unfavorable throughout the decade

• Since 2000, all major determinants of premium and product 

profitability have been going in the wrong direction: 

 interest rates are significantly lower than what was priced for, 

 voluntary lapse rates are lower than for any other insurance product, 

 morbidity is somewhat worse than expected and 

 mortality is actually improving. 

• For these reasons, the prior decade saw a major exodus of 

companies from the market, as returns on the product have 

been significantly below expectation.

• Only a dozen or so companies still in market compared to 

over 100 in the year 2000.

26
Claims experience is deteriorating in recent years:

Industry Actual to Expected Annual Incurred Claims, 2009-2015

27

112% 111% 112% 110% 114%

122% 126%

0%

20%

40%

60%

80%

100%

120%

140%

2009 2010 2011 2012 2013 2014 2015

Source: NAIC Experience Reports, 2009-2015
Most policies are administered by companies no longer in 

market and they have less favorable claims experience

55% 53% 55%

115%

45% 47% 45%

93%

0%

25%

50%

75%

100%

125%

% of Policyholders % of Annual

Claims

Cumulative % of

Industry Earned

Premiums

Actual to

Expected Incurred

Claims (2009)

Companies no longer selling policies Companies still selling policies

28

Source: Analysis of 2009 and 2010 NAIC Experience Exhibit Reports
Why the private market is limited in its reach: 

Demand and Supply Issues

Demand: Consumer

• Lack of information/shrouded 

attributes

• Misperceptions about need, 

costs, and coverage 

• Myopia

• Consumer confusion/product 

complexity

• Mistrust of industry/contracts

Supply: Insurer

• Adverse selection

• High selling costs

• Inefficient risk-bearing: 

common shocks outside 

carrier control

• Uncertainty regarding 

regulatory approaches

• Distribution challenges

29

Source: Scan Foundation, 2013
Strategies to Increase role of private insurance

Lower Cost of Product Change Tastes for Product Induce Insurers back into the 

market

Product Design:

• Simplify/standardize 

products

• Index Premiums High 

deductible plans

Change in market design:

• Product and distribution 

partnerships with public 

payers, providers, 

health plans (MA plans, 

disability, savings plans, 

provider networks, 

health insurers.)

Allow greater product fundingflexibility:

• Move away from level 

funding

• Variable benefit for 

fixed premium design

• Continue to encourage 

combination products

Choice Architecture:

• Expanded employer 

role

• Active choice – opt 

outs

• Mandate Availability

Educational campaign and 

warnings

Provide companies with more 

certainty around rate relief 

regulatory policy and “scheduled 

rate reviews” 

Targeted subsidy Explore public-private 

insurance partnerships for 

risks private carriers 

unwilling to assume (e.g. 

catastrophic tail risk for 

public)

Government organized or 

sponsored reinsurance to 

minimize risks outside of carrier 

control

30
Summary

• The challenge of LTSS financing will only grow in the years ahead

• Given the nature of this risk moving the system to a welfare-based 

impoverishment basis to an insurance-based approach is optimal

• The private market has heretofore greatly underperformed

• A combination of actions to influence demand and supply can encourage 

further growth in the market

• Regulators have a key role to play in inducing carriers back into the 

market and assuring a resurgent market as do state and federal 

policymakers who need to examine new models for financing care

31