To assess the financing potential of long- term care insurance, we modeled five different policies the first two alternatives, BIGBEN and LOWBEN, are based on a recently marketed policy offered by a major insurer in the field. They cover up to six years of nursing home care after a 100-day deductible and a prior hospitalization, providing a fixed-indemnity payment with a limited inflation adjustment. Home care is covered only after a nursing home stay. Following general industry practice and the specific requirements of the modeled insurance policy, no disabled person and no one over the age of 81 may buy a policy. The initial nursing home indemnity level for BIGBEN is $50 a day, and for LOWBEN $30, $40, or $50 a day, depending on what the person can afford. Since a $30 a day nursing home payment is less than half the average nursing home daily rate, a substantial out-of-pocket payment is required.
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