Enabling Informed Consumer Choice in the Long-Term Care Insurance Market

Abstract

Provisions in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) may increase private long-term care insurance sales without imposing substantially more stringent consumer-protection features. The ability of consumers to make informed choices when purchasing this complex product is examined in light of these changes. Data were collected through detailed examinations of policies and interviews with industry experts, insurance companies, agents, consumer groups, and regulators. Because of the complexity of this product, the goals of expanding, consumer choice and ensuring that consumers are able to make informed decisions often work against each other. Mechanisms are discussed through which the government can facilitate informed choice and improve consumer protection. The authors contend that, because the government is providing tax incentives that encourage consumers to purchase the product, it has the responsibility to ensure that consumers understand the long-term care insurance they purchase.

Private Long-Term Care Insurance and State Tax Incentives

“…One of the more direct ways for policymakers to promote purchasing LTCI is to subsidize its purchase through tax incentives, an approach that has been implemented at both the federal and state levels. At the federal level, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) offered limited tax advantages for LTCI by clarifying the treatment of premiums for qualified plans as medical expenses for individuals deducting medical expenses beyond 7.5% of their gross income and by not taxing LTCI benefits up to certain limits (Lutzky and Alecxih 1999). States have also used tax policy to encourage purchase of LTCI, and we focus on those policies in this paper.…”

Design limitations of long-term care insurance schemes: A comparative study of the situation in Spain

“…so cial or vol un tary insur ance). EU and US LTC fund ing sys tems dif fer, both in the fi nan cial role played by the pub lic sec tor and in the de vel op ment of in sur ance mar kets (Kane et al, 1998;Lutzky and Alecxih, 1999). Fur ther more, pri vate in surance com ple ments and/or sup plants pub lic in sur ance en ti tle ment.…”

Financing Long-Term Care: Options for Policy

“…For consumers, under-pricing has been the greater danger; it has often led to an insurer's abandoning the market and pocketing the accumulated equity after subscribers, facing sharply higher premiums, have allowed policies to lapse. Limited staffing and lack of experience with long-term care insurance in state insurance departments have compounded the problem (Lutzky and Alecxih 1999).…”