Long-Term Care Insurance Plans

Long Term Care Insurance Plans (LTCIPs) can cover the costs of long-term senior living needs.

• The LTCIP market has shrunk from roughly 100 insurers in 2004 to a dozen in 2020 (NAIC, 2022). Between 1990-2015, average premiums for LTCIPs tripled nationwide (NAIC, 2016).
  • The most likely users of these plans are those who are aware of LTCIPs and intend to leave an inheritance (Lin, 2016).
• Employer-sponsored insurance
  • Group insurance, such as employer-sponsored LTCIPs, can result in 5-10% savings on premiums (AALTCI, 2022).
  • The employer-funded LTCIP market shrank by 83% between 2002-2014 (Johnson, 2016; Cutler and Zeckhauser, 1998).
• Publicly-subsidized LTCIPs (NCSL, 2021)
  • WA law extends a public-option LTCIP to all workers (unless self-employed) with a lifetime maximum benefit of $36,500, and inflation protection for benefits based on the state consumer price index. Program costs are covered by a 0.6% payroll tax.
• Hybrid Plans: LTCIPs can be sold with life insurance in a single higher-premium plan, allowing the consumer flexibility to use funds that may go unused in either plan (NAIC, 2019).

Price caps or price setting: States can limit insurance costs by setting price caps (limit the maximum providers charge for services before reimbursement) or price setting (establish a fixed price for a service to receive reimbursement). While the effects of health insurance price caps, setting, and growth rates on medical insurance costs are well studied, similar studies of these factors on LTCIPs are lacking.

• Price caps that set the maximum charge for service between 160-250% of Medicare prices saved total system costs 5%, 10%, and 28% in OR, WA, and MT respectively (OR SOS, 2019; Sen, 2021; Schramm, 2021)
  • In some cases, caps or setting can cause providers to set higher prices for other services without caps or recommend higher price services to make up revenue (Chernew, 2021; Jacobson, 2010).
• Price setting of services at or slightly above a comparable insurance (such as Medicare) can reduce costs.
  • A 2021 study projected that if rates for service are set similar to Medicare, annual health spending would be $350 billion lower (Schwartz, 2021).

Pegged or capped growth rate: States can also limit the rate at which insurance premiums grow by pegging cost increases to the rate of inflation or by capping the growth in costs to a fixed percent. This can ensure that lifetime maximum benefits keep up with the rising cost of care.

• CA law requires LTCIPs to offer 5% inflation protection for a policy’s lifetime maximum benefit to match increased costs, which can increase premiums.
• In RI, health insurance growth caps pegged near the inflation rate reduced average patient spending by 8.1%. (Baum, 2019)
• Growth rate caps do not have flexibility should sudden changes (like the COVID-19 pandemic) change the cost of supplies (Chen, 2021).

Related Science Note:

• Affordability in Senior Living Communities

References

American Association for Long Term Care Insurance (2023) Group vs. Individual Long Term Care Insurance.  https://www.aaltci.org/long-term-care-insurance/learning-center/group-long-term-care-insurance.php

Assistant Secretary for Planning and Evaluation (2021) Medical Device Supply Chains: An Overview and Description of Challenges During the COVID-19 Pandemic. 2023.  https://aspe.hhs.gov/reports/medical-device-supply-chains

Baum, A, et al.   (2019) Health Care Spending Slowed After Rhode Island Applied Affordability Standards To Commercial Insurers Health Affairs. 38 (2):237-245. https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2018.05164

Brookings (2022) The future Of WA Cares: A response to Warshawsky.  https://www.brookings.edu/research/the-future-of-wa-cares-a-response-to-warshawsky/

California Department of Insurance (2014) Long Term Care Insurance. 2023.  http://www.insurance.ca.gov/01-consumers/105-type/95-guides/05-health/01-ltc/ltc-insurance.cfm

Chernew, M, Pany, MJ   (2021) Regulation of Health Care Prices: The Case for Backstop Price Caps in Commercial Health Care Markets JAMA. 325 (9):817-818. https://doi.org/10.1001/jama.2020.26821

Cossitt-Glesner, I (2021) Finding Long-Term Solutions for Long-Term Care. https://www.ncsl.org/research/health/finding-long-term-solutions-for-long-term-care.aspx

Cutler, D, Zeckhauser, RJ (1998) Adverse Selection in Health Insurance. National Bureau of Economic Research. https://www.nber.org/system/files/chapters/c9822/c9822.pdf

Jacobson, M, Earle, CC, Price, M, Newhouse, JP   (2010) How Medicare’s Payment Cuts For Cancer Chemotherapy Drugs Changed Patterns Of Treatment Health Affairs. 29 (7):1391-1399. https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2009.0563

Johnson, R (2016) Who Is Covered by Private Long-Term Care Insurance? Urban Institute. https://www.urban.org/sites/default/files/publication/83146/2000881-Who-Is-Covered-by-Private-Long-Term-Care-Insurance.pdf

Kaiser Family Foundation (2021) Limiting Private Insurance Reimbursement to Medicare Rates Would Reduce Health Spending by About $350 Billion in 2021.  https://www.kff.org/medicare/issue-brief/limiting-private-insurance-reimbursement-to-medicare-rates-would-reduce-health-spending-by-about-350-billion-in-2021/

Lin, H, Prince, JT   (2016) Determinants of Private Long-Term Care Insurance Purchase in Response to the Partnership Program Health Service Research. 51 (2):687-703.

National Association of Insurance Commissioners (2016) The State of Long-Term Care Insurance: The Market, Challenges and Future Innovations. 2023.  https://content.naic.org/sites/default/files/inline-files/cipr_current_study_160519_ltc_insurance.pdf

National Association of Insurance Commissioners (2019) CIPR Program: The State of Long-Term Care Insurance.  https://content.naic.org/sites/default/files/inline-files/2019_CIPR_LTCI%20Brief.pdf

National Association of Insurance Commissioners. (2023) Long-Term Care Insurance.  https://content.naic.org/cipr-topics/long-term-care-insurance

Oregon Office of the Secretary of State (2019) Hospital Payment Rules. 2023.  https://www.oregon.gov/oha/OEBB/DivisionRules/Proposed-OEBB-OARs-Hospital-Payments.pdf

Schramm, S, Aters, Z (2021) Estimating the Impact of Reference-Based Hospital Pricing in the Montana State Employee Plan. National Academy for State Health Policy. https://www.nashp.org/wp-content/uploads/2021/04/MT-Eval-Analysis-Final-4-2-2021.pdf

Sen, A, et al.   (2022) Participation, Pricing, and Enrollment in a Health Insurance “Public Option”: Evidence From Washington State's Cascade Care Program The Milbank Quarterly. 100 (1):190-217. https://onlinelibrary.wiley.com/doi/abs/10.1111/1468-0009.12546