Why long-term care insurance often falls short
For 35 years, Angela Jemmott and her five brothers paid premiums on a long-term care insurance policy for their 91-year-old mother. But the policy does not cover home health aides whose assistance allows her to stay in her Sacramento, Calif., bungalow, near the friends and neighbors she loves. Her family pays $4,000 a month for that.
“We want her to stay in her house,” Jemmott said. “That’s what’s probably keeping her alive, because she’s in her element, not in a strange place.”
The private insurance market has proved wildly inadequate in providing financial security for most of the millions of older Americans who might need home health aides, assisted living or other types of assistance with daily living.
For decades, the industry severely underestimated how many policyholders would use their coverage, how long they would live and how much their care would cost.
And as Jemmott belatedly discovered, the older generation of plans — those from the 1980s — often covered only nursing homes.
Only 3% to 4% of Americans ages 50 and older pay for a longterm care policy, according to LIMRA, an insurance marketing and research association. That stands in stark contrast to federal estimates that 70% of people 65 and older will need critical services before they die.
Repeated government efforts to create a functioning market for long-term care insurance — or to provide public alternatives — have never taken hold. Today, most insurers have stopped selling stand-alone long-term care policies: The ones that still exist are too expensive for most people. And they have become less affordable each year, with insurers raising premiums higher and higher. Many policyholders face painful choices to pay more, pare benefits or drop coverage altogether.
“It’s a giant bait and switch,” said Laura Lunceford, 69, of Sandy, Utah, whose annual premium with her husband leaped to more than $5,700 in 2019 from less than $3,800. Her stomach knots up a couple of months before the next premium is due, as she fears another spike. “They had a business model that just wasn’t sustainable from the get-go,” she said. “Why they didn’t know that is beyond me, but now we’re getting punished for their lack of foresight.”
The glaring gaps in access to coverage persist despite steady increases in overall payouts. Last year, insurers paid more than $13 billion to cover 345,000 long-term care claims, according to industry figures. Many policyholders and their relatives reported their plans helped them avert financial catastrophes when they faced long-term care costs that would have otherwise eviscerated their savings.
Others have been startled to learn policies they paid into over decades will not fully cover the escalating present-day costs of home health aides, assisted-living facilities or nursing homes. And in other cases, people who are entitled to benefits confront lengthy response times to coverage requests or outright denials, according to records kept by the National Association of Insurance Commissioners, the organization of state regulators.
Jesse Slome, executive director of the American Association for Long-Term Care Insurance, an industry trade group, said longterm care was the most challenging type of insurance to manage. “You need multiple crystal balls,” Slome said. “And you have to look 20 years into the future and be right.”
The industry’s wobbly finances haven’t steadied despite a brief profitable surge during the coronavirus pandemic. Earnings rose because thousands of people who were drawing benefits, many in nursing homes or assisted-living facilities, died from COVID-19, and other policyholders died before using their insurance. Others stopped tapping their benefits because they fled facilities and went to live with their families, who provided unpaid care.
Overall, earnings went from $2.3 billion in losses in 2019 to two years of profits totaling $1.1 billion, before receding into the red in 2022 by losing $304 million, according to Fitch Ratings.
Still, none of that was enough to reverse the industry’s longterm decline. Doug Baker, a director in Fitch’s U.S. life insurance group, said long-term care insurance “is one of the riskiest in our universe” because of the lingering financial burden from underestimating the number of people who would tap their policies.
More insurers now offer hybrid plans that combine life insurance with long-term care. Those policies are less generous than the ones offered a decade ago — and using the long-term care benefit drains some or all of the money policyholders hoped to leave to their heirs.
Many experts believe it’s untenable to expect that a private insurance market can protect most people from the growing burden of long-term care costs.
“The whole situation is poorly suited to that kind of insurance offering,” said Robert Saldin, a political science professor at the University of Montana who studies the industry.
Starting in the 1970s, long-term care insurance was touted as a way to keep older people from eroding their retirement savings or resorting to Medicaid, the state-federal program for the poor and disabled. Early plans were limited to nursing home care but later expanded to cover in-home care and assisted-living centers. Sales of policies doubled between 1990 and 2002.
As demand grew, however, there were signs the industry had vastly miscalculated the cost of its products. Insurers set early policy prices competitively low, based on actuarial models that turned out to be markedly inaccurate. Forecasters’ estimates of policyholders’ longevity were wrong. U.S. life expectancy increased to nearly 77 years in 2000 from about 68 years in 1950, federal records show. And as people lived longer, their need for care increased.
STUDIO CITY, Calif. — Some of the mystery and controversy shrouding a sprawling Los Angeles-area property owned by a national Black Lives Matter nonprofit have dissipated for dozens of families grieving a loved one killed by police.
The Black Lives Matter Global Network Foundation Inc., which was widely criticized last year for purchasing a $6 million compound with donations that followed racial justice protests in 2020, hosted the families for a dinner at the home this fall. The event coincided with an annual conference in Southern California, where hundreds who are affected by police violence meet to find support in their journeys to healing, accountability and justice.
More than 150 dinner guests, including some who previously accused the foundation of using their loved ones’ names to raise tens of millions of dollars over the last decade, were not just fed and sent on their way. They were given tours of the gated property that has six bedrooms and bathrooms, a swimming pool, a soundstage and office space.
“It was laid out, it was beautiful, it was welcoming,” said Beatrice X Johnson, co-founder of Families United 4 Justice Network, the grassroots social justice group that convened the Sept. 28 to Oct. 1 conference.
She is an aunt to Oscar Grant, the young Black man fatally shot while restrained on an Oakland, Calif., transit station platform in 2009, and is married to fellow Justice Network founder Cephus X Johnson. The two are affectionately known as Uncle Bobby and Auntie Bee within the community of families — and they once counted themselves among the skeptics of the BLM foundation’s decision to purchase the property.
“There’s been a lot of controversy around this spot, even with families,” Auntie Bee said after the dinner. “The families wanted to see this place. That’s a no brainer. And who else would be invited to dinner there, if not the families impacted by police?”
As many of these families gather nationwide for another holiday season with empty chairs at their dinner tables, the BLM foundation says the Studio City home will continue to be a refuge for those grieving loved ones killed in incidents of police violence. It’ll also continue to serve as a campus for the foundation’s Black artists fellowship.
They officially call it the “Creators House.”
“I personally call it a home for freedom, because it is where Black people’s gifts and talents can be nurtured in order to flourish,” said Shalomyah Bowers, a BLM foundation board member.
“It’s where we’ve kept our activists and organizers safe. It’s where we plan and organize outside of the confines of white supremacy. And it’s where healing happens,” he added.
For nearly two years, Bowers and other board members have faced scrutiny over the foundation’s finances — a scrutiny accentuated by revelations the $6 million property had been purchased with little input from the organizers or families of police brutality victims, whose names rallied the larger movement. After revealing in 2021 more than $90 million in donations poured into the foundation following worldwide protests over the murder of George Floyd, the latest nonprofit tax filings showed the foundation with $30 million in assets.