Medical Underwriting In Long-Term Care Insurance: Market Conditions Limit Options For Higher-Risk Consumers

Abstract

A key feature of private long-term care insurance is that medical underwriters screen out would-be buyers who have health conditions that portend near-term physical or cognitive disability. We applied common underwriting criteria based on data from two long-term care insurers to a nationally representative sample of individuals in the target age range for long-term care insurance (50–71 years of age). The screening criteria put upper bounds on the current proportion of Americans who could gain coverage in the individual market without changes to medical underwriting practice. Specifically, our simulations show that, for the target age range, approximately 30% of individuals whose wealth meets minimum industry standards for the suitability of long-term care insurance would have their long-term care insurance application rejected for medical reasons. Among the general population–without considering restrictions on wealth–we estimate that 40% would be disqualified. In evaluating long-term care financing reforms and their potential to increase private insurance rates, as well as to reduce financial pressure on public safety-net programs, policymakers need to consider the role of underwriting in the market for long-term care insurance.

Financing Long-Term Services and Supports: Continuity and Change

“…Further, LTC insurers have tightened their underwriting while reducing benefits, making it less beneficial for people interested in private LTC insurance to buy policies (Ujvari, 2012). A recent study estimated that 40 percent of the general population aged 50-71 could not pass the medical underwriting for LTC insurance (Cornell, Grabowski, Cohen, Shi, & Stevenson, 2016).…”

The Impact of Business Cycle on Health Financing: Subsidized, Voluntary and Out-of-Pocket Health Spending

“…Voluntary health spending is a direct financial incentive for unnecessary medical treatment. Besides, it allows households to share the risk of medical costs [21][22][23]. Out-of-pocket health spending can be used to assess the extent of financial protection within a country [24].…”

The Impact of Policy Incentives on Long‐Term Care Insurance and Medicaid Costs: Does Underwriting Matter?

“…Among those who apply for insurance, about 15–25 percent are disqualified (Cornell et al. ). Some firms offer differentiated pricing based on the applicant's underwriting score.…”

“…Underwriting practices put an upper bound on the potential for subsidies to increase the proportion of Americans who are covered by LTCI, and they subdue the offsets available from any increases that might occur: Approximately 40 percent of the U.S. population ages 50–70 would likely be disqualified from private long‐term care insurance for medical reasons (Cornell et al. ).…”