Health risk, medical underwriting, and long-term care insurance partnerships

Given the high and uncertain costs of long-term care (LTC), insurers commonly rely on medical underwriting to determine eligibility. However, certain insurance designs may relax these medical underwriting criteria. We examine the impact of the rollout of the Long-Term Care Insurance Partnership (LTCIP) program—a joint federal–state initiative aimed at promoting private long-term care insurance (LTCI) in the United States. By shifting part of catastrophic long-term care costs to Medicaid—a means-tested public insurance programme—the LTCIP can reduce insurers’ exposure to financial risk. We exploit this policy variation using a difference-in-differences framework, allowing for heterogeneous effects by pre-LTCIP health status and chronic conditions. Using longitudinal data, we find that LTCIP increased LTCI take-up among both healthier and higher-risk individuals. The estimated increase was 2.1 percentage points among individuals with chronic conditions and 4.8 percentage points among those without chronic conditions. These findings are consistent with a partial relaxation of underwriting constraints.