Long-Term Care Insurance: High Price, Lack of Understanding Hurt Sales in Indiana
In May 1993 the state of Indiana implemented the Indiana Long Term Care Program (ILTCP, or partnership program). This was a public-private partnership to finance long-term care. ILTCP provides one dollar of asset protection for each dollar paid out by the purchaser's insurance policy (known as partnership policies).
Once the insurance has paid benefits in an amount equal to remaining assets, the purchaser may apply for Medicaid to help pay for continuing long-term care without having to spend down the protected assets.
The project was part of the Robert Wood Johnson Foundation's (RWJF) national Program to Promote Long-Term Care Insurance for the Elderly.
Policy sales have been lower than expected, due chiefly, according to the project director, to the policy's high price (compared with other, nonpartnership policies) and a lack of understanding and acceptance of ILTCP by insurance agents.
As of September 30, 2000, 12,641 policies were in effect, 58 people were eligible for benefits, seven had exhausted their benefits and four had accessed the state's Medicaid program.
RWJF provided $427,780 for planning and $2,048,672 for implementation of the project.
The number of Indiana residents 65 and older was expected to increase from 585,690 in 1980 to 737,420 by 2010, with the highest rate of increase occurring in the 85-and-older age group. The average daily cost of nursing home care was expected to increase from $100 in 1996 ($36,500 a year) to $250 in 2016 ($91,250 a year). In 1987 the governor signed into law a bill that established the Indiana Long Term Care Insurance Project, which was designed to encourage development of the long-term care-insurance market and to reduce the impoverishment elderly people frequently experience in order to finance long-term care.
Planning grants were awarded to the Indiana State Budget Agency. Midway through the project, the state created the Office of the Secretary of Family and Social Services, and the project was shifted to that agency for the implementation phase.
During the planning and implementation grants, the grantee institutions accomplished the following:
- Established a Consumer Advisory Committee to assist with the development of insurance policy regulations and the consumer education component of the project.
- Developed a public-private partnership model in which individuals would purchase insurance coverage equal to the assets they wish to protect. Payments from the private insurer would count as the spending down of assets for the purpose of establishing Medicaid eligibility, and individuals would be able to maintain control of assets equal to the amount paid by the insurance policy.
- Specified the criteria that policies from participating insurers would have to meet to qualify as partnership policies, and recruited private insurers to participate in ILTCP.
- Designed a public-use database for receiving quarterly data from insurers, edited the database, incorporated it into the UDS, and used it to generate reports summarizing ILTCP activity and sales.
- Designed and implemented a consumer education campaign. Grant funds were used to establish the Senior Health Insurance Information Program a consumer counseling and information service about long-term care insurance, with 99 operational local sites in 78 of Indiana's 92 counties and a toll-free telephone line. Other public awareness and outreach efforts included public presentations to consumers, media days in which communities were targeted for an intensive one-day media focus, placing articles and public service announcements on ILTCP in the general and trade print media, radio presentations and public service announcements, television spots, a 10-minute video on ILTCP; and a Web site with information related to ILTCP: www.state.in.us/fssa/iltcp.
- Of the 16,384 calls received at Indiana's Senior Health Insurance Information Program toll-free line (1-800-452-4800), 35 percent were about long-term care insurance or the Indiana Partnership.
- Refined case management procedures for use in the partnership program.
- Evaluated program marketability among different consumers.
- Collected and analyzed data concerning the use of long-term care services in Indiana, with a focus on determining the characteristics of the aged population and spend-down patterns. Project staff also developed their own model to estimate the effect of increased long-term care coverage on the state Medicaid budget.
- Fostered state legislation to establish statutory authority for the new insurance standards associated with ILTCP.
- Filed and received approval for a Medicaid state plan amendment from the HCFA, allowing ILTCP policyholders to access Medicaid benefits without spending all of their assets.
- Organized an outreach effort to insurance agents and other financial planners. These efforts included regional seminars, quarterly agent newsletters, monthly agent updates, marketing and information materials and tools, a brochure, and articles for trade publications.
- Implemented ILTCP in May 1993, enabling policyholders to protect a dollar of assets for each dollar of program policy benefits paid out for long-term care services.
- Made regulatory and statutory modifications to ILTCP based on market response and to address price concerns. For instance, a legislative change removed the requirement mandating that insurers offer only policies that provide both institutional and home and community-based services a change that may lower some policy prices by 25 to 33 percent. ILTCP staff also forged a state plan amendment expansion that added a disabled category to the program, thereby allowing asset protection for ILTCP policyholders younger than the age of 65.
The following description of benefits is based on the most current information available.
