Long-term care insurance. Premium estimates for prototype policies.

Private insurance has been suggested as a way to relieve the growing pressure on Medicaid budgets brought about by the long-term care needs of the elderly. This paper provides premium estimates for prototype long-term care insurance policies. Alternative specifications of services covered, amount of benefits paid per day, waiting period before benefits begin, years of coverage, age at time of purchase, administrative expenses, risk selection, and tax treatments are examined. The estimates are useful in understanding the general order of magnitude of premiums for various types of policies and assumptions. They may also be useful in deriving initial rates for new types of policies or in setting initial rates for an insurer with no access to actual experience data.