Out-of-pocket payments, Medicaid and help from relatives all remain larger sources of care for those who need it. There are about 8 million long-term care policies in force, covering a fraction of the nation's older population.
"Who should buy this and who shouldn't?" asked Bonnie Burns, a training and policy specialist for California Health Advocates, a pro-consumer group. "Well, sorry, it's much more complicated than that."
Complaints by beneficiaries -- centering on rejected claims and slow reimbursements -- have further complicated the decision, prompting Sen. Charles E. Grassley (R-Iowa) to recently ask large insurers for details on how they process claims.
The displeased customers include Betty Hoff, an elderly widow who moved into an assisted-living facility near her Central Valley home after her health declined a few years ago.
Hoff was insured by Bankers Life & Casualty. Her son, John N. Hibben, said in an interview that the insurer repeatedly resisted reimbursing him for the monthly out-of-pocket costs of more than $2,000.
"It took about a year and a half before we got our first payment," he said. Ultimately, the company paid up, Hibben said, but "it was a hassle for about three years."
Bankers Life declined to comment on Hoff's case. But spokeswoman Barbara Ciesemier said in a statement that the company was "committed to the highest standards for ethics, fairness and accountability, and we agree that every long-term care policyholder deserves assurance that their claim will be handled in a timely manner and in accordance with their contract."
Bankers Life and its parent, Conseco, approved 98% of claims submitted last year, she said, adding, "In rare instances, we make mistakes, but we are working hard to improve practices."
Supporters of the industry insist that horror stories are rare exceptions. Overall, just 3.3% of claims are denied, said Mohit M. Ghose, a spokesman for America's Health Insurance Plans, a trade group. "The vast majority of claims are paid," he said.
In California, about 12% of claims were denied in 2005, according to the state Department of Insurance. The agency is studying why that rate exceeds the national average.
A flurry of rate hikes in the 1990s and since 2000 also has caused controversy. Industry advocates say such increases mostly reflected growing pains of insurers that were still learning about the real costs and risks of products introduced in the 1970s and 1980s.
Consumer critics say the price boosts often followed "low-ball" premiums, cynically intended to draw in new customers. Though insurers cannot raise rates on individual policies, they can raise rates for entire categories of policyholders -- based on age, for example -- and records show that a portion of the industry has done so.
For people living on fixed incomes, "a rate increase of even 10[%] or 20% can have a dramatic effect on their ability to continue to pay those premiums," Burns said.
In California, eight of 24 companies currently licensed to write long-term care insurance have hiked rates at some point since 1990, according to the Department of Insurance. Twenty-three other firms that no longer offer new policies also raised rates during that period.
The price hikes are not universal, however, and the three biggest providers of such coverage -- representing about 70% of the market -- have shown restraint.
Among the top three, for example, John Hancock and MetLife have never raised premiums on the long-term care policies they have issued. Genworth Financial, the industry leader, recently applied for its first increase, which will average 10% and affect just under half of its current long-term care policies.