- Minimum amount of insurance required: one year
- Minimum benefits: $85 per day for nursing home, 50 percent of policy nursing home benefit for home and community-based services
- Coverage after long-term care insurance expires: Medicaid, with asset protection equal to the amount of money the partnership policy paid out. When covered by Medicaid, an income contribution from the purchaser is required.
- Inflation adjustments: increases of 5 percent compounded annually. Previous adjustments are figured into successive adjustments.
- Requirements for policyholders to begin receiving benefits: one of following: (1) deficiency in two out of five ADLs, (2) cognitive impairment, (3) complex, unstable medical condition
- State subsidies: none
In March of 1998, legislation passed that offered both dollar-for dollar and total asset protection. This made Indiana the only state to offer a hybrid model. Since December 31, 1998, the number of policies sold has increased by 100 percent, suggesting that the hybrid model is attractive to consumers and agents.
ILTCP sales have been slower than expected. As of September 30, 2000, 12,641 policies were in effect, 58 people were eligible for benefits, 7 had exhausted their benefits and 4 had accessed the state's Medicaid program. (Three individuals who had exhausted benefits but not accessed Medicaid are still spending down their assets to the level they insured for a situation that occurs if policyholders, at the point when their private insurance expires, have more assets than were covered by the partnership policy.)
Based on feedback from insurers, agents, and consumers, price has been the primary obstacle to policy sales (for $160,000 worth of coverage, an individual who takes out a policy at age 45 would pay $645 per year; at age 55, $1,006 per year; at age 65, $1,838 per year), along with a lack of understanding and acceptance of ILTCP policies by insurance agents.
Further, initial ILTCP standards inhibited companies from developing, filing, and offering new generations of partnership policies. This limited the ability of ILTCP policies to compete in the long-term care-insurance market. As of December 1998, 13 insurance companies were participating in ILTCP.
During the 10-year span of these grants, project staff published nine project-based reports, four journal articles, and two newsletters. During the implementation phase, the grantee institution conducted a publicity campaign to educate the public about the program. During the campaign, 74 informational presentations were given, 2 videotapes were produced, and 3 news releases were distributed. This resulted in 68 articles in mass-media print outlets, including USA Today, The Indianapolis Star, and Consumer Reports, and 13 radio or television shows mentioning or featuring ILTCP. Since September 1995, the Indiana Partnership for Long-Term Care has conducted over 300 presentations reaching more than 10,200 consumers and insurance professionals.
A 1999 direct mailing was sent to more than 300,000 residents of Indiana, generating many responses about the Partnership program. Detailed information concerning ILTCP can also be found on the program's Web site: www.state.in.us/fssa/iltcp. (See the Bibliography for details.)
According to the project director, there are three main lessons to be learned from ILTCP:
- Communicating with, learning from, and modeling after other states' partnerships for long-term care programs is essential in helping speed up the implementation process, as well as providing valuable perspectives about administrative, policy, and marketing issues.
- Developing good working relationships with the Medicaid and state insurance Departments, the national program office, and the insurance companies can help expedite implementation.
- Treating insurance agents as partners in the program is crucial to the program's success, since agents need to believe in a product in order to produce sales.
- Partnership policies must be kept current with improvements in other policies to remain competitive, or sales will suffer.
- The inflation protection policy feature needs to be fully understood by the agent and explained to the consumer, because indexing for inflation increases a policy's premium substantially. If consumers and agents do not understand the long-term value of inflation protection, they may not be able to fairly differentiate between premiums for inflation-protected and non-protected policies.
AFTER THE GRANT
Indiana, along with Connecticut, California and New York, continues to offer the specially tailored long-term insurance policies.
The partnership programs have saved the four states $8 million to $10 million in health care bills, plus it allows them to be more assertive in prodding people to get long-term care insurance because the policies are more affordable, said Mark Meiners, the director for the Center for Health Policy, Research and Ethics at George Mason University and an architect of the partnership program.
OBRA 1993's Effect on the Model
The Omnibus Budget Reconciliation Act of 1993 contained language with direct impact on the expansion of partnerships for long-term care to other states. The Act recognized the four initial states, plus a future program in Iowa and a modified program in Massachusetts. These six states were allowed to operate their partnerships as planned because their state plan amendments had been approved by the Department of Health and Human Services before OBRA 1993 went into effect. The remaining states were prohibited from doing so.
New Federal Legislation Expands the Model
In the spring of 2006, President George W. Bush signed legislation that was part of a larger budget-cutting measure that allows the long-term care insurance partnership model to be used in all 50 states. Besides increasing the incentives to purchase long-term care insurance, the bill made it harder for seniors to give away money and property before asking Medicaid to pick up their nursing home tabs.
Mark Meiners said he hoped the nationwide clearance for the programs will help spur interest in consumers to buy coverage and in insurers to offer it.
