Susan A. Coronel LTC Director America’s Health Insurance Plans What is LTC Insurance and Where is the Market Headed?

Overview  Status 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 Growing 10,000+ *NOTE: 2003 and 2004 figures are estimates. Source: AHIPLTC Market Surveys

LTC Insurance Products by Percentage of Policies Sold and Average Age of Buyer LTC product % of companies ( n =103) % of Policies Sold as of 12/02 % of Policies Sold in 2002 Avg Age of Buyer in 2002 Individual Employer-sponsored LTC as part of a life insurance policy 7 3 N/A Source: AHIPLTC Market Surveys

Claims Paid by LTC Insurance Insurers Paid as of December 31, 2002$8.4 billion Paid between January 1 and December 31, 2002$1.4 billion 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 Offered Source: AHIP LTC Market Surveys

Typical Coverage under LTC Insurance Policies Services Covered:  Nursing Home Care  Assisted Living Facility  Home Health Care  Alternate Care  Hospice Care  Respite Care Other Benefits Offered:  Bed Reservation  Care Coordination/ Management  Medical Equipment  Caregiver Training  Restoration Benefit Source: AHIP LTC Market Surveys

Typical Coverage under Long- Term Care Insurance Policies (cont’d)  Policy Type: Comprehensive integrated policies/ Facility only / Stand-Alone home health care  Daily Benefit Amounts: $50-$500  Benefit Periods: 1 year to lifetime coverage  Deductible Periods: days  Age limits for purchasing:  Limited pay policies: single premium/ 10-pay/ pay until 65  Waiver of Premium  30-Day Free Look Period  Inflation Protection Options  Nonforfeiture Benefit Options

Average Annual LTC Insurance Premiums AgeBaseWith 5% compounded inflation protection (IP) 40 $422$ $564$1, $1,337$2, $5,330$7,572 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 Source: AHIP LTC Market Surveys

Comparison of Using LTC Insurance vs. Out-of-Pocket Dollars to Pay for LTC Costs Scenario: 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 ½ 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? LTCi Premiums Paid for 35 Years (1) Benefits Payable Under LTCi Policy Actual 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 ½ year stay $877,335 in savings for LTCi policyholder 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

Benefits of LTC Insurance to Policyholders –Having 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 Caregivers –Family 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 Medicare –Long-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  President’s Proposal  Other LTC-related Bills –LTC Partnerships –IRAs and other vehicles –Others

Long-Term Care & Retirement Security Act Bill sponsors: Grassley-Graham and Johnson- Pomeroy Introduced in 105 th, 106 th,107 th and 108 th Congress; In 108 th Congress, about ¼ 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 Purchasers  4 Existing Partnerships (California, Connecticut, Indiana and New York) –Dollar for dollar protection –Total asset protection –Hybrid  Tightening Medicaid Eligibility Rules  Future Partnerships –National model –Simplicity –Reciprocity –Consumer Education

State LTC Initiatives  State Tax Incentives  State-sponsored LTC employer plans  Other innovative state initiatives

Other Possible Legislative Actions  Creating/enhancing LTC Education campaigns –Setting up multi-purpose LTC information centers –Using websites and clearinghouses  Promoting other vehicles for LTCI purchase –Health Savings Accounts; Reverse Mortgages –Others  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 LTCI Federal/State Innovative programs or demonstrations on LTC

Conclusions  The 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 Resources  HHS LTC Awareness Campaign – or call PLAN-LTCwww.ltcaware.info  Guides to LTC Insurance – available through the Federal Citizen Information Center by calling PUEBLO or  LTC Champions Network