Long-Term Care Insurance: Improving Consumer Education

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Long-Term Care InsuranceImproving Consumer
Education

• Marlene Stum, University of Minnesota
• Paul McNamara, University of Illinois
• Ron Wall, University of Hawaii
• Mary Ellen Rider, University of Nebraska
• Financial Security in Later Life
• National Roll-Out Conference Panel Presentation
• March, 2002 Myrtle Beach, SC

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• Plan
• For changes in health and independence, including
  long term care
• Act
• Increase knowledge of risks,
• costs and financing options for health,
• including long term care
• Develop a plan for managing long-term health risks

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Purposes

• Brief introduction to long term care insurance as
  one long term care financing option
• What does research suggest consumers need to know
  about long term care insurance?
• What are key decision making points and
  considerations for consumers?
• What have we learned about target audiences and
  delivery strategies?

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Long-term Care InsuranceMarket Realities and
TrendsWhat research suggests consumers need to
know

• Marlene S. Stum, PhD
• Family Social Science
• University of Minnesota

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Long Term Care Insurance

• One financing alternative
• Personal Resources
• Private insurance--currently pays 5-7 of bills
• Government options (Medicaid)
• A changing and growing market
• Gaps in perception versus reality
• Complex and overwhelming for consumers
• Increasing messages of personal responsibility

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Market Realities and Trends

• Individual market has focused on older
  buyers--average age 67.
• About 6 of population has purchased individual
  policy
• Group market, especially in the workplace, has
  increased over 30 annually since its beginnings
  in 1987. Average buyer age is 50.
• Group market penetration 5-6 of eligible
  employees purchase

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Market Realities

• Over 3,000 employers offered LTCI to their
  employees in 1999.
• 21 states offer to state/public employees
• Federal government offering to the federal
  family--20 million potential purchasers
• Includes spouses, parents, in-laws, step-parents,
  adult children 18 and over

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Market Realities and Trends

• www.opm.gov/insure/ltc/index.htm
• Early enrollment March 25-April 15
• Open Season July 1- Dec.31, 2002
• Will generate many consumer questions
• Need to understand LCTI and how to compare it
  with other financing alternatives given risk,
  cost, and later life goals.

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Market Realities and Trends

• Financial incentives offered to encourage market
  growth
• HIPAA (Health Insurance Portability and
  Accountability Act of 1996) brought tax
  incentives (IF itemize deductions and exceed 7.5
  of AGI threshold)
• 20 states offer tax incentives (tax credits)
• 18 states allocate resources for public
  education about long term care risk, exposure,
  and availability of LTCI.

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Is there a research base?

• Primarily market research focused examining role
  of socio-demographic variables of
  buyers/non-buyers
• Majority on individual versus group market
• Conducted by and for industry
• Just beginning to examining claims and
  experiences of LTCI users

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To Buy or Not to Buy Examining Long term Care
Insurance Employee Decision Making

• Principle Investigator Co-Investigator
• Marlene Stum, PhD Virginia Zuiker, PhD
• Family Social Science
• University of Minnesota

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Research Questions

• What impact did offering the long term care
  insurance benefit have on employee long term care
  risk management decision making and planning?
• What is the relative significance and
  contribution of factors within and outside the
  family system on the decision to enroll or not
  enroll in Long Term Care Coverage (LTCC)?

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Gaps Addressed

• Group vs. individual market research
• Micro-level data (employee perspective)
• Guided by existing theory
• Family decision making
• Ecological systems
• Focus on decision making processes as well as
  outcomes
• Sample representative of entire State of
  Minnesota eligible employee population
• Examines how multiple factors contribute to
  enrollment decisions

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Methods

• Written mailed surveys (February 2001)
• Random sample of 1600 buyers and non-buyers from
  total population of 61,000
• 53 overall response rate (64 buyers / 42
  non-buyers)
• 830 completed surveys

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Reinforced other study findings

