1 / 17

Health and Lapse of Long-Term Care Insurance

Health and Lapse of Long-Term Care Insurance. R. Tamara Konetzka, PhD University of Chicago Ye Luo, PhD University of North Florida June 2008 Funding: NORC and University of Chicago Center on Aging. Background.

Patman
Télécharger la présentation

Health and Lapse of Long-Term Care Insurance

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Health and Lapse of Long-Term Care Insurance R. Tamara Konetzka, PhD University of Chicago Ye Luo, PhD University of North Florida June 2008 Funding: NORC and University of Chicago Center on Aging

  2. Background • Despite high cost of LTC and substantial probability of need, LTC insurance market remains small. • Most LTC financing proposals include expansion of LTC insurance. • Policies becoming more standardized and awareness increasing. • Issues of affordability, adverse selection, and moral hazard remain. • Lapse rates are high, especially soon after purchase.

  3. Why study lapse? • Consumers who lapse lose the investment they made in insurance premiums paid. • Thus lapse = renewed risk of the financial burden of LTC, but with less income. • We know very little about the attributes of people who lapse.

  4. Research Questions • What is the probability of lapsing a LTC insurance policy, controlling for competing risks? • What are the health characteristics of people who are likely to let a LTC insurance policy lapse? • Can income or health shocks explain lapse?

  5. Prior Research • Vast majority of studies were cross-sectional, focus on prevalence. • Important factors associated with having LTC insurance: middle income, middle assets, good health, higher education. • Purchase and retention of LTCI is an inherently dynamic process. • Only one rigorous study of policy lapse.

  6. Prior studies using longitudinal data • Cramer and Jenson 2006 • Study of purchase using HRS • Predictors of purchase similar to prevalence studies • Finkelstein, McGarry, and Sufi 2005 • Study of lapse using HRS • “dynamic inefficiency” in LTC markets • Lapsers are ex-post less likely to use a nursing home, though they are poorer and less educated

  7. Conceptual Framework • Purchasers assess value of LTC insurance policy in terms of cost, probability of needing LTC, and payout if LTC needs arise. • Must weigh cost of LTCI against other uses • Revisit decision over time as health and financial shocks are introduced

  8. Data • Health and Retirement Study, 5 waves 1996 – 2004. • Respondents born between 1924 and 1947 (age 49-72 in 1996). • 55,663 two-wave intervals, pooled. • Examined smaller subgroups for lapse analysis (up to 5,067)

  9. Determining Insurance Status • Used the question each wave: “Do you have any LTC insurance which specifically covers nursing home care for a year or more or any part of personal or medical care in your home? • Lapse = “yes” at time 1 and “no” at time 2. • “Have you ever cancelled/lapsed” question is very inconsistent over time; also unable to identify timing of lapse; also subject to recall bias.

  10. Potential Data Issues • Measurement error • Do people really know if they have LTCI? • Some inconsistent patterns over time • Solution: Group data by likely extent of measurement error and run sensitivity analyses • Lapse rates are sensitive to these groupings • However the predictors of lapse appear to be robust to this measurement error

  11. Transition Framework Status at time 1 = one of 2 discrete states: • In community without LTC insurance • In community with LTC insurance Outcome at time 2 = one of 4 discrete states: • In community without LTC insurance • In community with LTC insurance • Institutionalization • Death

  12. Methods Multinomial logit estimation of: • Transition probabilities from time 1 to time 2 • Effects of demographics, health, and financial characteristics at time 1 on lapse in time 2 Change Model-- Logit estimation of: • Effects of changes in health status between time 1 and time 2 on lapse in time 2.

  13. age gender race self-rated health education marital status income assets has kid has daughter number of kids number of nearby kids whether kids own home expect to leave a bequest Potential Predictors

  14. 2-Year Lapse Rates

  15. More likely to lapse: Poor self-rated health status Black Hispanic Lower income Lower assets Less educated More children Less likely to lapse: Very good health Female Retired & not working at all Kids work full-time Kids own homes Expect to leave a bequest Results: Predictors of Lapse

  16. Preliminary Conclusions/Implications • Sicker individuals less likely to buy LTCI but also more likely to lapse if they do buy it. • Unlikely that reassessment of risk can explain most lapse – more likely that affordability is the issue. • Expansions of the LTC insurance market to those who can marginally afford it may be inefficient and leave frail elderly worse off.

  17. Caveats/Limitations • Little information on attributes of policies, most importantly prices • Remaining measurement error • Still need to analyze 3-period transitions to assess the effects of changes in health and income over time

More Related