The House-passed health bill could further batter the already-beaten down market for long-term care insurance. And drive even more middle income seniors into impoverishment and onto Medicaid long-term care.
Here’s why: The House bill, called the American Health Care Act (AHCA) would significantly raise health insurance premiums and out-of-pocket medical costs for buyers aged 50-64. And that is exactly the age at which people think about buying long-term care (LTC) insurance. While only about 9 percent of buyers are under 50, two-thirds are age 50-64, according to an industry survey.
But if the AHCA sharply increases their health costs, they will be far less likely to buy long-term care insurance. Those most likely to want to purchase will be those who believe they will need care. LTC insurers will either not sell them coverage due to their pre-existing conditions or sharply raise premiums for all, further driving healthier consumers out of the LTC insurance market.
The AHCA’s effort to raise medical costs on older or sicker consumers has been well documented. To start, carriers could charge people 50-64 five-times what they charge younger buyers for the same insurance. The Congressional Budget Office estimates that premiums (including subsidies) for a 64-year-old making $26,500 would rise from $1,700 under the ACA to $14,600 under the initial version of the House bill. A 64-year-old making more than $115,000 would lose all subsidies and pay more than $19,000 annually for health coverage under the first version of the AHCA. The agency has not yet scored the bill that passed the House but the cost of a similar policy is unlikely to change very much.
Raising the maximum premiums for 50-64 year-olds may reflect actuarial reality, but it would impose a heavy new financial burden on people at exactly the time they are deciding whether to buy long-term care insurance.
And that’s just the beginning. The law also would allow states to permit health insurance companies to slash benefits, increase out-of-pocket costs, or raise premiums even more, especially for those with pre-existing conditions. All those changes would further drive up the medical costs of the 50-64 group and cut even more into the financial resources they’d have to pay for long-term care coverage.
Interestingly, a pre-existing condition such as cancer could raise the price of a health policy but not necessarily disqualify a buyer from LTC coverage. Why? Cancer patients need costly medical treatment but rarely require long periods of non-medical personal care.
Given the choice between buying health insurance or long-term care insurance that they’d likely not need for two decades or more, nearly all middle-age, middle-income consumers already choose health coverage. Raise the cost of their health insurance and even more will make that choice.
Alternatively, some consumers may not buy health insurance at all because it is unaffordable, or may buy less expensive insurance that covers less. Whether they are uninsured or underinsured, they’ll have to pay more of their medical costs out-of-pocket, leaving them with less to buy LTC insurance. Those premiums currently average about $2,700.
A crushing new financial burden on middle-income consumers aged 50-64 is the last thing the private long-term care insurance industry needs. Thanks largely to rising premiums, sales of stand-alone policies fell from 750,000 a decade ago to barely 100,000 last year.
And there is more bad news. People who forgo medical care in their 50s and 60s are more likely to develop untreated chronic conditions that may lead to long-term care needs in old age. Imagine, for example, a 60-year-old who has undiagnosed high blood pressure. She doesn’t go to the doctor because she has no health insurance. A few years later, she suffers a major stroke.
She’ll have fewer resources to pay for her now-extensive personal care needs. And that would make it more likely she’ll turn to Medicaid, the federal program that funds between one-third and one-half of all paid long-term supports and services. The fewer resources middle-income people have, the more likely they’ll impoverish themselves paying medical and long-term care costs. And the more likely they’ll land on Medicaid—a program the AHCA would cut by nearly $1 trillion over the next 10 years.
The AHCA would create a perfect storm for those aged 50-64. It would increase their medical costs, leave them with less money to save or purchase long-term care insurance, increase the chances they’ll develop chronic conditions that will lead to long-term care needs, and drive them onto Medicaid, which the House would cut.
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