GRANT DETAILS & CONTACT INFORMATION
Indiana Program to Promote Long-Term Care Insurance for the Elderly
State of Indiana, State Budget Agency (Indianapolis, IN)
- Planning Grant
Amount: $ 327,800
Dates: January 1988 to September 1990
- Planning Grant
Amount: $ 99,980
Dates: August 1990 to July 1991
Carol Cowgill Kramer
State of Indiana Office of the Secretary of Family and Social Services (Indianapolis, IN)
- Implementation Grant
Amount: $ 1,263,611
Dates: August 1991 to June 1995
- Implementation Grant
Amount: $ 785,061
Dates: August 1995 to June 1998
Mary Ann Marvin
(Current as of date of this report; as provided by grantee organization; not verified by RWJF; items not available from RWJF.)
Books and Reports
Hogan JT. Policyholder Survey. Indianapolis: Indiana Long Term Care Program, May 1999.
Hogan JT. Program vs. Non-Program Sales. Indianapolis: Indiana Long Term Care Program, May 1999.
Project staff. Agent Manual. Indianapolis: Indiana Long Term Care Program, 1994; revised September 1998.Thousands printed and sold.
Project staff. Indiana Partnership Select Agent Directory. Indianapolis: Indiana Long Term Care Program, 19971998. 3 editions developed; hundreds printed and distributed.
Project staff. Insurer Participation Requirements, Manual. Indianapolis: Indiana Long Term Care Program, revised September 1998.Less than 75 printed and distributed.
Project staff. Newspaper Articles Indiana Long Term Care Program. Indianapolis: Indiana Family and Social Services Administration, 1994.
Project staff. Partnership Guide for Agents. Indianapolis: Indianapolis Long Term Care Program.Revised September 1998. 800 printed; 700 sold/distributed.
Project staff. Policy Comparisons Indiana Long Term Care Program. Indianapolis: Indiana Family and Social Services Administration, August 1994.
Scanlon L. Sales Trends for Program and Non-Program Long Term Care Insurance Policies for Companies Participating in the Indiana Long Term Care Program, 19911993. Indianapolis: Indiana Family and Social Services Administration, August 1994.
Hack MA. "Partnership Program Helps to Provide Long-Term Care." Issues in Business, September 1997.
Jarnagin VL. "A Call to Action for National Long-Term Care Reform: Indiana's Private-Public Cooperative as a Model." Indiana Law Review, 29:2, 1995.
Kreier R. "Success Unclear for Long-Term Care Plan Experiment." American Medical News, June 10, 1996.
Brochures and Fact Sheets
"Your Piece of Mind." Indianapolis: Indiana Long Term Care Program. July 1996.
"What You Should Know about Long Term Care Answers to the Most Commonly Asked Questions from the Indiana Long Term Care Program." Indiana Long Term Care Program; Summer 1996, revised May 1998.
"New Tax Deductions for Long Term Care Insurance." January 1997.
"1999 Self-Assessment Guide for Long Term Care Insurance." Senior Health Insurance Information Program and the Indiana Long Term Care Program, Revised 1999.
"Long Term Care and the Indiana Long Term Care Program." Indianapolis: Indiana Long Term Care Program, January 1999.
Partners. Indianapolis: Indiana Long Term Care Program. 199598: seven issues developed; thousands printed and distributed.
Update Partners. Indianapolis: Indiana Long Term Care Program, 199598. 22 bulletins developed; thousands printed and distributed.
World Wide Web Sites
www.state.in.us/fssa/iltcp provides information related to Indiana Long Term Care Program. Indianapolis: Access Indiana, Summer 1998.
Audio-Visuals and Computer Software
The Missing Piece of the Retirement Puzzle, a videotape. Indianapolis: Indiana Family and Social Services Administration, 1994. Revised August 1996. 450 copies produced; 410 sold/distributed.
Celeste Holm Public Service Announcements, three 30-second and one 60-second public service announcement. California: California Partnership for Long Term Care, April 1998. Have not been distributed to date.
Press Kits and News Releases
News release on the Indian Long Term Care Program, mailed on January 1996.
News release on the Indian Long Term Care Program, mailed on May 1996.
News release on the Indian Long Term Care Program, mailed on May 1998, to central Indiana newspapers published by Westside Enterprise, Indianapolis: Hendricks County Flyer, Plainfield; Challenger, Greenwood; Franklin Challenger; Lafayette Journal & Courier; The Spotlight, Indianapolis; Indianapolis Recorder.
Report prepared by: Robert Crum
Reviewed by: Marian Bass
Reviewed by: Molly McKaughan
Program Officer: Stephen Somers
Program Officer: Pamela Dickson
Program Officer: Nancy Barrand
Program Officer: Andrea Gerstenberger
Evaluation Officer: Joel Cantor
Evaluation Officer: James Knickman