Risky business: long-term care insurance underwriting

Inquiry. 1995 Fall;32(3):271-84.

Abstract

Private insurance is one strategy for financing the large and growing cost of long-term care. Little is known, however, about the extent to which medical underwriting may limit the potential of private insurance to cover nursing home care, or whether the underwriting criteria used in this relatively new market successfully identify high-cost groups. This paper uses data from the National Mortality Followback Survey to address these two questions. We estimate that between 12% and 23% of the population would be rejected for private long-term care insurance because of their health if everyone applied at age 65. These figures rise to between 20% and 31% at age 75. Our simulation results suggest that long-term care insurance underwriting criteria identify individuals who vary substantially in the financial risk they pose to insurers. In most cases, whether a criterion identifies a high-cost group is sensitive to the policy individuals are assumed to buy.

MeSH terms

  • Activities of Daily Living
  • Actuarial Analysis
  • Aged
  • Health Status
  • Humans
  • Insurance, Long-Term Care / economics*
  • Insurance, Long-Term Care / statistics & numerical data
  • Life Expectancy
  • Life Style
  • Nursing Homes / statistics & numerical data
  • Risk
  • Risk Management / organization & administration*
  • United States