Long-Term Care Partnership: State Considerations for Inflation Protection

Publication Date: August 2007

Publisher: Center for Health Care Strategies, Inc., Lawrenceville, N.J.; Robert Wood Johnson Foundation

Author(s): M.R. Meiners

Research Area: Health

Type: Report

Abstract:

This technical assistance brief discusses factors states should consider when developing inflation protection requirements for Long-Term Care Partnership programs. The four original Partnership states—California, Connecticut, Indiana and New York—required compound 5 percent inflation protection. Without inflation protection, they felt consumers would have to use protected assets to cover an increasingly larger portion of their long-term care bill. Inflation protection adds significantly to the cost of the premium, however, and could result in reduced consumer demand for Partnership insurance. The 2005 Deficit Reduction Act (DRA) addressed these conflicting concerns by providing for varied inflation protection according to age at time of purchase. Questions remain as to how best to fulfill the DRA's "some inflation protection" requirement. Some in the insurance industry have been working hard to have states approve the "future purchase option" (FPO) inflation adjustment. A major concern with FPO is the possibility that an individual will fail to choose an inflation upgrade and therefore lose his or her Partnership status. States should avoid this by providing clear information to help consumers understand what they are purchasing.