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Comparing Long-Term Care Insurance Policies: Bewildering Choices for Consumers

A new AARP Issue Paper outlines ways to make long-term care insurance policies more comprehensible for consumers. The report, written by Bonnie Burns of California Health Advocates and published by AARP’s Public Policy Institute (PPI) was released at the National Association of Insurance Commissioners Quarterly Meeting on June 10th. It looks at the myriad considerations people face when selecting an insurance plan and recommends ways to make it easier for consumers to make sound decisions.

AARP Director of Policy John Rother said, "Comparing one long-term care insurance (LTCI) policy with another is a challenge, even for professionals. Consumers will find very little independent help or guidance to assist them during the decision-making process, and nothing that will help them easily choose one policy over another."

According to AARP, a big part of the challenge is that policies are so complex. Rother explains, "Consumers face a bewildering array of LTCI policy choices. These products contain an assortment of benefits and features, and come in policy designs that vary from one company to another, leading to significant product differences within a single state. Adding to consumers’ confusion are the variations in federal and state regulatory requirements that might be applied to the sale of different types of LTCI policies in a given state."

The report outlines the issues that cause difficulties for consumers in measuring and comparing LTCI policies. They include:

  • How many activities of daily living (ADLs) must be impaired to trigger benefits;
  • Which family members will not qualify as care providers for benefit payment; and
  • What type of assisted living facility qualifies for benefits.
  • How the daily benefit amount is calculated;
  • Whether benefits are increased for inflation and, if so, by how much;
  • How long benefits will last;
  • When premium payments might be waived;
  • What constitutes a home-modification benefit;
  • How medical underwriting is handled; and
  • The risks inherent in limited-term policies.

"Good insurance should protect us from high future costs, but it is unpredictable when someone will need long-term care insurance," Rother said. "The problem is whether the consumer can determine if the premium is fairly priced and the policy will meet their needs. The recommendations in the PPI report will not solve all the difficulties that consumers face. However, these recommendations could begin to make it easier for consumers to make sound decisions," he added.

The report recommends:

  • Standardizing policy benefits, features, and provisions.
  • Requiring all insurers to offer at least the same benefit packages that are offered through the Federal Long-Term Care Insurance Program.
  • Requiring that LTCI policies that pay benefits for multiple types of care make the total value of all purchased benefits available to the policyholder in any covered setting (nursing homes, assisted living, care at home, and so forth).
  • Requiring companies to offer an option for paying family caregivers, with appropriate monitoring.
  • Regularly revising and updating regulatory standards so that the regulatory framework becomes more up-to-date than it is currently.

AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have independence, choice and control in ways that are beneficial and affordable to them and society as a whole. We produce AARP The Magazine, published bimonthly; AARP Bulletin, our monthly newspaper; AARP Segunda Juventud, our bimonthly magazine in Spanish and English; NRTA Live & Learn, our quarterly newsletter for 50+ educators; and our website, AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

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