HIAA Expects Long-Term Care Sales To Rebound

By Frederick Schmitt

Although the long-term care insurance market has been slowed by legislative and regulatory pressures, the Health Insurance Association of America believes the slump is only temporary.

In its Long-Term Care Insurance Findings in 1994, which looks at market trends, product offerings and sales results, HIAA reveals that long-term care insurers believe the market rebounded in 1995 and that consumer demand remains high.

"I think it can be one of the strongest growth areas in the insurance field," HIAA president Bill Gradison said. "The aging population, coupled with a growing sense that government won't pay for this anymore, is building demand for this product."

HIAA figures indicate that roughly 3.8 million private long-term care insurance policies were sold in the United States between 1987 and 1994, at an annual growth rate of 25 percent.

In 1988, the total number of policies sold swelled 38.7 percent from 815,000 to 1.13 million. In 1989, 420,000 new policies were purchased, representing a 37.2 percent growth. In 1990, 1991 and 1992, respectively, annual growth increases were 24.5 percent, 25.9 percent and 20.5 percent. In 1993 growth slowed to 16.6 percent, and in 1994, it hit a low with only 12.3 percent growth.

Although the growth percentages have slowed, Mr. Gradison noted that sales figures have remained relatively steady, with approximately 450,000 new policies sold each year.

In the last three years, however, new policies issued slipped from 500,000 in 1991, to 487,000 in 1992, to 420,000 in 1993.

According to the survey, the decrease in consumer demand--which resulted in postponed purchases--was brought about by uncertainty over the outcome of federal health care reform.

"Consumers felt that some form of home care benefit would be provided; some even anticipated more comprehensive benefits like government-sponsored nursing home care," the summary cites in its Future Trends section.

Further, it explains that states have adopted provisions developed by the National Association of Insurance Commissioners, which could result in increased premiums. Such provisions include: mandated nonforfeiture benefits, rate stabilization, and agent compensation limits.

Another report finding indicates that approximately 80 percent of the LTC policies sold in 1994 were done so through the individual or group association markets.

Based on information from the 12 top sellers of long-term care coverage, the average age of those purchasing individual and group association LTC in 1994 was 66.7.

At age 50, the average national annual premium for a policy with $100 a day nursing home benefit or a $50 a day home health care benefit, a 20-day elimination period, and four years of coverage was $397, according to the study. The same policy at age 65 cost $1,058, and at 79, $4,512, it added.

The report also notes that all plans include coverage for nursing home care, home health care, and adult day care, and 11 of the 12 offered alternate care and respite care benefits.

Additional information on the plans reveals that all are guaranteed renewable, have a "30-day free look" period, a pre-existing condition limitation period of six months or less, cover Alzheimer's disease, sell to persons over 80 years old, and offer an unlimited lifetime nursing home maximum.

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