The health insurance industry, after a decade of hesitancy, has finally begun to offer long-term health care policies so that people can buy insurance to cover nursing home costs and home health care they may need in the future.
Surveys done by the Health Insurance Association of America, which represents the major health insurance companies, show that most people incorrectly believe that long-term nursing home costs are covered by Medicare, the federal health care program for the elderly. Most private plans, including the supplementary Medicare plans, do not cover long-term care either. At present, the only way an elderly person can become eligible for federal assistance in paying nursing home costs is to impoverish himself by selling off all assets down to $1,800 for an individual or $2,600 for a couple. These assets do not include the family home, car or home furnishings. At that point, the person becomes eligible for Medicaid, the federal program that pays for health care for the poor. By then, however, the family is impoverished.
Nursing home costs run anywhere from $22,000 to $30,000 a year, depending partly on what part of the country the person lives in. Few families can absorb that cost for any length of time, and until recently, few health insurance companies offered long-term health care policies because they were afraid of the costs of paying out on them. This month, however, Burton E. Burton, president of the employe benefits division of Aetna Life & Casualty, predicted in testimony before a Senate subcommittee that "private long-term care insurance will evolve and in the coming years offer widespread protection to the majority of the elderly."
Speaking for the Health Insurance Association, Burton told the subcommittee that about 70 companies are now selling long-term care policies, compared with 16 only three years ago. Within the last six months, employer-sponsored group long-term policies have started to be marketed by Aetna, Metropolitan, Prudential and Travelers. Aetna is marketing a policy for retirement communities. A privately insured long-term health care plan is being developed for federal employes.
The industry is seeking tax relief on insurance company reserves and modifications in the tax code to remove obstacles to employer financing and sponsorship of these policies as an employe benefit.
Benno Isaacs, a spokesman for the association, said that long-term care is "probably one of the most critical health care problems of today." Last week, he said, a commission appointed by the governor of Connecticut issued a report predicting a 70 percent increase in the number of people in that state aged 75 to 84 from 1980 to 2000. The commission also predicted that paying for long-term care could take up 7.9 percent of the state's budget if alternative ways of financing are not found. It recommended, among other things, that coalitions be formed among governments, the private sector and employers to develop ways of ensuring long-term care.
Isaacs said that the typical benefit period in these new policies is three years, although some offer five. "People go into a nursing home for an average of 2 1/2 years." All of the policies found in the association survey covered skilled nursing care and a majority provided for intermediate and custodial care. Only one out of six paid for care in the home. "If you get a long-term care policy, you want home health care in it," he said. Most policies cover care for senility and Alzheimer's disease.
He said that the plans will get cheaper as the pool of people who want them gets larger. Amex Insurance, which began writing these policies a decade ago, was charging $324 a year last year for a policy that paid $60 a day in nursing home costs if purchased by someone 60 years old or younger. The same policy purchased at age 70 cost $850 a year, and at 75 years it cost $1,364. The premium remains the same as when it was purchased. Isaacs said that a good policy must include guaranteed renewability and plans their members are offering carry inflation riders as well.
That the health insurance industry is beginning to respond to this need is good news indeed. We have all heard far too many heartbreaking stories of families being financially devastated by nursing home costs. Now that the insurance industry is writing long-term policies, it is time for employers to start looking at them as a benefit and for governments to encourage their availability by removing regulatory obstacles and by helping to educate consumers so that they know what they are buying.