Free Case Evaluation

The long term care insurance (LTC) industry has been fraught with problems in the past decade including unmanageable premium increases, limited coverage and insurance companies who find ways to deny benefits due to the increasing cost of health care. The problems have resulted in a decline of the average age of LTC policyholders and many lawsuits alleging bad faith. However, a new form of long term care insurance may soon become a reality.

Average age of LTC purchaser declines

According to the American Association of Long Term Care Insurance (AALTCI), insurance companies generally deny over 25 percent of applicants between the ages of 65 and 75 any form of long term care coverage – for any reason they can find. In fact, the average age of a consumer who purchases a long term care policy today has dropped from 67 to 58 since 2000 – approximately the time when many insurance companies realized that they had grossly underestimated the costs of long term care expenses. While the average age is now only 58, the AALTCI reported that 14 percent of purchasers were under age 50, 46 percent were between the ages of 50 and 60 and only 39 percent were over age 60.

New forms of LTC

According to a recent Washington Post article, researchers are attempting to find better ways to provide long term care for the increasingly aged population in the United States. They have proposed a product known as a ‘life care annuity’ – an insurance policy that would provide for lifetime payments – including long term care coverage.

According to the article, the product would allow more people to purchase coverage because you would be included in a pool of policyholders. While the actual cost might be higher than traditional long term care insurance, it would at least provide more people with the coverage they need.

Only time will tell

Unfortunately, the tax consequences would make such a product rather unattractive to most right now. Long term care policy proceeds are not taxed, while life annuity payments are. However, that may soon change as well. The Pension Protection Act was passed in 2006 and amends the Employee Retirement Income Security Act (ERISA) to repeal existing funding rules for defined benefit pension plans for plan years beginning after 2007.

Only time will tell whether a ‘life care annuity’ product would be successful, however it’s encouraging to know that other options may soon become available. To see the AALTCI data, go to www.aaltci.org/. To see the Washington Post article, go to www.washingtonpost.com/.