• A new decision-making experience for most
  consumers
• Non-buyers have good intentions
• 63.2 intend to purchase
• 72 very likely or likely to buy (Stucki)
• Too young and far away from retirement years
• Too many competing lifestage demands

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Role of Resources

• Buyers were more likely to have
• Higher household incomes
• More long-term care prior experience
• Higher financial literacy
• More self-efficacy

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Prior Long Term Care Experience
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Perceived Sources of PaymentWithout Long Term
Care Insurance
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Consistent findings

• Enrollment barriers include
• Perceived lack of affordability
• Insufficient information
• Confusion
• Complexity of policy features

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Comparison to other studies

• Majority of employees believe in personal
  responsibility to plan and pay for long-term care
• Majority of employees believe long-term care
  insurance should be purchased (79)
• Non-buyers concerned insurance is not a good
  value for the money (65 in HIAA 63 this study)

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Attitudes RegardingLong Term Care Coverage
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To improve consumer decision making

• Recognize this is a new decision making
  experienceconfusion and lots of questions should
  be expected
• Who should buy LTCI?
• Whats the best age to buy?
• How much will it cost me?
• What happens to all the money Ive paid if I
  never need LTC?
• What if the company Im insured with goes out of
  business?
• When and how much will the premiums increase?
• If Im interested, how do I select coverage
  features
• inflation protection, benefit amounts

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Improve financial literacy and self-efficacy

• Risk of needing long-term care
• Risk of long-term care versus other lifecycle
  risks
• Differences in disability and long term care
  insurance
• Costs of various types of long term care
• Who pays if there is no LTCI
• How to judge if plan is a good value
• How to judge affordability for two family members
• Reality of existing health plans coverage of LTC
• Potential costs of doing nothing
• Selecting specific coverage features

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To Buy or Not to Buy Examining Long term Care
Insurance Employee Decision Making

• Executive Summary and information on couple-level
  qualitative research in progress available at
• http//fsos.che.umn.edu/stum/research/ltc.dm

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LTC Educating the Consumer

• Dr. Ron Wall
• Hawaii Cooperative Extension Service
• University of Hawaii at Manoa

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LTC Consumer Education

• What is the reality of long-term care?
• How can the risks be reduced or minimized?
• How can the risks be addressed financially?

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What is at stake?

• Getting needed care
• Getting into desired facility
• Paying for needed care
• Avoiding impoverishment
• Avoiding loss of estate

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Things to Keep in Mind

• Percentage of elderly in the future depends on
  births, deaths, and immigration policy.
• Facts regarding recipients of long-term care
  depend on what constitutes long-term care.
• Projection of those needing paid LTC care depends
  on health, medicine, family factors.
• Severity of LTC as a societal problem based on
  population not same as personal problem.

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Figuring the Odds--0 to 100

• Projected need for Nursing Home Care
• 57 no need
• 10 0-3 months
• 8 3 months-1 year
• 14 1-3 years
• 11 3 plus years

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Your LTC Risk and Reality

• Family LTC history
• Your medical history
• Family support system
• Living arrangements
• Income and assets

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LTC Risk Reduction Factors

• Level of health fitness
• Living arrangements
• single family home
• elderly community
• assisted living
• Family support system
• living with spouse or relatives
• living near extended family
• living isolated from any relatives

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Good Preparations for the Future

• Prepare for old age
• fitness and health program
• communal housing lifestyle
• family/friends support system
• Put finances in order
• sock away retirement funds
• reduce debt solidify assets
• low cost, simplified investments
• encumber and ensure income
• set aside funds for special needs
• ready estate for timely transfers

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LTC Problems Beyond Money

• Hiring home care
• Managing home care
• Supporting family care
• Adapting to group home
• Abiding institutional care
• --Impersonal?
• --Detached?
• --Regimented?
• --Isolating?

