More than ever, private long-term care coverage is an insurance product likely to be purchased by affluent customers.
New research by Marc Cohen, co-director of the LeadingAge LTSS Center @UMass Boston, and co-author Eileen Tell found that four of every five buyers of long-term care coverage earned $50,000 per year or more in 2015. People in that income category accounted for just 20 percent of long-term care sales in 1995.
The shift corresponds with significant increase in the cost of the coverage over time. “Fewer middle income people are attracted to the product at current prices,” Cohen and Tell wrote in the latest edition (issue 45) of Long-Term Care News, a publication of the Society of Actuaries.
One of the most dramatic declines in the purchase of long-term care insurance took place among customers who earned $20,000 to $34,999 per year. Those customers accounted for 40 percent of the long-term care insurance market in 1995 but by 2015 bought just 7 percent of the policies.
The new long-term care insurance data is the latest installment of a series of survey reports that began in 1990 and updated the market’s profile every five years. The latest survey included 1,326 people who bought long-term care insurance that year and 225 others who considered the purchase but did not buy. It also included a telephone survey of 800 Americans age 50 and older selected at random. Policy design features of nearly 9,000 recently sold individual policies were analyzed to understand the type of coverage being purchased.
The survey found that byers of long-term care insurance were the most likely group by far to identify the cost of possible future care as a personal expense for themselves and their families. A total of 68 percent of buyers in the survey responded that they would be responsible for the cost. Correspondingly, 48 percent of non-purchasers and 38 percent of the randomly selected survey subjects over age 50 identified the cost of long-term care as a personal expense.
The survey also asked non-buyers what might prompt them to reconsider coverage. Among the possibilities they cited were a government back-stop to coverage, an income tax deduction for premiums and an ability to use non-taxable funds such as IRAs or 401(k) accounts to pay for coverage.