Short-Term Care Insurance Finding a Market

Big premium increases for long-term care insurance (LTCi) have created new opportunities for short-term care insurance (STCi), a category that has kept a relatively low profile. Until now.

Proponents of STCi say the time has come to push hard and loud to promote the value of STCi. New plans call for launching a dedicated STCi website as well as a marketing campaign targeted at agents and consumers.

The flurry of activity surrounding STCi is no accident as 2015 shapes up to be record year for sales, predicted Jesse Slome, executive director of the American Association for LongTerm Care Insurance in Westlake Village, Calif.

There were 26,237 STCi policies sold in the first six months of 2015, an increase of 71 percent compared with the year-ago period, according to the National Advisory Center for Short Term Care Information, a new database dedicated to tracking STCi.

Premiums up

STCI premiums jumped 54 percent in the first half of this year compared with the year-ago period, the organization reported. Annual figures for 2015 will be released over the next few weeks.

“Agents need to seek other options to meet their client needs and a policy that provides one year of coverage is a very viable solution,” said Slome, in an interview with InsuranceNewsNet.

LTCi price increases and tighter underwriting standards have made it more difficult for consumers to qualify for LTCi, but they still want some protection, Slome said.

Costs for LTCi coverage rose 8.6 percent from 2014 to 2015, according to the 2015 Long-Term Care Insurance Price Index released in January 2015. LTCi carriers are raising prices to make up for years of underpricing LTCi policies. The current 2016 price index has not been released yet.

Unlike long-term care policies, which cover policyholders for years or decades, short-term coverage is designed to protect policyholders for less than a year and agents use the policies for senior retirement planning.

Clients who buy STCi usually become eligible for benefits when they need assistance performing two or more activities of daily living.

STCI fits because anywhere from 25 percent to 40 percent of LTCI applicants are declined, and because Medicare imposes coverage limits that people may not be aware of until it’s too late, Slome said.

Many applicants, who might get turned down by a LTCI carrier, might qualify for STCI through simplified underwriting. For agents who have gone through the trouble of applying for LTCI, only to get turned down, STCI offers some sort of saving grace, Slome said.

According to the National Advisory Center for Short Term Care Information, a 360-day benefit of $100 per day ($36,000  for home care, assisted living or skilled nursing home costs) for a male or female 65 years old would cost $61 a month in premium. The coverage would start right away.

The same benefit that would start after a 30-day waiting period for a 65 year old would cost $54 a month in premium.

Detractors say STCi, which serves as a stopgap to cover the 90-day period before an LTCi or a Medicare policy kicks in, isn’t really worth it.

Whether STCi delivers as it is designed to do, industry proponents say the time has come for STCi’s day in the sun.

Key meeting

A print marketing campaign underwritten by insurance carriers and distributors is planned for later this year as well as the launch of a dedicated website, www.shorttermcareinsurance.org. About $18,000 is coming out of the AALTCI to help build the website, Slome said.

The print campaign and the website follow the creation of the National Advisory Center for Short-Term Care Information, which was launched last year.

As many as eight STCi carriers have expressed an interest in funding the STCi campaign and Slome said he is scheduled to meet Feb. 9 with the carriers to firm up sponsorship details.

“Everything is always a step-by-step slow build,” he said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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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].