EBRI Issue Brief

Long-Term Care Financing and the Private Insurance Market

Aug 1, 1991 24  pages


  • The number of individuals with long-term care insurance policies grew from 815,000 in 1987 to nearly 2 million in 1990. The number of companies selling long-term care insurance nearly doubled over the same period, from 75 to 143.
  • Nursing home expenditures totaled $47.9 billion in 1989, of which fully 45 percent was financed through consumer out-of-pocket payments. Most of the remainder (43 percent) was financed through the Medicaid program.
  • Although the long-term care insurance market is currently dominated by policies that are sold individually or through associations, employer-sponsored plans offer several benefits over individual policies and could potentially dominate the market in the future.
  • Newer long-term care insurance policies no longer include many of the restrictions imposed on earlier products, such as limitations on preexisting conditions, prior hospitalization as a prequisite for nursing home coverage, and/or skilled nursing care as a prerequisite for home- or community-based care.
  • Ambiguity surrounding the tax treatment of long-term care insurance might be an impediment to the market for long-term care insurance—particularly employer-based group insurance. This possibility has led policymakers and private industry to call for clarification of the tax code.
  • Currently the subsidy for out-of-pocket long-term care is limited to the dependent care tax credit and expenses paid from a dependent care spending account—both applicable only under specific circumstances.