Long-term Care Insurance: Light at the End of the Tunnel

Now that the federal government’s CLASS Act has been shelved, the problem of paying for long-term care is back in the public eye. According to a 2011 MetLife report, the cost of a private room in a nursing home averages $87,000-plus a year, while the assisted living facility rate is more than $41,000 a year – and these massive costs are only expected to grow. Worse still, these sums do not include private aids or any of the special equipment a senior or disabled person might need.

If you are not one of those fortunate enough to have put away millions for long-term care, then you are left with two options: depend on your adult children and other family members to pay for your care, or use up lifelong savings and then rely on government programs to support you. Neither one is an attractive prospect.

Then there is private long-term care (LTC) insurance, which promises to give you more choices, independence and a sense of dignity. This sounds like a no-brainer. Yet, only 3 percent of Americans have private long-term care policies, and the number of new insurance buyers has dropped to a record low in the past few years.

The reasons for this are many, but what’s clear is that there is a great deal of skepticism (not without reason) towards the long-term care insurance sector. Many Americans don’t trust that in 20-30 years their LTC insurance company will still be there to provide the benefits as promised.

For private LTC insurance companies, confronted with this skepticism, now is the time to take charge and create a national educational campaign to raise awareness about the benefits of long-term care insurance. By breaking numerous long-term care misconceptions and educating potential customers – young and healthy Americans – LTC companies will increase enrollment among these lower-risk buyers.

Educating Americans

The lack of easy-to-understand information about what services Medicare and Medicaid do and do not cover causes a lot of confusion for Americans who end up paying for many long-term care services out of pocket. Almost 40 percent of people mistakenly believe that Medicare will cover their long-term care costs, according to a 2009 survey from Prudential.

Educating the public on what is actually covered by government-run programs can be very beneficial for the long-term care insurance business. Such a campaign will allow a company to gain much-needed trust and credibility among potential consumers and position strongly against many competitors in the industry.

Addressing their concerns

The main worry for anybody looking into long-term care options is the lack of guarantees. They are afraid that premiums will rise so dramatically that, in time, they will no longer be able to afford the plan they’ve been paying into for years. Or, even if they do keep up with premiums, their earned benefits will not be paid out when it comes time to collect.

By addressing these concerns, an insurance company will be able to offer a sense of security to these potential buyers and, as a result, substantially increase the number of new and healthy participants.

Explaining the benefits

What are my odds of needing care later in life? Why should I pay over $2,000 a year for decades if I’m not even sure I will need any assistance?

LTC insurance companies should look at these reasonable questions as an opportunity – an opportunity to make a case for their product. After all, once you turn 65, there is a two-in-three chance of someday needing assistance with activities of daily living.

Making it easy

Unless you are hiding something, there is no reason to confuse potential buyers with complicated paperwork. Make it easy for them to understand the current LTC situation and care options, how much the premiums cost and when they can collect benefits. Communicate to consumers; don’t talk at them.

There are many factors that LTC insurance carriers have to face to stay alive – higher than expected costs, the uncertain nature of the business and weak demand are all factors that need to be overcome. While many of those are beyond a single company’s power to change, the latter can be addressed and even solved by a smart communications campaign that will spark much interest in long-term care insurance among Americans.

It takes a strong leader and an enormous amount of patience to fight all the stigmas associated with the private long-term care insurance industry. But those that manage to do so successfully will not only make LTC insurance attractive, they will create a positive image of a trustworthy company, that will inevitably lead to faster and more sustained growth.
 

Nina's blog, "Long-term Care Insurance: Light at the End of the Tunnel" originally appeared in Professional Patient Advocate on December 21, 2011