Nursing Home Coverage : Long-Term Care Policies Catch On

Private health insurers have begun to wake up to a new and potentially lucrative market: the coverage of nursing home and other long-term care expenses that have often drained the life savings of elderly Americans.

Aetna Life Insurance Co. last month became the latest in a stream of companies to offer long-term care policies. The company said it would offer 7,500 retired employees of the state of Alaska an insurance policy covering nursing home care or home care, and it said similar policies would be made available in other states.

The action marks a new stage in the development of the long-term care insurance market, because the Aetna policy is the first to be sold through an employer group, industry officials said.

Virtually all the 200,000 individuals who have already bought long-term care insurance purchased the coverage directly from the companies, rather than purchasing it as part of a group. Most health insurance is obtained through groups, either paid for by an employer or by group members.

Industry officials said the market for long-term care insurance would grow much faster if more group coverage is made available, because such coverage is cheaper and easier to market than individually written policies.

Robert A. Hall, an assistant vice president for Aetna, said: “You could have a couple of million people” signed up for private, long-term coverage within several years. “And I think that’s very conservative,” he added.

While some industry experts said such projections were too optimistic, it is clear that insurance companies, after years of reluctance to cover nursing home costs, have begun to take an interest in long-term care.

Stumbling Blocks

About 30 companies offer long-term care policies, roughly twice the number of two years ago, and another 30 are exploring the possibility, said Arthur Lifson, a vice president for Equicor, a major insurance company. Many industry giants are offering such policies, including Aetna, Prudential Insurance Co., Metropolitan Life Insurance Co. and Travelers Corp., which has also begun offering a group policy but has not yet signed any employers.

“I think everyone’s taking it very seriously,” said Lifson. “Whether or not there’s a lot of growth in the future will depend on how the early entrants grow.”

The growth of the long-term care insurance market has been hampered in the past by industry fears of the unknown and the potentially astronomical cost of paying for nursing home care--anywhere from $20,000 to $40,000 a year, industry officials said.

The policies have also not been popular among consumers, because many erroneously believe that Medicare covers the majority of long-term care costs, officials said. In fact, Medicare covers few of these costs, and people must often liquidate their life savings to qualify for Medicaid, the federal-state insurance program for the poor that does cover some nursing home costs.

But the increasing publicity about catastrophic health costs has heightened demand for long-term care insurance, industry officials said.

Some congressional officials and other health-care experts expressed doubt that the private sector would have a major effect in helping low- or middle-income people, and they said the federal government may eventually be forced to shell out more money for nursing home care. They pointed out that private long-term insurance is still relatively expensive for many people.