America’s population is aging rapidly. In 2000, 12.4% of adults in the United States were age 65 or older. By 2018, that total had crept up to 16% and it continues to grow. In 2020, the percentage of Americans 65 or older is projected to reach 16.9% and by 2030 it’s forecast to top 20%.
So what changes as the population ages? Fulfilling the needs of older citizens takes on a higher priority. Health issues that limit a person’s ability to function independently – especially those who are chronically ill from ailments such as stroke, heart disease or dementia – are becoming more widespread as greater numbers of people grow older.
Being chronically ill is generally defined as being unable to perform, without substantial assistance from another individual, at least two daily living activities (eating, toileting, transferring, bathing, dressing, and continence) for at least 90 days due to a loss of functional capacity or requiring substantial supervision to protect the individual from threats to health or safety due to severe cognitive impairment.
Right now, millions of adults in the U. S. are estimated to be suffering from a chronic health condition. Of these, 6 in 10 adults have one chronic condition, and 4 in 10 are dealing with two or more ailments, according to the Centers for Disease Control2. A chronic condition almost always requires special accommodations or care to enable the person to live comfortably.
The cost of treating chronic conditions is staggering nationwide and can be financially devastating for individuals. National health spending is projected to increase by 5.5% per year until 20263 and as more of the population needs support, people are looking for ways to pay for services.
Insurers have anticipated this growing dilemma and taken steps to help individuals deal with chronic care costs - with mixed results. Individual Long Term Care Insurance (LTC), once thought to be a product with tremendous growth potential, has been supplanted by growing sales of benefit-linked or hybrid products offering care protection as a feature of a policy.4
Benefit-linked or “hybrid” products primarily offer long-term or chronic care protection in two ways: as a rider or additional benefit on top of the base policy, or as an endorsement written into the insurance contract. There are important distinctions between these two:
1. Policies that include long term care benefits as a rider or additional benefit often either charge a rider premium to fund the benefit or the base policy premium includes the cost of the benefit. Policy owners must pay these premiums even if they never use the long term care benefits. Still some other policies allow policy owners to split their face amount between a death benefit and long term care benefit.
2. By comparison, policies that include chronic care benefits as an endorsement typically don’t require any additional premium payments. With most policies that offer accelerated benefits for chronic care, no additional benefit is being created outside of the base policy and there are no out-of-pocket costs, though one-time fees usually reduce the amount when the benefit is exercised. The insured is simply accelerating his or her policy benefit to access a pool of money they need to pay for chronic care issues.
3. There also may be differences between the different types of policies/benefits in how policy owners access their benefits. Under most polices that offer long-term care benefits, after receiving qualified long-term care services, the policy owner must submit a claim for reimbursement which puts the responsibility on them initially to pay for services out of pocket. There also may be limitations on the types of services that are eligible for reimbursement. Policies that offer an acceleration of benefits for chronic care are often less restrictive, giving policy owners the freedom to spend the money any way they choose.
Life insurance and annuities with a chronic care benefit continue to grow in popularity because the benefit is included automatically with no added premium payments. The Chronic Care benefit provides a way to pay for care expenses and home modifications that may not be covered by some insurance that offers benefits for long term care or Medicare.