Long-Term Care Insurance:Improving 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
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
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?
Long-term Care InsuranceMarket Realities and TrendsWhat research suggests consumers need to know Marlene S. Stum, PhD Family Social Science University of Minnesota
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”
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 it’s beginnings in 1987. Average buyer age is 50. • Group market penetration: 5-6% of eligible employees purchase
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
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.
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.
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
To Buy or Not to Buy: Examining Long term Care Insurance Employee Decision Making Principle Investigator:Co-Investigator: Marlene Stum, PhDVirginia Zuiker, PhD Family Social Science University of Minnesota
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)?
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
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
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
Role of Resources • Buyers were more likely to have: • Higher household incomes • More long-term care prior experience • Higher financial literacy • More self-efficacy
Consistent findings • Enrollment barriers include: • Perceived lack of affordability • Insufficient information • Confusion • Complexity of policy features
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)
To improve consumer decision making • Recognize this is a new decision making experience—confusion and lots of questions should be expected • Who should buy LTCI? • What’s the best age to buy? • How much will it cost me? • What happens to all the money I’ve paid if I never need LTC? • What if the company I’m insured with goes out of business? • When and how much will the premiums increase? • If I’m interested, how do I select coverage features • inflation protection, benefit amounts
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
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
LTC: Educating the Consumer Dr. Ron Wall Hawaii Cooperative Extension Service University of Hawaii at Manoa
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?
What is at stake? • Getting needed care • Getting into desired facility • Paying for needed care • Avoiding impoverishment • Avoiding loss of estate
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.
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
Your LTC Risk and Reality • Family LTC history • Your medical history • Family support system • Living arrangements • Income and assets
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
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
LTC Problems Beyond Money • Hiring home care • Managing home care • Supporting family care • Adapting to group home • Abiding institutional care --Impersonal? --Detached? --Regimented? --Isolating?
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
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
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
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
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
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.
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
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
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
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?
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?
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)
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
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
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