For the past few years, Covid has made everyone think a little harder about mortality and health. But now that the worst of the pandemic seems to be behind us, how has it affected long-term-care (LTC) insurance?

Increased Interest
“We have definitely seen an increase of LTC insurance inquiries since the summer of 2020,” says Brian Gordon, president of Murray A. Gordon & Associates/MAGA Ltd., an LTC specialist firm in Bannockburn, Ill.

Many clients who had rejected long-term-care coverage in the past, he says, came back with a change of heart. “We generally see clients … between the ages of 48 and 62, but since Covid we’ve been receiving more inquiries from people 70 and older,” says Gordon.

Many of them may be out of luck, however—or at least they were in the early days of the coronavirus.

Tougher Underwriting
It’s too soon for any hard data on the lasting effects for the industry, but Covid did make it tougher for applicants to pass the underwriting requirements. “Some insurers have expanded the list of pre-existing conditions that will disqualify an applicant,” says Melissa Ciotoli, managing director and senior wealth advisor at GYL Financial Synergies, a firm based in West Hartford, Conn.

People from certain regions were denied coverage, too. “Insurers are looking very closely at applications coming from areas of the country known to have high Covid infection rates,” says Kimberly Foss, founder and president of Empyrion Wealth Management in Roseville, Calif. “In many cases, such applications are being turned down, along with those from persons who have traveled to certain countries.”

This increased scrutiny led to more in-person medical exams, says F. Michael Zovistoski, managing director at UHY Advisors NY in Albany, N.Y. “LTC providers have needed to better assess risk relating to new applicants,” he adds. Many carriers “included various new questions in their applications, [questions] related to comorbidities, Covid exposure and foreign travel, to mention just a few,” he says. “All these factors weigh into more applications being turned down.”

Lower Maximum Ages And Longer Waiting Periods
At the same time, the age restrictions on these policies tightened. Older applicants always require more stringent reviews to qualify for coverage, but the rules became even more unforgiving during the pandemic.

“When states issued stay-at-home orders and insurers couldn’t conduct in-person exams, many [carriers] reduced the maximum age for applicants,” says Ciotoli at GYL Financial. “Some temporarily stopped accepting applications from people in their late 60s or early 70s, and a few reduced the maximum age to as low as 65.”

At Nationwide, for instance, which doesn’t offer stand-alone long-term-care policies but does have a variety of LTC riders and other linked-benefit or hybrid plans that offer both life and long-term-care coverage, the maximum issue age was lowered from 75 to 70—though the carrier says that had more to do with low interest rates than Covid. “We rely on interest income to pay for LTC benefits,” says Kathy Pemberton, Columbus, Ohio-based senior director of life product development for Nationwide. “A policy issued to a 75-year-old is too close to the expected age of needing care”

In addition, many carriers put a waiting period on coverage, especially if a client ever tested positive for Covid. “If you have had Covid, there is a 90-day waiting period, and a six-month waiting period if you have been hospitalized with Covid,” says Eric Bond, founder and wealth advisor at Bond Wealth Management in Long Beach, Calif.

For younger, healthier applicants, though, some insurers simplified their application process, conducting remote interviews instead of face-to-face meetings and accessing medical records electronically. What’s more, the pandemic has not raised long-term-care premiums, at least not yet. Changes in premium rates require regulatory approval, a process that’s been delayed because of Covid.

Rate Increases Likely
Still, rate increases seem likely. That’s not entirely due to Covid. The “long period of low interest rates hurt the ROI of insurance companies,” explains Kevin Patrick Peters, a wealth advisor at XML Financial Group in Rockville, Md.

The lower rates, taken together with an increasing number of claims and the highest inflation in decades, make sizable rate hikes a near certainty, Peters says.

More Emphasis On Home Care
A subtler shift has been the way long-term-care plans are marketed. Considering how dangerous—even deadly—nursing homes were during the worst of the pandemic (they accounted for nearly a third of U.S. Covid deaths), healthcare providers and their representatives have been emphasizing the benefits of coverage for at-home care. “Certainly agents are positioning the policies as the means to stay out of the facility and provide greater control,” says Peters.

As Ciotoli at GYL Financial puts it, the pandemic “strengthened the resolve of insurers to position long-term-care insurance as ‘nursing home avoidance insurance’—a risk management tool to stay out of nursing homes and receive needed and required care at home.”

Most long-term-care policies have always covered at-home care, but that benefit wasn’t always recognized. “Covid has made consumers more aware than ever of the inherent risks of being in close proximity to other elderly and frail individuals, as well as those caring for them,” says Jesse Slome, director of the American Association for Long-Term Care Insurance, an industry group based in Westlake Village, Calif. “The desire to remain in one’s own home for as long as possible is now paramount, and advisors are capitalizing on this to promote the home-care benefits found in both traditional and linked-benefit products.”

Surge In Short-Term Plans
More significant, perhaps, has been a bump in “short-term-care and home-care-only policies in states where these policies are available,” says Slome, referring to plans designed to provide recovery from an accident or illness, with benefits that typically last no more than a year. “Once relegated to those declined for traditional LTC coverage, we see many producers offering them side by side with traditional plans.”

Where this surge in interest may lead is anyone’s guess. Even before the pandemic, the state of Washington passed the Long-Term Services and Supports Trust Act, making it the first state in the country to create a government-run LTC insurance program. It’s funded through a payroll deduction that went into effect January 1, 2022.

Washingtonians who owned private long-term-care coverage before November 1, 2021, however, can opt out. That deadline led to a huge run-up in sales. In the six months before the cutoff, more than 450,000 people in the Evergreen State reportedly purchased private coverage.

“If this mandate spreads to other states, the underwriters could become overwhelmed, and carriers may pull out of the market,” predicts Howard Sharfman, senior managing director at NFP Insurance Solutions in Chicago.

More Demand, Less Risk
Nevertheless, whatever happens in politics or with the pandemic, the need for long-term care is a constant. “The basic value proposition with LTC insurance has not changed, and the need has not changed either,” says Len Hayduchok, president of Dedicated Financial Services in Rehoboth Beach, Del., and Hamilton, N.J. “What might have changed is the perception of people’s mortality and morbidity, and that has created an uptick in interest in insurance products related to health in general—while insurance carriers have been more careful in the risks they are taking.”