A growing number of Americans are expected to need long-term-care services such as nursing home and home health care in the coming years. But experts increasingly doubt that private LTC insurance alone is a viable way to finance that care.
The once-burgeoning LTC insurance market has fallen into a steep decline because of diminished consumer demand, underpriced premiums that did not keep up with sharp cost increases, and an extended period of low interest rates.
Richmond, Va.-based Genworth Financial, a leading seller of LTC policies, recently announced a $345 million charge based on underpricing of its plans. Genworth officials said they were considering halting the sale of new policies, and that they would seek rate hikes and develop higher-return, lower-risk LTC plans.
In 2002, 102 companies sold LTC polices, according to HHS. By 2012, fewer than 15 companies were actively selling a meaningful number of policies. Large insurers, including Aetna, Humana, Nationwide Financial and Prudential have all exited the LTC market. LTC insurers have raised premiums repeatedly to keep up with costs, some by more than 50% for existing customers.
According to Conning & Co., an insurance research firm, there were 92 LTC insurers in 2013 that collected more than $10 billion in direct premiums. Most are small companies that have stopped offering new plans. The 10 largest sellers, including Genworth, Mutual of Omaha and Transamerica, accounted for 78% of the market share in 2013. It's estimated that about 8 million Americans have LTC policies, and approximately 322,000 new policies were sold in 2012, according to the American Association of Long-Term Care Insurance. In contrast, more than 700,000 policies were sold in 2002, according to HHS.
When most insurers entered the market in the 1970s, their LTC expenditures totaled less than $20 billion, according to a 2013 HHS report. By 1990, insurers were paying out more than $70 billion.
Terence Martin, director of life annuity research at Conning, said there is little chance that stand-alone LTC insurance products for individual consumers will ever again see the growth they experienced during the 1980s.