Susan A. CoronelLTC DirectorAmericas Health Insurance PlansWhat is LTC Insurance and Where is the Market Headed?

OverviewStatus Report on Current LTC Insurance Marketplace

Benefits of LTC Insurance

Current Federal and State Proposals on LTC

Future Trends

Conclusions

The LTC Insurance Marketplace is Growing10,000+*NOTE: 2003 and 2004 figures are estimates.Source: AHIPLTC Market Surveys

LTC Insurance Products by Percentage of Policies Sold and Average Age of Buyer

Source: AHIPLTC Market Surveys

Claims Paid by LTC Insurance Insurers

Source: AHIP LTC Market Surveys

Average Annual Growth Rates in the LTC Insurance Marketplace Source: AHIP LTC Market Surveys

Number of Employer-Sponsored LTC Insurance Plans OfferedSource: AHIP LTC Market Surveys

Typical Coverage under LTC Insurance Policies

Services Covered:

Nursing Home CareAssisted Living FacilityHome Health CareAlternate CareHospice CareRespite Care

Other Benefits Offered:

Bed ReservationCare Coordination/ ManagementMedical EquipmentCaregiver TrainingRestoration Benefit

Source: AHIP LTC Market Surveys

Typical Coverage under Long-Term Care Insurance Policies (contd)Policy Type: Comprehensive integrated policies/ Facility only / Stand-Alone home health care Daily Benefit Amounts: $50-$500Benefit Periods: 1 year to lifetime coverageDeductible Periods: 0-365 daysAge limits for purchasing: 18-99Limited pay policies: single premium/ 10-pay/ pay until 65Waiver of Premium30-Day Free Look PeriodInflation Protection OptionsNonforfeiture Benefit Options

Average Annual LTC Insurance Premiums Note: Coverage is $150 daily benefit amount, four years of coverage, and a 90-day elimination period.*Reported by 11 of the 13 sellers identified as having sold 80 percent of all individual and group association LTC insurance policies in 2002.Source: AHIP LTC Market Surveys

AgeBaseWith 5% compounded inflation protection (IP)40$422$89050$564$1,13465$1,337$2,34679$5,330$7,572

Comparison of Using LTC Insurance vs. Out-of-Pocket Dollars to Pay for LTC CostsScenario: A 50-year old purchases a LTC insurance policy that covers $150/day, for 4 years of coverage, with 5% comp inflation protection. He pays $1200/year for this policy. When he turns 85, he goes to a nursing home for 2 years (average nursing home stay). How much would his nursing home stay cost? How does this compare to premiums he would have paid over 35 years?

Average annual premiums of $1,200 x 35 years Assuming current costs are $70,000/year and increases at annual 5% comp rate for 35 years

LTCi Premiums Paid for 35 Years (1)Benefits Payable Under LTCi PolicyActual Nursing Home Costs Policyholder Will Face* (2)Difference between LTCi Payments and Potential Out-of-Pocket Costs$42,000$788/day for 4 years or up to a total of $1,150,483 in benefits$367,734 per year or a total of $919,335 for 2 year stay$877,335 in savings for LTCi policyholder

Benefits of LTC Insurance to PolicyholdersHaving LTC insurance allows disabled elders to remain in their homes and delay or avoid using institutional services.

LTC insurance reduces the out-of-pocket expenses average savings of $60,000 and $75,000 for nursing homes and can total more than $100,000 for assisted living costs.

Buying this insurance makes these purchasers feel more secure about their future and better about the way they plan to secure that future. These purchasers also feel that they have taken appropriate steps to protect their spouses.

Benefits of LTC Insurance to CaregiversFamily caregivers suffer less stress if the disabled elder they are caring for has private long-term care insurance.

Working age family caregivers double their chances of remaining in the workforce if the disabled elder they are caring for has private long-term care insurance. These caregivers also experience significantly fewer work disruptions and social stresses.

