At the height of the pandemic last year, nursing homes became the epicenter of the contagion. Their residents and staff accounted for one-third of all Covid-related deaths in the U.S. The repercussions on the long-term care (LTC) insurance market soon became unmistakable.

Heightened Interest
First, overall interest in LTC planning, a subject that's often put on a back burner, became intense.

Brian Gordon, president of LTC insurance specialist Murray A. Gordon & Associates/MAGA in Bannockburn, Ill., said clients who had rejected LTC coverage a few years ago came back with a change of heart. "They are thinking about the issue and getting serious about planning for the future," he said. "They see how it gives the family direction and a plan for care, some of which is due to their experiences with Covid, whether they had it themselves or a friend or family member did."

More Emphasis On Home Care
Second, clients and insurance carriers alike put more emphasis on coverage that allows you to remain in your own home when you need care, instead of having to be institutionalized.

The pandemic "dramatically impacted both the interest and the way knowledgeable specialists market the protection," said Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI) in Los Angeles.

The industry began stressing the fact that "the majority of LTC insurance claims pay for home-care services," he says—in response to rising interest for this coverage option.

Stricter Underwriting Requirements
At the same time, however, it's become harder than ever for clients to secure traditional, standalone LTC insurance if they don't already have it.

"The pandemic certainly affected the underwriting criteria used for accepting or rejecting new applications," said David Beck, an insurance agent and partner at Egan, Berger & Weiner in Vienna, Va. "The number of people who could actually obtain coverage was greatly diminished."

One client of Beck's was told she'd be turned down unless she completed a full face-to-face physical exam; a medical history, virtual exam, and recent blood work wouldn't suffice. "This guideline was not in existence prior to Covid," said Beck.

He anticipates greater scrutiny of medical records going forward.

In addition, there are more age restrictions and more pre-existing medical conditions deemed uninsurable. Recent travel to certain foreign countries now trigger automatic postponements of applications and claims; residents of certain states where Covid was high are also automatically delayed or denied.

"One major insurer now requires a 90-day waiting period after full recovery [from Covid], and another has a six-month waiting period," before benefits claims are honored, added Slome at the AALTCI.

An Unviable Value Proposition
In a way, all this is understandable. Carriers want clients who are less likely to make claims. But demand is highest among those who are most likely to make claims. "The consumers who are most interested in the coverage are those who see long-term care in their future, and perhaps imminently," observed Len Hayduchok, CEO and president of Dedicated Financial Services in Rehoboth Beach, Del., and Hamilton, N.J.

This disconnect between supply and demand could put the industry at risk. "LTC insurance is becoming an almost unviable value proposition in the market," said Hayduchok.

Consequently, more people than ever are turning to hybrid plans that link LTC coverage to life insurance or an annuity. These products have always had less stringent underwriting requirements to qualify. They also have more predictable premiums (most are paid upfront) and resolve the "use it or lose it" problem—i.e., clients will receive benefits one way or the other, either through a LTC claim or as a death benefit, or both.

"Hybrid policies will become more of the norm," said Beck, the insurance agent.

Existing Policies Performed Well
In any case, long-standing LTC insurance customers had few complaints during the pandemic.

"Our clients largely did not experience issues with coverage or benefits," said F. Michael Zovistoski, a certified financial planner and managing director at UHY Advisors NY in Albany, N.Y. If anything, he said, the carriers themselves may have suffered a little as many of their members were unable to pay premiums on time. "There were also some minor delays in back-office services as insurance company employees settled into working at home."

But because most LTC policies have a 90-day or longer elimination period, during which policyholders must wait before benefits kick in, Covid scarcely figured into new claims. "For the vast majority of our clients—and I presume the population as a whole—LTC insurance never really had the opportunity to perform or disappoint," said Beck.

Lasting Effects Unknown
The lasting effects of the pandemic on LTC insurance remain to be seen.

"Over the shorter term, it is likely that companies will continue to take a cautious approach to underwriting and product design, which could make it more difficult for some people to obtain the type and amount of coverage they desire,"  said Kimberly Foss of Empyrion Wealth Management in Roseville, Calif.

The long-term implications, though, are less clear. "Until the long-term mortality and health effects of Covid are more well understood, and until more actuarial data is available, companies will be unable to comprehensively analyze the financial impact on the industry," she said.