Long-Term Care Insurance:

Better Controls Needed in Sales to People With Limited Financial Resources

HRD-92-66: Published: Mar 27, 1992. Publicly Released: Apr 15, 1992.

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Pursuant to a congressional request, GAO provided information: (1) health and financial factors that limit long-term care insurance purchases; (2) insurance company policies regarding the sale of long-term care insurance to low-income people; and (3) the extent to which insurance companies train and monitor their agents to comply with such policies.

GAO found that: (1) 23 percent of persons age 65 may be unable to obtain coverage because of health problems; (2) in 1990, between 79 and 90 percent of persons at least age 67 or over could not afford long-term care insurance; (3) in general, people with limited financial resources should not purchase long-term care insurance because they can not afford adequate coverage, may quickly spend down to Medicaid's eligibility level, or may already have Medicaid coverage; (4) a 1990 survey found that almost 30 percent of people buying such insurance had annual incomes below $20,000; (5) at the eight insurance companies reviewed, except for Medicaid recipients, companies did little to prevent their agents from selling long-term care insurance to low-income people; (6) although company officials said that their policy is to avoid selling such insurance to low-income people, they did not always articulate this policy in writing; (7) only one of the eight companies reviewed has established financial criteria to determine a purchaser's eligibility for buying long-term care insurance, and none obtains information to help determine a person's income or assets; (8) four companies' marketing materials do not caution consumers to consider whether long-term care insurance is appropriate for them, given their income and assets; (9) most of the training material companies use for their agents inadequately addresses how or whether an agent should consider consumer's income and assets when selling long-term insurance; and (10) companies do not monitor whether agents sell such insurance.