The insufficiency of the private insurance market in providing financial security for older Americans in need of home health aides, assisted living, or other forms of daily assistance has been evident. For many years, the industry underestimated the number of policyholders who would utilize their coverage, their lifespan, and the cost of their care.
Jemmott, as it turns out, discovered this fact belatedly, particularly with regards to older plans from the 1980s that only covered nursing homes.
According to LIMRA, an insurance marketing and research association, only a small percentage (3% to 4%) of Americans aged 50 and above have a long-term care policy. This is in stark contrast to federal estimates that indicate 70% of individuals aged 65 and above will require critical services before their passing.
Despite repeated government efforts to establish a functional market for long-term care insurance or provide public alternatives, these initiatives have not gained traction. Currently, most insurers have ceased selling stand-alone long-term care policies due to their exorbitant costs, which continue to rise each year. As a result, policyholders are faced with difficult choices of paying more, reducing benefits, or completely dropping their coverage.
Laura Lunceford, a 69-year-old resident of Sandy, Utah, describes the situation as a "giant bait-and-switch." Her annual premium, along with her husband's, skyrocketed from less than $3,800 to over $5,700 in 2019. She experiences anxiety months before the next premium is due, fearing another significant increase. She criticizes the insurance industry for having an unsustainable business model from the start and expresses frustration at the lack of foresight on their part.
Despite the substantial payouts made by insurers, there are still glaring gaps in access to coverage. In the previous year, insurers disbursed over $13 billion to cover 345,000 long-term care cases.
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