John O'Connor illustration
McKnight’s Editorial Director John O’Connor
John O'Connor
John O’Connor

When it comes to senior living payments, private long-term care insurance has been exiled to the children’s table. Actually, that assessment may be too kind.

Only a handful of insurers even offer the product anymore. Of those that do, premiums have skyrocketed while coverage has been dialed way down.

Americans have voted with their feet. And here’s the collective verdict on LTC insurance: no thanks.

Which really is too bad. Because LTC insurance could have been a payment contender. The product offered the promise of market rate payments to operators and peace of mind to policy holders. Alas, the actuaries at many insurance companies wildly underestimated both how long their customers would live and how rapidly costs would rise. As they say in tennis: game, set, match.

Does that mean operators should completely write off private insurance as a funding source? Not so fast.

In fact, a new packaging twist — combining life insurance policies with LTC policies — just might get private insurers back in the game.

This hybrid option accelerates death benefits should the policy holder experience a triggering health issue. And as these are whole life policies, they have a savings component and can accrue cash value. Why is this latter provision important? It nullifies a major objection: that policyholders will spend a fortune on premiums and not see a penny in return.

Some insurers are sweetening the pot by not requiring a large upfront investment (which often reaches $100,000 or more). Instead, the amount can be spread over several years. Another selling point: policy premiums will never rise in the future.

As for the benefit operators would see, it’s pretty simple, really. Better payments.

Put another way, would you rather have an insurer paying you retail for your services, or would you rather get whatever Medicaid rate your state sees as appropriate? As choices go, that’s really not one.

Lest I sound like a shill for the insurance industry, keep in mind these are insurance companies we’re talking about. So yes, proceed with a mature adult’s level of caution. Not to cast any aspersions, but let’s just say some carriers are not above ruthless tactics when it comes to denying and delaying what’s owed. So there’s that.

Still, hybrid policies do have a potentially huge payment upside. And it’s not like most communities are flush with cash these days.

Life is full of mysteries. Senior living operators not enthusiastically supporting hybrid polices probably deserves a seat at that table.

John O’Connor is editorial director of McKnight’s Senior Living and its sister media brands, McKnight’s Long-Term Care News, which focuses on skilled nursing, and McKnight’s Home Care. Read more of his columns here.