Division of Aging, North Carolina Department of Human Resources,
for the North Carolina General Assembly
March 1996
Since at least 1987, North Carolina has been a leader in promoting the public's interest in the availability of quality long term care insurance policies. This leadership is evident in the fact that North Carolina ranks near the top among states in its application of the Long Term Care Insurance Model Act and Regulation developed by the National Association of Insurance Commissioners. North Carolina consumers of long term care insurance have also benefited from the valuable role assumed by the Department of Insurance's Seniors' Health Insurance Information Program (SHIIP), including its development of the North Carolina Guide to Long-Term Care Insurance.
Long term care insurance is a relatively new line of business in North Carolina. As of February 1, 1996, there were 68 licensed insurers who had obtained approval of at least one long term care product for use in North Carolina. A report of experience among 59 insurers for 1994 showed an incurred claims total for North Carolina in excess of $32.5 million and earned premiums for this period of more than $113 million. Of the 73,854 persons insured, 34 percent were covered under a policy less than a year old and only 4 people were covered by a policy held for 10 or more years.
Signs of growth in the sale of long term care insurance were evident in a special survey of insurers conducted for this report in February 1996. More than half of the reporting companies started selling long term care insurance in 1990 or later, and most of the others since 1988. Among the 30 companies that provided annual sales data, their total volume of sales in 1995 was 4.5 times the volume of policies sold in 1990. According to these insurers, more than 60 percent of the buyers of long term care insurance are women, and nearly 63 percent of the purchasers are age 60 to 74. These demographic characteristics are consistent with what is known about the experience of other states.
Findings from this survey show that an annual premium for a basic policy for a 60-year-old is likely to be less than $750 per year, varying by the elimination period and duration and amount of policy benefits. An increasing number of North Carolinians may be able to afford long term care insurance, especially with some economic incentives. The survey results also indicate that insurers are exploring innovations in the design of benefits, including alternate plans of care and coverage for assisted living and, to a lesser extent, a disability model that gives policyholders the option of a cash benefit instead of reimbursement for specific services. While North Carolina's experience with long term care insurance is growing and maturing, there is still much that can be learned from the experience of other states.