The History of Long Term Care Insurance

Long term care insurance provides care for those who need long term care in a nursing home, care at home or adult day care. The concept is fairly straight forward – it provides policyholders peace of mind that they will be able to afford the type of care that fell mainly on family members and friends in years past. Long term care insurance has been around since the late 1970’s. However, it didn’t really catch on until the late 1980’s and early 1990’s and only a handful of insurers offered long term care insurance in the beginning.

Long term care options – then and now

While nursing homes have been around for many years, the concepts of “at home” care and “adult day” care were foreign to most people. However, as longevity rates increased due to new medical technologies and drugs, more and more people were living longer than expected. Those that needed some type of long term care were fairly limited in their options.

During the 1980’s, additional options for long term care started to emerge. Assisted living communities became more popular and many found themselves on long waiting lists because there simply weren’t enough facilities to meet the demand. Eventually, more were created and the concept changed a bit. Facilities started offering graduated care – something that made real sense. A person could live in a facility and receive varied degrees of care. If, and when, that person needed more care, he could simply “add on” additional services for an additional fee. Nursing homes saw the value in that concept and many simply converted a wing of their facility to accommodate those people who only needed occasional services and offered them the option to “move down the hall” when they needed more care.

Unfortunately, traditional health insurance generally didn’t cover these types of expenses and long term care insurance was still in its infancy. The result was that many people had to sell their homes in order to pay for full time care before state aid would kick in. At the same time, home care and adult day care eventually started to became more popular and more and more insurers saw the need for long term care insurance. By the late 1980’s and early 1990’s, long term care insurance was a hot commodity. Everyone had to have it and insurers made a pretty penny on the deal.

Good policies gone bad

Problems began to arise a few years ago as policyholders, who had been making premium payments for years, started seeking their policy benefits. What insurance underwriters didn’t know at the time was how much health care costs would rise over the next 20 years and how much longer Americans would live. Suddenly, insurers realized that they had underestimated their exposure. While some stepped up the plate and made good on claims, more did not. Horror stories of elderly people not being able to get the care they needed started to make the headlines. Insurers were, and still are, being accused of simply ignoring policyholders and hoping they would die before any proceeds would have to be disbursed.

The issue has now become both litigious and political. Policyholders have begun suing their carriers for failing to pay for legitimate claims. The lawsuits have made national headlines and have gotten the attention of politicians, so much so that Congress and the General Accounting Office are investigating certain insurers over their marketing and claims practices.

Long term insurance is still a viable option for many, although the number of insurers selling it has declined. Many insurers have sold off their long term care books of business in favor of other products as the market has become saturated. Before purchasing a policy, consumers should make sure that they understand exactly what’s covered and what isn’t. Avoid purchasing policies from insurers who do not have a solid financial background and check into how many complaints have been filed against them for non-payment. All insurance companies are rated by agencies such as A.M Best, Standard & Poor and Moody’s.

Case Studies: Long Term Care Insurance

Case Study 1: The Unexpected Cost Burden

John and Mary, a retired couple in their late 70s, had been enjoying their golden years together. Unfortunately, John suffered a stroke that left him with limited mobility and in need of continuous care. As their savings dwindled to cover his medical expenses, Mary realized they needed additional support.

They explored long term care options and realized the cost of round-the-clock care was beyond their means. However, with the long term care insurance policy they had purchased years ago, they were relieved to find that the policy covered the expenses associated with home care, ensuring John could receive the necessary assistance without depleting their savings entirely.

Case Study 2: Insufficient Coverage and Out-of-Pocket Expenses

Sarah, a 65-year-old retiree, was diagnosed with a chronic illness that required ongoing medical attention and assistance with daily activities. She had diligently purchased a long term care insurance policy to safeguard her future. However, when she needed to transition to an assisted living facility due to her worsening condition, she discovered that her policy’s coverage fell short of the expenses.

Sarah had to dip into her personal savings to bridge the gap, causing significant financial strain. The experience highlighted the importance of understanding policy details, including coverage limitations and exclusions, to ensure adequate protection.

Case Study 3: Denied Claims and Legal Battles

Robert, an 80-year-old policyholder, had been paying premiums for his long term care insurance policy for over two decades. When he finally needed to access his benefits after being diagnosed with Alzheimer’s disease, the insurance company denied his claim, citing ambiguous policy terms.

Feeling betrayed and left without the financial support he had anticipated, Robert sought legal recourse. The subsequent legal battle drew attention to the contentious issue of denied claims and sparked public discussions about the need for clearer policy language and better consumer protection in the long term care insurance industry.