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The need for long-term care (LTC) services is expected to be substantial for people over age 65, but only 3% of Americans over the age of 50 have any LTC insurance protection, according to a LIMRA analysis. This gap is of growing concern as a large number of Americans are reaching age 65 at a time when LTC costs have skyrocketed.
According to the Department of Health & Human Services, 56% of Americans will need long-term care at some point, and nearly half will need paid LTC services. About one-third will have some out-of-pocket LTC costs, and 14% will incur out-of-pocket costs of more than $100,000.
The cost of LTC services is a growing challenge, LIMRA said. The annual median cost of home health aid exceeds $77,000, and the median yearly cost for a semi-private room in a nursing home is between $110,000 and $127,000, said the report.
Caregiving often falls to families as costs soar beyond reach. This has prompted increased interest among younger generations and primary caregivers in LTC insurance products. More than 7 in 10 say being a caregiver has impacted how they think about their own future care needs, and these consumers are more likely to want to proactively plan for their potential LTC needs so they don’t become a burden on their loved ones.
The LTC insurance segment has come under pressure as LTC costs skyrocketed. Policy rate hikes implemented to mitigate these increasing costs dampened sales, and more than three-quarters of standalone LTCI carriers left the market by 2012, said LIMRA.
With the need for protection persisting, the combination of life and LTCI products has grown over the past 15 years. New companies have entered the market with new and adapted product design targeted at middle-income and mass affluent consumers.
“Our research suggests that those in the sandwich generation — specifically millennials — who are caring for aging parents and younger children are very open to combination products,” said Bryan Hodgens, senior vice president and head of LIMRA Research. “While stand-alone products typically attracted an older customer, combination products can expand the market to younger adults, potentially making coverage more affordable.”
Expansions in workplace products are likely, according to LIMRA. The organization noted companies have already begun to enhance their products with caregiver resources and wellness programs. Among carriers offering combination products, the biggest challenges revolve around actuarial modeling and assumption setting, as there is little claims data currently available, said LIMRA.
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