Exiting the Market: Understanding the Factors behind Carriers' Decision to Leave the Long-Term Care Insurance Market. 4. Consumers of Long-Term Care Insurance


Roughly seven million individuals have a LTC insurance policy. The LTC Financing Strategy Group estimated that penetration among individuals who are considered to be suitable purchasers (i.e., have incomes in excess of $20,000 and are not currently eligible for Medicaid) is 16% of the over age 65 group and about 5% of the age 45-64 age group.34 The profile of individuals purchasing LTC insurance has changed dramatically over the last 20 years. As products have become more comprehensive and costly, the proportion of middle income buyers of insurance has declined. Table 3 summarizes key characteristics of buyers in the individual market. The average age of buyers continues to decline, and most purchasers are working, married college-educated and have significant levels of income and assets. In the group market, the average age is roughly 46 years. Not shown in the table is the fact that most people purchase the insurance to protect current consumption patterns (e.g., maintain standard of living, avoid dependence, maintain affordability of services) rather than to protect assets.35

TABLE 3. Characteristics of Individual LTC Insurance by Purchase Year
Socio-Demographic Characteristics 1990 1995 2000 2005 2010
SOURCE: Who Buys Long-Term Care Insurance in 2010-2011? A Twenty-Year Study of Buyers and Non-Buyers (in the Individual Market), AHIP, 2012.
Average Age 68 69 67 61 59
   70 and over 42% 49% 40% 16% 8%
Percent Female 63% 61% 55% 57% 54%
Percent married 68% 62% 70% 75% 72%
Median Income   $27,000     $30,000   $42,500 $62,500 $87,500
   % Greater than $50,000 21% 20% 42% 71% 77%
Median Assets N.A. $87,500   $225,000     $275,000     $325,000  
   % Greater than $75,000 53% 49% 77% 83% 82%
Percent College-Educated   33 36 47 61 71
Percent Employed N.A. 23% 35% 71% 69%

One of the ways policymakers have worked to expand the private insurance market to reach middle income adults is to support Partnership Programs. These programs -- which represent a partnership between state Medicaid programs and the private insurance industry -- are designed to enable individuals who purchase qualified LTC insurance policies to access Medicaid benefits without having to spend down their assets to Medicaid levels, if and when their LTC insurance benefits are exhausted. A growing number of states -- upwards of 45 by the end of 2012 -- have implemented such programs.36 Even so, few people age 50 and over -- less than 25% -- actually know whether or not their state has a Partnership Program. However, the Program does hold appeal: fully 45% of a random sample of individuals over age 50 indicated that they would be likely to purchase a policy if their state participated in a Partnership Program.37

For individuals who have been approached by agents and choose not to buy a policy, most cite cost as the primary impediment to purchase. Other far less prevalent reasons typically include the difficulty of choosing a policy, a lack of confidence in insurers to pay benefits as stated, and the desire to wait to see if better policies come on the market.38

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