Long Term Care

What Is COVID-19's Potential Impact On Long-Term Care Insurance?

Elderly experiencing ‘outsized toll’ from the pandemic

New market research from the American Academy Actuaries focuses on the pervasive impact of COVID on our health care systems. Read the issue brief Impact of COVID-19 on Long-Term Care Insurance here.

WASHINGTON, — 2/2/2021 — A new issue brief from the American Academy of Actuaries applies actuarial expertise to provide an understanding of how COVID-19 could impact long-term care insurance (LTCI), including LTCI delivery, demand, and markets, as well as new public policy considerations.

“The elderly, who most benefit from long-term care services, have as a group experienced an outsized toll from the COVID-19 pandemic, adding to our sense of need to assess the pandemic’s consequences for long-term care insurance,” said Bruce Stahl, a member of the Academy’s Long-Term Care Reform Subcommittee, which authored Impact of COVID-19 on Long-Term Care Insurance. “Adjustments to underwriting and persistent low interest rates are COVID-19-related impacts already clearly affecting LTCI. More time and experience will tell if there are other consequential effects, such as a shift from facility to home care settings, or increased care needs for COVID-19 survivors.”

COVID-19 could have other meaningful impacts on LTCI, including:

  • Mortality and morbidity changes if they affect claim periods and/or claims incidence compared to what was previously expected.
  • Changes in the demand/delivery for long-term care services such as the increased use of telehealth.
  • Changes in policy lapse rates due to economic conditions or fear of infection in care settings.
  • Delays in LTCI regulatory filings or approvals, and/or the introduction of charges or costs affecting insurer margins or insurer solvency of potential concern to regulators.

Excerpts From the American Academy of Actuaries Issue Brief:

Morbidity: Claim Incidence Rates

It is possible that LTCI claims incidence rates could either increase or decrease in the short term as a result of COVID-19. Some factors may reduce incidence rates, including:

  • Mortality due to COVID-19 among those that would otherwise begin receiving formal care.
  • Concern about entering a nursing facility where COVID-19 infection and mortality rates have been higher than observed across the general population
  • Fear of having an infected home health worker entering the home
  • Hesitancy to visit doctors to seek medical clearance for LTCI claim eligibility
  • As more Americans work from home, a shift toward informal care with more sources available for such informal care
  • Fewer injuries as people are reducing activity, shifting away from driving, reduced vacations, and other physical activities in favor of isolation-type activities

Data through the second quarter of 2020 suggest that some carriers are, in fact, experiencing reduced incidence rates in the short term. At the same time, there will be factors that may increase incidence rates, such as complications or health impairments affecting COVID-19 survivors. Though there remains significant uncertainty concerning the long-term health impacts of COVID-19, certain complications may lead to higher incidence rates if survivors have decreased ability to perform activities of daily living (ADLs). While more speculative than empirical at this stage, it is hypothesized that, during the pandemic, more people will gain weight and be less fit due to increased stress partially driven by less social interaction, gyms being less accessible, and factors relating to other local restrictions.

Adjustments to underwriting and persistent low interest rates are COVID-19-related impacts already clearly affecting LTCI...

With respect to long-term impacts, early indications show an increased impact related to nursing homes and facilities that seems to have created a reduction/deferral of new entrants into those facilities. Deferral could be in the form of not claiming or extending home care services. Non-claims may also be a result of inability or reluctance to see a doctor due to quarantines and general COVID-19 fears.

LTCI Claim Termination Rates, including Claimant Mortality, Recovery, and Exhaustion of Benefits

COVID-19 is generally expected to increase claim termination rates in the short term. This is fueled, at least in part, by increased mortality rates among older people with underlying health conditions who contract COVID-19. People in LTC facilities appear to have been heavily impacted. Generally consistent with the AARP findings cited earlier, the New York Times reported in June 2020 that more than 40% of COVID-19 deaths were linked to nursing homes.

Early data support the notion that LTCI claim terminations will increase in 2020. One carrier (Unum) announced publicly that LTC claimant mortality increased by 30% in the second quarter of 2020.

With respect to an LTCI privately insured population, however, it bears mentioning that a significant portion of the COVID-19 deaths may be associated with Medicaid-funded homes, which might not house a meaningful number of insureds.

As we move to longer-term impacts on LTCI claimant mortality, items to consider include:

  • Will the increase in claimant mortality in the short term create lower claimant mortality long term? Is the impact mostly limited to those who would have experienced earlier claimant mortality rates anyway?
  • Will a deferral of claims lead to increased future claimant mortality as insureds may be less healthy upon claim? Correspondingly, would recoveries and benefit exhaustions be fewer?

Aside from the disabled life mortality impact, there may also be an uptick in claim recovery rates as insureds discontinue formal care over concerns of becoming infected at their facility or through a home health worker. To a lesser extent, facility terminations may be compounded as families explore home care options that may not have been considered prior to the pandemic. This seems to be more likely in the short term with some potential ramifications longer term.

Benefit Utilization

In the short term, the difficulty in attracting workers due to medical concerns and temporarily increased unemployment benefits may increase LTC costs. This may be offset as those who need care reduce home care visits and thus home care utilization. These impacts may vary dramatically across different parts of the country.

In the longer term, if utilization in facilities decreases as a result of the pandemic, this could mean that insureds are either receiving services in a home care setting or delaying services all together. Either of these would seemingly drive higher utilization in the future, with the former driving higher benefit utilization in the home care setting and the latter increasing utilization in all settings. Other items to consider include:

  • In cases where utilization is already near 100%, will there be minimal future impact?
  • What will happen to labor costs as competing forces are at play, including higher unemployment and health concerns for workers in this field?
  • What will happen to facility costs if regulations change and measures are put in place to reduce risk of in-facility spreading of infections?
  • For indemnity policies, what second-order impacts will there be on incidence rates from cost changes?

Read the issue brief and learn more about the Academy’s work on long-term care issues here.




The American Academy of Actuaries is a 19,500-member professional association whose mission is to serve the public and the U.S. actuarial profession. For more than 50 years, the Academy has assisted public policymakers on all levels by providing leadership, objective expertise, and actuarial advice on risk and financial security issues. The Academy also sets qualification, practice, and professionalism standards for actuaries in the United States.