Long-Term Care Insurance

Coverage Varies Widely in a Developing Market Gao ID: HRD-87-80 May 29, 1987

In response to a congressional request, GAO provided information on private long-term care insurance policies, specifically: (1) policy benefits and premiums; (2) policy limitations and restrictions; and (3) the potential for abuse in the market.

GAO noted that comparison of the 33 policies it reviewed was difficult because: (1) definitions of care and other key policy features were not uniform; and (2) data on the effects of various policy restrictions and limitations on benefits were not yet available. GAO found that: (1) nearly half of the policies provided benefits for all levels of long-term care, including skilled, intermediate, custodial, and home care services; (2) over half of the policies covered mental disorders of demonstrable organic origin, such as Alzheimer's disease; (3) there was wide variation in both the duration and amount of benefits and in premium costs for all levels of long-term service; (4) policies with relatively short waiting periods were common, but they tended to duplicate Medicare nursing home coverage; and (5) nearly all of the policies contained restrictive clauses that attempted to establish medical necessity and reduce the likelihood that policyholders would receive benefits. GAO also found that: (1) the potential for abuse related to unclear policy language and marketing practices exists in the long-term care insurance market; (2) the National Association of Insurance Commissioners developed model legislation designed to protect consumers while allowing the insurance industry to experiment with different approaches to providing long-term care insurance; and (3) Congress may wish to consider legislation to reduce potential abuse during market development.

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