The idea of creating long-term care insurance (LTCI) is not new. It has been talked about for many years. The issue arose during the 2017 French presidential election campaign and again, with force, early this year when Thierry Beaudet, chairman of the National Federation of Mutual Societies (FNMF) spoke out in favour of large-scale pooling of the LTC risk, meaning mandatory long-term care insurance. Although the form that this new insurance cover could take is a matter for debate, the necessity for LTCI can hardly be challenged. Demographic studies, the projected future cost of LTC and the concern harboured by insureds and even employers, all make this a major issue.
Life expectancy in good health is not what is increasing the most
Everyone has seen the figures for life expectancy at birth which, in 2016, reached 85.3 years for women and 79.3 years for men. Men are very rapidly getting close to the 80-year mark. In the 10 years from 2006 to 2016, male life expectancy has indeed progressed by 2.2 years. These heartening figures do, however, conceal a much less pleasant reality which has been pinpointed in a study by the Drees*: while life expectancy continues to increase, life expectancy in good health is not keeping pace. Life expectancy in good health means that period in which one can live “without suffering from the inability to perform some of the activities of daily living (ADLs)”. As a result, increased life expectancy does not so much mean more time spent getting around and enjoying retirement but a prolonged period of disability and dependence on other people.
Future costs of long-term care set to explode
The French population is ageing. According to forecasts by INSEE** the percentage of people over 65 will increase from 18.8% in 2016 to over 26% by 2060. Progress in medicine is having its effect. At age 65, life expectancy is 23.5 years for women and 19.4 years for men. Living over the age of 85 will become quite commonplace. However, old-age will be more and more medicalised, assisted and expensive. Today, the cost of taking care of old people in a state of dependency amounts to €30bn or 1.4 GDP percentage points. According to forecasts published by the Drees, these costs could double in GDP terms by 2060. A time bomb for public finances? This is because three quarters of the expenditure related to LTC are borne by the public purse: healthcare, home care and assisted living. With the other quarter remaining as the patient’s co-pay, they are also exposed to this cost explosion.
The longevity risk is back
The prolongation of one’s life span means employees run the risk of surviving their savings and then not having the means to finance dependency care. Although young people are aware of this, nevertheless, they are not ready to devote more of their resources to preparing old-age because their priority remains buying their own home. However, more and more employed people over 50 are becoming aware of this risk, mainly because every five years they are now sent a statement of their vested pension rights.
Long-term care is a two-pronged risk for employers
Some employers would like to respond to these growing concerns and are looking at LTC products on offer that are complementary to traditional protection (“prévoyance”) covers. Amongst the solutions on offer, some provide cover for the care needs of insureds who become dependent, whilst others cover the risk of finding oneself in a situation of family caregiver by providing “respite care”. In reality, the LTC issue is not a far-off problem for employers. A company whose workforce has an average age of 45 is a company that risks suffering the boomerang effect of staff members having to take care of dependent family members. It is a well-known fact that absenteeism is 40% higher among caregivers.
LTC is an issue therefore for all stakeholders involved in financing disability and healthcare. Whether the initiative comes from the public authorities, the complementary insurance carriers or the employers themselves, one thing is certain LTCI (“assurance dépendance” in French) is set to become part of the vocabulary of social protection.
* Drees: Direction de la recherche, des études, de l’évaluation et des statistiques (French government body for statistics on health and social issues) – January 2018 – No. 1046
** INSEE: Institut national de la statistique et des études économiques (National Institute of Statistics and Economic Studies)