New inexpensive genetic testing has the potential to ruin the business model of long-term care insurers.
Long-term care insurance works in a similar manner to other forms of insurance. Policy issuers are banking on the fact that not everyone who pays premiums will be as expensive to care for as some others.
Consequently, some people who pay will not need long-term care. As a result, their premiums will be used to fund the care of those who do.
After all, that is the way that insurance works.
It is a reliable business model because people do not know whether they will be the ones who need to draw more money out of the insurance pool. This leads them to hedge their bets and purchase insurance.
However, if there was an easy way for people to have a much better idea whether they will actually need long-term care, then the current insurance models could be broken, as The New York Times explains in "New Gene Tests Pose a Threat to Insurers."
Inexpensive genetic tests are now available that will give people a better idea whether they are likely to develop Alzheimer's and Parkinson's diseases. Both diseases are likely to lead to the need for long-term care.
People who know they have a greater risk of contracting the diseases, would be more likely to buy long-term care insurance than others.
Insurers can now ask people about their risks for the diseases, but people are not under any obligations to tell insurers the truth and the results of the tests are not available for insurers.
This is an example of the way that medical advances are quickly changing how the elderly will be cared for in the U.S. Any major damage to the long-term care insurance market, will make it more difficult to care for those in need.
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Reference: New York Times (May 12, 2017) "New Gene Tests Pose a Threat to Insurers."