Long Term Care Awareness Month wrapped up as the calendar turned from November to December, and while the annual campaign certainly doesn’t cause much of a stir among Americans, it does tend to generate new batches of statistics every year that should be alarming to middle-age and senior Americans – not to mention agents that sell it.
And while it is no secret that LTCI specialists typically don’t like to present a bunch of scary statistics to prospects intending to spur them into buying coverage, that doesn’t mean it isn’t helpful to know some facts about the current state of the LTCI market. Even as LTCI sales decline, the need for long-term care services will increase substantially in coming decades as more and more baby boomers enter retirement – many of them blissfully unaware of how a long-term care event could wreak havoc their portfolios without some form of LTCI coverage.
Consumers still say it’s “too expensive”
During LTCI Awareness Month, LIMRA presented research showing that combo products – life insurance and annuity products with a long-term care rider – are becoming increasingly popular while sales of stand-alone LTCI have declined a staggering 60% since 2012. LIMRA attributed declining sales as being mainly due to cost concerns from the consumer perspective and profitability concerns from the carrier perspective. Fewer carriers are willing to take on the risk associated with the stand-alone products now than when they first appeared in the market.
New survey data released in late November by OneAmerica echoed the “too expensive” complaint from consumers as well, with 53% of consumers who don’t have coverage saying they don’t have it because they think it is too expensive.
That was far more than the other top excuses identified in the OneAmerica survey, including, “I don’t want to pay for something I may never need” (25%), “I’ve never heard of it” (13%), “I’ve heard negative things about it” (9%), and “I don’t know how to get it” (9%).
Furthermore, among those who do not have LTCI in the OneAmerica survey, nearly half — 49% — of Americans with annual household income of $75,000 or more cited it being too expensive as a reason they don’t have LTC insurance.
Also during November, an article posted on CNBC identified the “sweet spot” for LTCI buyers as those with investable assets of $1 million to $4 million – with $2-$3 million being “ideal.” That piece also said those with more than $4 million would be better off self-insuring while for those with portfolios of $1 million or less, LTCI “may not be worth the risk and reward.”
In promoting the findings of their survey, OneAmerica stressed that many middle-class families may find LTC protection a cost-effective way to prepare for the needs of growing older, while protecting their retirement income from the drain of unexpected expenses, and noted that roughly 70% of Americans ages 65 and older will need some kind of help with the activities of daily living as they age.
“Especially with asset-based LTC protection, many people preparing for retirement find they can reposition assets they already have to gain LTC protection,” said Chris Coudret, vice president and chief distribution officer, Care Solutions at OneAmerica. “Others find that a multi-pay premium option with guaranteed premiums and benefits fits well into their existing retirement strategy.”
LTCI by the numbers
- A 65-year-old today can expect to incur $138,000 in LTC costs over their lifetime, according to a 2017 Bipartisan Policy Center report.
- Two-thirds of Americans age 40 and older say they’ve done little or no planning for their LTC needs, according to a poll from the AP-NORC Center for Public Affairs Research.
- Living in a nursing home now costs an average of $97,000 a year according to Genworth’s 2017 survey of LTC costs. Assisted living facilities cost about $45,000 per year.
- 57% of Americans say they plan to rely on Medicare to pay for ongoing living assistance (AP-NORC survey), but Medicare doesn’t cover extended nursing home stays or non-skilled living assistance, which make up the majority of ongoing care needs.
- More than 50% of Americans end up paying for long-term care out of pocket (2017 Bipartisan Policy Center report), a figure which rises to nearly 70% for those receiving LTC at home.
- Medicaid is projected to account for 40% of national spending on LTC services by 2030.
- According to LIMRA data, there will be 82 million Americans in retirement by 2040, and federal government data estimates that 52% of those 65 and older will need long-term care services during their lifetime.
- Today, LIMRA estimates that less than 7% of consumers over age 50 have long-term care coverage.
- More stats: Morningstar – 75 Must-Know Statistics About Long Term Care