LTC market will face ‘greater strain.’ Are solutions already at hand?
The long-term care issue is receiving plenty of attention – both from the explosive growth of LTC riders attached to life insurance, as well as several state and federal proposals.
Recenlty, the Senior Issues Task Force met to discuss long-term care trends, issues and long-term prognosis. The task force – a National Association of Insurance Commissioners’ group – is in information-gathering mode, members said.
The task force heard presentations from Bonnie Burns, training and policy specialist with California Health Advocates, and Steve Schoonveld, consultant with GCG Consultants.
“One of my concerns about these products is that the underlying life insurance product that has these benefits is often unclear as to how these benefits are integrated,” Burns said. “If there’s a rider or some way that the internal benefits in these policies trigger long-term care benefits, it isn’t clear to consumers how that happens, or how those benefits interact with each other.”
Booming hybrid sales
Sales of life policies with long-term care riders now comprise about a quarter of all life insurance sales. These hybrid policies have replace traditional LTC-only insurance to a large degree.
Twenty-seven percent of consumers said that a standalone LTC insurance policy was too expensive, LIMRA found, with life combination products a more attractive option. Over one quarter (26%) of American consumers would be extremely or very likely to consider purchasing life/LTC products, LIMRA found in its 2024 Insurance Barometer study, up from 19% in 2019.
The survey showed that 39% of millennials are very likely to consider buying a life combination product compared to 27% of Gen X and 17% of baby boomers.
Retirees who do not have LTC benefits can either rely on Medicare or self-fund any nursing home needs. For those who are not wealthy, it can mean a roll of the dice.
The baby boomer generation will begin turning 80 next year and the 2030s will bring a substantial demand for long-term care, Burns said. They will be followed by Gen X and millennials in the following decade, she added.
“The size of these combined generations will place even greater strain on what is today, an inadequate, disparate, unorganized way of getting and paying for care,” Burns said. “State Medicaid programs are rapidly feeling the effects of reduced funding, a growing worker shortage and an increased demand for care.”
Public-private partnerships needed
Task force members discussed the need for more public-private partnerships and innovative solutions to LTC needs. Burns and Schoonveld discussed the wide range and state and federal efforts to address the LTC issue.
Seventeen states are at some stage of a master plan on aging, Burns noted, of which long-term care is addressed. Likewise, several states have different ideas in different stages for a state LTC benefit. Established in 2019, the WA Cares program is up and running in Washington State and serving as a pilot program of sorts.
WA Cares is funded by a payroll tax of 0.58% on employee wages, which began in July 2023. The tax applies to all full-time, part-time, and temporary workers in Washington, with some exemptions. Self-employed individuals can choose to opt in.
Beginning in July 2026, eligible individuals can access a lifetime benefit of up to $36,500 (adjusted annually for inflation) to help pay for LTC services.
WISH for LT care
A bipartisan bill in the House of Representatives shows promise for creating a national LTC benefit, Schoonveld said.
Reps. Tom Suozzi, D-N.Y., and John Moolenaar, R-Mich., have reintroduced the Well-Being Insurance for Seniors to be at Home (WISH) Act to address the issue. The bill would allow Social Security recipients to get a new benefit specifically to pay for LTC costs at home.
WISH would create a trust fund to pay benefits a brief waiting period. Supporters say WISH would strengthen the private insurance market, which would provide coverage during the one-to-five-year waiting period, while also relieving financial stress on Medicaid.
“When you get that continuum of care across the care episode, you get a better shot of keeping that individual in a safe place in their home,” Schoonveld said. “And then the WISH program could save, and the Medicaid program thereafter can save as well.”
As these developments accelerate, the NAIC and the task force is the perfect place to hold a running dialogue so the best results are shared and spread across the states, Burns said.
“The need for long-term care is growing at an unprecedented pace, and the demand for care and caregivers will soon outpace the ability of families to provide that care,” she said. “I urge the Senior Issues Task Force to hold an interim meeting to discuss various state strategies and proposals for financing this kind of care.”
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