As the long-term care (LTC) marketplace evolves, some insurers are moving toward hybrid products that help policyholders age in place and avoid nursing homes or assisted living facilities for a longer period of time. The trend not may only benefit policyholders who prefer to remain in their own homes but could mean big savings for the insurers themselves.
- Hybrid long-term care insurance products combine life insurance with LTC and often have a cash benefit that policyholders can use as they please.
- The cash component allows policyholders to pay for in-home care, sometimes from family members, and age in place.
- Insurers also save money by keeping policyholders out of nursing homes for a longer period of time.
How the New Policies Work
The new hybrid policies are life insurance products with LTC riders and a cash component that policyholders can spend as they see fit for LTC services and sometimes for nontraditional caregiving options, such care as from family members and friends. They are far more flexible than conventional LTC policies.
In general, the hybrid products offer LTC benefits if the policyholder needs them and a life insurance death benefit if they don’t. So they are not a use-it-or-lose-it proposation.
Hybrid policies are currently available from companies like Brighthouse Financial, Nationwide, Securian Financial, River Source Life Insurance, and Lincoln Financial Group, which recently became the first carrier to offer a hybrid policy with a variable component linked to market performance—and thus market risk.
Lincoln’s MoneyGuard Market Advantage policy is the industry’s first variable life insurance policy with an LTC extension-of-benefits rider. The policy provides for "flexible care cash"—which allows policyholders to use up to 50% of their daily maximum benefit, without the need for receipts, to pay caregivers like family members.
Policies from Securian, Nationwide, and Brighthouse also offer cash benefits. With Nationwide’s LTC hybrid, CareMatters, for example, funds can be used in any way—perhaps for a wheelchair ramp, to pay for household chores like cleaning or mowing, or to pay an informal caregiver, such as a family member who is missing work to provide that care, according to Nationwide spokesperson Charley Gillespie.
“Underwriters recognize that consumers want to be at home to receive care, and consumers want to have the flexibility to allow anyone to provide care for them,” Gillespie said.
The Win-Win of Aging in Place
Policies that cover some types of care at home are not a new concept. The latest data from the American Association for Long-Term Care Insurance show that 51.5% of new LTC insurance claims paid for care in the policyholder’s home. However, many policies won't pay if the care is provided by a family member.
Insurers realize that the ability to stay in their homes and communities with family members and other potential caregivers nearby is not only what many policyholders want, but it can also play a large role in keeping claims costs down.
In addition to being potentially isolating, nursing home care is the most expensive option. The average cost of a private room in a nursing home is $290 a day, or $105,850 a year, according to the American Council on Aging. It can be lower in some areas but much higher in others—$500 a day, or $182,500, a year in the San Francisco area, for example.
By contrast, a homemaker (who provides services like cooking and cleaning) costs $24.50 an hour on average, while a home health aide (who provides more hands-on personal care but not medical care) averages $25 an hour. In either case they may only be needed for a few hours a day in order for a person to be able to remain in their home rather than move to a nursing home or assisted living facility.
Insurers are also drawing on lessons learned from organizations like Friends Life Care Partners, a Pennsylvania-based "continuing care retirement community without walls" whose members remain in their own homes and receive any necessary home care and related services as they age. It uses a variety of assessment tools to measure members' risk of, say, a fall or a stroke, and then addressees that risk, such as by recommending Tai Chi for balance or physical therapy for building strengthen, before a health incident that might require nursing home care can happen. Less than 3% of members are in nursing homes or assisted living facilities, according to the organization's president, Carol Barbour.
A number of insurers currently have pilot programs to test the value of similar interventions with their LTC policyholders. So far the results have been encouraging, which suggests that such initiatives could be the next big trend in the world of long-term care insurance.