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LTC Insurance Considerations

• Adequate, inflation protected daily benefit
• Good coverage over return on premiums
• Indemnity basis over reimbursement of costs
• Pooled benefits over segregated benefits
• No or less home care coverage if not feasible
• Shorter period over unprotected daily benefit
• No waiver of premium over less coverage
• Realize premiums and costs will increase
• Recognize commitment is for the long-haul

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Inherent Risks of LTC Insurance

• Premium risk
• Coverage risk
• Reimbursement risk
• Company default risk
• Government entry risk
• Personal budget risk
• Competing needs risk
• Investment return risk

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LTC Situation in Hawaii

• Proposed CarePlus 10/month for 70/day
• Elderly housing and assisted living options
• Employer sponsored LTC insurance policies
• Consumer education and counseling

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Hawaii LTC-related Services

• LTC Ombudsman-- LTC patient advocate
• Project Dana--social support for homebound
• SAGE Plus--volunteer insurance counseling
• Nursing Home without Walls--home care help

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Consumer Education in Hawaii

• Publications in print and on university web site
• Articles in newspapers and newsletters
• Workshops in workplace and community venues
• Videotapes distributed to unions and other groups
• Individual counseling and e-mail responses

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Some Curious Conclusions

• If everyone had LTC policy with 90 day
  elimination period only 1 of 3 would receive any
  benefit.
• 89 of all elderly would be covered by an LTC
  policy having a 3-year maximum benefit period.
• Since entry occurs 30-90 days before benefits
  paid, getting in not a function of having LTC
  insurance.
• Institutionalized care is most inevitable for
  those who have no family support system to rely
  on.
• If all those who can afford LTC insurance buy it,
  LTC will still be societal problem due to the
  rest.

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Envisioning the Future of LTC

• Caregiver shortage worsens
• LTC costs outpace inflation
• Premiums increase more
• Insurance less affordable
• Companies quit or divest
• Government more involved
• Tax breaks for care giving
• Institutionalization of loners
• Insurance for estate benefit

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What I believe is needed

• Consumer view of critical information
• Preparation for full range of old age risks
• Recognition of need for financial flexibility
• Consideration of long-term affordability
• More realistic options

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Purposes of Consumer Education

• Enable consumer to make informed choices
• Help consumer to use resources wisely
• Assist consumer in avoiding waste and loss
• Empower consumer to act on own behalf
• Encourage consumer to act responsibly

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Long Term Care InsuranceCritical ConceptsMary
Ellen Rider, Ph.D.Extension Specialist, Consumer
Health Policy

• What is your risk for various levels of care?
• Home Health Care?
• Bed and Board Care?
• Assisted Living?
• Skilled Nursing Facility?
• Continuing care community?

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Long Term Care Insurance Risk Considerations
(continued)

• What is the relationship of your risk
  considerations to the purchase of long term care
  insurance?
• - If you need it, is it covered? Price?
• How does your health history relate to projected
  cost of coverage?
• How does your age at purchase relate to projected
  cost?

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Long Term Care Insurance Risk Considerations
(continued)

• Financial stability of insurer
• Transferability of coverage when changing
  employers (if purchased through employer) cost
  if picking up yourself
• Financial stability of care facility
• ability to change facilities? (if important or
  available to you)

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Long Term Care Insurance Educational Concerns

• Target markets for education
• (Not a low income issue)
• Age of students
• Socioeconomic level of students
• Singles
• Women
• Couples

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Potential Partners

• Regional CMA Partnership
• training and update relative to changes in
  Medicare
• State Departments of Insurance
• SHIPP/NICA programs
• counseling relative to Medicare specifics,
  supplemental (Medigap), or long term care
  coverage relative to duplication of coverage
  through Medicare
• State Health Care Association
• Professionals associated with long term care
  industry
• State Departments/Divisions on Aging

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On-line Experience

• Wrote a lesson limit on print due to cost
• Developed an on-line, non-credit module password
  protected - with grant funds
• Reviewed by peers (state agency reps and family
  economists)
• Offered 2 sessions (students from various states)
  in 2001 2 more sessions to be offered
  spring/summer 2002
• Problems publicity discussion participation
  evaluation feedback