By Cyril Tuohy
Private long-term care insurers are expected to pay $34 billion in long-term care claims in 2032. This is an increase of 415 percent from the $6.6 billion in long-term care claims made last year, according projections by the American Association for Long Term Care Insurance (AALTCI).
The leading edge of the baby boom began to retire at the age of 65 in 2011. In 20 years, those retirees will have reached 87, an age when their long-term care insurance policies will kick in – if they haven’t already – to help pay for services.
“The quadrupling in benefit payments is the result of aging of policyholders, policy value increases and the continued growth of individuals purchasing protection,” Jesse Slome, executive director of the AALTCI, said in a statement.
In 2012, long-term care insurers paid $6.6 billion in claims to 264,000 policyholders, with the largest claim for any policyholder — man or woman — reaching $1.8 million.
Slome also said that the actuarial study didn’t include the billions of dollars insurance companies will pay out for hybrid or combination long-term care and life policies or annuities, which have been on a growth spurt recently.
“Billions more in yearly long-term care benefits will be paid to the growing number of people who are purchasing hybrid products, including life insurance policies that offer long-term care benefit riders,” Slome said.
The cost of long-term care is expected to grab a larger share of Medicare and Medicaid dollars as more people live longer and require help with basic living, either at home, in assisted living communities or in nursing homes.
Lawmakers in Washington have appointed a commission to study the nation’s future long-term care needs. Experts have testified that there is a role to play for private long-term care insurance, even as the burden of serving Americans’ long-term care needs will come largely from taxpayer-funded programs like Medicare and Medicaid.
The private market, which makes up only a fraction of total long-term care claims payments, already has raised rates on existing policyholders to pay for future claims.
Medicare and Medicaid will not be able to afford the cost for care, particularly when most 60-year-old women today can expect to reach the age of 85, Slome said. That’s where private coverage can step in and help.
"If you live a long life, the risk of needing long-term care is enormously high and most people have no plan in place to deal with this reality," he said.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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