Benefits of LTC Insurance to Medicaid and MedicareLong-term care insurance reduces state and federal Medicaid expenditures and federal Medicare home health expenditures. Medicaid savings are projected to total about $5,000 per policyholder and Medicare savings are estimated to exceed $1,600 per policyholder.

Aggregate savings to Medicare and Medicaid for the current number of policyholders are estimated at about $30 billion. These savings will grow as more people acquire policies and the average age of purchasers continues to decline.

Federal Long-Term Care Legislative Activity Long-Term Care & Retirement Security Act

Ronald Reagan Alzheimer's Act

Presidents Proposal

Other LTC-related BillsLTC Partnerships IRAs and other vehiclesOthers

Long-Term Care & Retirement Security Act

Bill sponsors: Grassley-Graham and Johnson-Pomeroy

Introduced in 105th, 106th ,107th and 108th Congress; In 108th Congress, about of Senate sponsored and over 130 House sponsors.

Phase in an above-the-line deduction for Qualified LTC insurance premiums and LTC coverage under cafeteria plans/FSA

LTC caregiver tax credit up to $3,000

Updates HIPAA consumer protection standards

LTC Partnerships - Providing Medicaid Protection for LTCI Purchasers4 Existing Partnerships (California, Connecticut, Indiana and New York)Dollar for dollar protectionTotal asset protectionHybrid

Tightening Medicaid Eligibility Rules

Future PartnershipsNational modelSimplicityReciprocityConsumer Education

State LTC InitiativesState Tax Incentives State-sponsored LTC employer plansOther innovative state initiatives

Other Possible Legislative ActionsCreating/enhancing LTC Education campaignsSetting up multi-purpose LTC information centers Using websites and clearinghouses

Promoting other vehicles for LTCI purchaseHealth Savings Accounts; Reverse MortgagesOthers

Combination of different approaches

Establishment on new and innovative Medicaid approaches/demonstrations

Future Market Trends Awareness of LTC issues and LTC insurance will increase but there will remain the need for more LTC consumer education efforts

Partnerships between public and private sectors will increase.

Federal/State legislative proposals to encourage LTCIFederal/State Innovative programs or demonstrations on LTC

ConclusionsThe LTC insurance market is growing. LTC insurance policies offered today are comprehensive and provide good value.

LTC insurance benefits policyholders, caregivers and state and federal budgets.

Demographics and market trends will inevitably look to private sector for help in financing LTC. Future LTC insurance products must continue to be flexible and consumer-friendly.

Media will play a key role in expanding the LTC market and encouraging savings for LTC.

Additional ResourcesHHS LTC Awareness Campaign www.ltcaware.info or call 1-866-PLAN-LTC

Guides to LTC Insurance available through the Federal Citizen Information Center by calling 1-888-8 PUEBLO or www.ahip.org

LTC Champions Network www.ltcchampions.org

Benefits to Policyholders

Having long-term care insurance allows disabled elders to remain in their homes and delay or avoid using institutional services. Approximately half of claimants and family caregivers interviewed by trained nurses and social workers said that in the absence of their long-term care insurance benefits, the claimants would not be able to remain in their homes and would have to seek institutional alternatives.

Disabled elders with private long-term care insurance receive an average of 14 more hours of personal care per week than similarly disabled non-privately insured elders.Having a long-term care insurance policy reduces by 66 percent a persons chances of having to spend his or her assets to pay for nursing home care to the point of impoverishment and Medicaid eligibility.

Long-term care insurance reduces the out-of-pocket expenses of disabled elders. The average reduction in out-of-pocket nursing home costs is between $60,000 and $75,000 and can total more than $100,000 for assisted living costs.

Long-term care insurance provides important psychological benefits to purchasers under 65. According to our surveys, buying this insurance makes these purchasers feel more secure about their future and better about the way they plan to secure that future. These purchasers also feel that they have taken appropriate steps to protect their spouses.