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U.S. Government to Use Captives to Address Elderly Care

Retiring seniors face many hurdles when it comes to selecting and securing long-term care options. Media attention on nursing homes and long-term care facilities has revealed less-than-satisfactory care levels. Insurers are pulling out of the senior care market as well. These two factors have left many retirees scrambling to find suitable options. Captive insurance may provide a solution, and the United States government plans to leverage captives in helping to mitigate the elder care crisis.

State of the Elder Care Industry

America’s population is aging rapidly. By 2040, it is predicted that the population of individuals 85 years or older will have doubled from 2016 figures, or about 14.6 million people. As a result, demand for nursing homes and long-term care facilities is increasing. While this may sound like a positive development for the senior care industry, the reality is quite different.

No matter the type of care facility – including nursing homes, memory care centers, residential senior communities, and skilled care facilities – quality of care has become a critical issue among retirees and healthcare industry regulators alike. Numerous factors have led to the decline of care levels in nursing homes, including:

  • Inadequate staffing.
  • Growing reliance on Medicaid payment rates over private payments, leading to financial insecurities.
  • Overcrowding of facilities.
  • Disparities in care between White and Black residents.
  • Mismanagement of care facilities.
  • Growing populations of elderly individuals with untreated or poorly-treated health conditions.

Further complicating the situation is a shrinking long-term care insurance market, with insurers pricing policies beyond the reach of all but the most financially-able facilities or withdrawing coverage altogether. Higher risk exposures and skyrocketing claims costs have soured the insurance market on nursing homes, When traditional insurance products are no longer available or are too expensive, captive insurance often serves to provide viable solutions.

How Captive Insurance Can Help

Captive insurance industry experts believe that the U.S. government will have to step in to avoid a senior care crisis. Captives have been used by the government before to prop up industries harmed by withdrawal of traditional insurance options; government funding has been privately managed via captive entities successfully in the past, and analysts suggest that the senior care market is ripe for a similar intervention.

Captive insurance represents a valid solution for the senior care crisis due to several important factors:

  • Captives impose greater discipline on claims processing.
  • Captives typically demonstrate a sharper focus on risk management principles.
  • Oversight inherent in captives can drive quality and care delivery performance improvements across the long-term care sector.

Growing populations of retirement-aged individuals, withdrawal of traditional insurers from the market, and the toll COVID-19 has taken on elderly populations in nursing homes have set the stage for captive insurance solutions. The crisis represents a potentially lucrative opportunity for captives to enter the space, especially when supported by government funding and oversight.

Although there are not yet concrete plans or announcements on the part of the federal government, the senior care crisis is a very real concern among industry professionals and legislators. By leveraging the power of captive insurance entities, the government can help reverse declining care and insurance coverage trends. By funding captives and by implementing rigorous risk management and claims processing strategies, the government has the power to protect America’s elderly long-term care residents.

About Caitlin Morgan Captive Services

Caitlin Morgan Captive Services provides clients with captive insurance solutions supported by years of experience in establishing the successful formation and implementation of a wide range of captives. To learn more about how we can help you, please contact us at (855) 975-4949.