The Care Bill is an obvious boost to the long-term care market. But, annuities aside, what are the insurance implications? Richard Walsh investigates.
People will still need to meet this element of expenditure out of their income from pensions. Also, the change to the means testing rules is complex.
Although the upper threshold is raised considerably to £118,000, the lower limit remains similar to now. So the pound-for-pound impact for those who will qualify for means testing support will be much higher than it is now.
Finally, we come to the most difficult bit – the cap covers eligible expenditure only as assessed by each local authority (ie, the amount they would have paid if the person had been entitled to full level of support).
The bill proposes a universal set of eligibility criteria. However, even this will not provide certainty on the amount that will be assessed as going towards the cap, because it depends on how much each local authority would actually pay.
Given the current cash-strapped times, local authorities are reducing their levels of support to provide only for those with the highest level of needs.
This means that qualification towards the cap is likely to start later than many would expect. In addition, there is a big mismatch between what self funders pay for care home fees and what local authorities provide. The balance will not count towards the cap.
I predict that the cross-subsidisation that occurs now in some homes will become increasingly controversial, as it becomes more transparent when local authorities have to assess funding needs for all those who meet the universal qualifying criteria.
All of this provides big challenges in terms of product design, financial advice and how premiums and claims will be treated for tax and state financial support.
Overall, though, this is an opportunity that should be seized by the insurance industry.
Richard Walsh is a director and fellow of SAMI Consulting,
www.samiconsulting.co.uk
Graph one: Percentile distribution of expected lifetime care costs for people currently aged 65 (2009-10 prices).
Source: Commission on the Funding of Care and Support
Graph two: Possible asset depletion for people who enter residential care and have lifetime care costs of £150,000 with a £75,000 cap and extended means test of £100,000.
Source: DH analysis
