Long-Term Care Options Proliferate: Are They Viable?

In the past, stand-alone policies were cheaper or offered more benefits. But today’s hybrids “are more attractive [than they used to be],” notes Gordon.
Jochem at BMO Harris posits that consumers are more aware of the need for long-term-care coverage than ever before, but surprisingly unaware of the linked options. “When you show them the linked-benefits choices—where they don’t have to pay premiums throughout retirement, have control over that asset, can change their mind, have a return-of-premium option and can benefit from simplified underwriting—most will go for that,” she says. “Plus, they like the idea that if they don’t use the LTC benefit, they can still get their money back for other purposes or keep the asset in their estate.”

Varieties For Every Profile
Of course, individual needs and priorities vary. “The positive to buying the life insurance with the LTC rider is that the premiums will not go up. … The negative is that you have to buy enough life insurance so that the 1%, 2% or 4% a month rider will provide enough LTC insurance to fill the need,” says Gary Smith of New England Retirement Advisors in Auburn, Maine. “Inflation is not built in.”

Still, experts agree that what’s currently available does provide sufficient options and stability. “Consumers have an adequate array of choices,” Smith says. “The companies that have stayed in the market are committed to long-term viability. The companies that are no longer in the business probably should not have been in the business to begin with.”

Similar reassurances come from Richmond, Va.-based Genworth Financial, the leading seller of LTC policies. Spokesperson Al Orendorff says, “The current group of companies now selling and servicing long-term-care insurance has the scale and commitment to serve the large market of older Americans who still wish to purchase this product. … There are more choices than ever.”

That’s especially good news considering the growing number of senior citizens who may need LTC coverage. Orendorff says the independent SCAN Foundation, a Long Beach, Calif.-based nonprofit devoted to improving life for senior citizens, recently concluded that the number of Americans who need long-term care will rise from 12 million today to 27 million in 2050. “The increase in sales of hybrid and linked policies is a reflection of and response to that need,” says Orendorff.

Expanding And Contracting Simultaneously
That said, it may sound contradictory—an expanding market from a consolidating industry? Orendorff contends that the industry is still smaller than it could or should be.

“The industry is evolving and creating options for consumers,” concurs Kamilah Williams-Kemp, a vice president at Milwaukee-based Northwestern Mutual, another key provider of LTC policies. “There’s really no one-size-fits-all solution.”

That doesn’t mean its growing pains are entirely behind it, though. Last November a Boston College study found, in part, that average long-term-care costs are actually less catastrophic than previously thought, and it called into question the very need for LTC coverage of any type. Bad press followed.

To longtime observers, though, it was a short-lived distraction. “That study really is irrelevant, and you can quote me on that,” says Slome. “It focused primarily on the need for skilled nursing home care, when the vast majority of LTC insurance pays for care other than in skilled nursing homes—51% of new claims start with home care, which is what people want.”

Indeed, given the aging population, the necessity of LTC solutions remains indisputable. And growing. “The need for long-term care isn’t going away,” says Williams-Kemp.