Long term care insurance –narrow framing is not the problem

Who are you calling a narrow framer?
Who are you calling a narrow framer?

Health Business Blog readers know the Wall St. Journal is among my favorite publications, but I have to call BS on a recent piece: Why People Don’t Buy Long-Term-Care Insurance. It’s written by a couple of Wharton professors, who frankly should be ashamed of themselves.

Here’s what they have to say:

When it comes to long-term care, two facts stand out. First, an estimated 70% of people will need such care, which will be costly. And second, most of them refuse to buy insurance to cover it…

[O]ur research suggests that some consumers’ rejection of long-term-care insurance is based on what psychologists call “narrow framing,” or people’s tendency to exclude key factors when making decisions. Narrow framing has been found to be common when individuals face complicated decisions—and shopping for long-term-care insurance is certainly one of those instances.

Then they go on to explain how they classified people as “narrow framers” and finally end with advice for insurance companies on how to tweak and reposition their products.

Give me a break.

There may be some narrow framing going on, but that’s not the main issue. The problem is that for many people long term care insurance isn’t an attractive product.

Insurance is useful when it covers rare events that could be financially ruinous. But long-term care is a common need (“70% of people” according to the authors) and the benefit structure doesn’t protect against catastrophic expenses.

Last time I looked into long term care insurance, two years ago, I was offered a level premium policy for my wife and me that cost over $10,000 per year. The benefits were $10,000 per month, with a 25 week elimination period (that’s the waiting time before benefits kick in) and 6 year benefit period, with a 5% COLA. In other words (leaving aside inflation for a moment), the maximum benefit is $720,000.

What I really wanted was a policy with a 5 year elimination period and no cap on the benefit period. But no one I can find offers that –either because it’s not legal or because there’s insufficient demand.

Call me a “narrow framer” if you will, but before that, please provide a better argument for why long term care insurance is a good value.

Image courtesy of marcolm at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.



4 thoughts on “Long term care insurance –narrow framing is not the problem”

  1. David, as a veteran of the long term care insurance field, thanks for your observations.

    What I see happening in the industry is this: the policies are just becoming attractive to a narrower and narrower demographic. I attended an industry meeting, where an insurer announced that its average buyer of an LTC product was a female in her late 50’s with an income of $100,000.
    Also, the average buyer of their product had also purchased disability insurance as needed, and had substantial amounts of life insurance.
    In other words, a person who was not shy about planning 30 years in advance.

    In my agency, the last two purchasers of LTC insurance were one couple who had recently sold a business for cash, and another couple who had received a large inheritance.

    Mass market LTC products are close to disappearing.

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