What happened to long-term care insurance? |

How will you pay for long-term care? That’s a question every middle-aged or younger Indianan should be asking. There are few answers. The United States has made virtually no progress in addressing this looming crisis, unlike countries like Germany, the Netherlands, and Japan, which pay for care through social insurance programs.

There was a time in America in the late 1980s and early 2000s when thousands of people bought long-term care insurance sold by many insurance companies as the solution to paying for future long-term care needs. home and nursing facilities. The financial press hyped the product, agents knocked on doors to sell it like other types of insurance, and people shelled out a lot for a policy. Today, those who still have their policies are finding higher and higher rate increases, making it difficult for some to fit those higher premiums into their fixed retirement budgets.

What happened?

The demise of this product was predictable in the late 1980s and early 1990s, when I wrote three articles for Consumer Reports warning buyers. “We think some insurers will be forced to raise prices significantly,” the magazine reported, noting that such a policy may offer “inferior coverage and your premiums may rise when less can pay more.” That is exactly what happened. Policies were undervalued, company revenues have been lower than expected, people are staying in nursing facilities for longer periods, and people who bought policies years ago keep those policies as they get older.

The promise was that if people bought a policy that paid a daily benefit for a nursing home stay (some later also covered home and community care), they could preserve their financial assets from a Medicaid payout. Medicaid is the payer of last resort for nursing home care in this country, but only after a person in need of such care has spent the majority of their assets on caring for her. In other words, purchasing long-term care insurance that pays some of the bills would save a person’s financial assets.

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In some states, people could buy a “partnership policy,” which met certain criteria and was considered a better quality product. The Robert Wood Johnson Foundation (RWJF), a leading philanthropic organization, tried to stimulate sales of this insurance by creating partnership policies. If a person bought one of those policies and became eligible for Medicaid after using its insurance benefits, he could avoid having to spend his assets to pay for care.

The Association failed to get large numbers of people to buy long-term care insurance. The coverage was expensive and there was little marketing behind them. By 2012, the foundation was “done with nursing homes and long-term care,” said senior policy adviser Katherine Hempstead. “I don’t think anyone thinks that long-term care insurance can be part of the solution.”

Indiana along with New York, California, and Connecticut became the first states to adopt partnership policies. According to a spokesperson for the Indiana Department of Insurance, more than 50,000 such policies have been sold, but only two companies are still selling them today. She told me that partnership policies had saved the state’s Medicaid program an “estimated” $164.5 million, but that “an actual dollar amount cannot be calculated.”

The spokesman directed me to https://www.in.gov/idoi/ratewatch/ Rate Watch, a helpful department resource that lets the public know what rates have been requested by state insurance companies. It includes information about rates for long-term care insurance, but also for health insurance and Medicare supplement policies.

I checked the site and found that insurers were asking for huge rate increases in 2021: 401 percent for a Continental General policy and 237.5 percent for one of the Metropolitan Life contracts.

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“Obviously, this form of insurance is a failure if companies have to come back to say they need more money and raise their premiums, which happens at the worst times in policyholders’ lives,” said Bonnie Burns, policy specialist and training. with the nonprofit organization California Health Advocates, which has followed this product for 40 years.

Worst time or not, the roughly 50,000 Indiana people the state insurance department says still own these policies have no choice but to keep them.