Introduction: How insurers can help fund long-term care in Ireland

This paper is the second in a two-part series examining long-term care in Ireland and whether the insurance industry has a role in meeting Ireland’s growing long-term care challenge.

The first paper covered the long-term care challenge by discussing the current provision of long-term care in Ireland; the Nursing Home Support Scheme (NHSS), more commonly known as the Fair Deal scheme; and how demographic changes are likely to impact future demand.

This paper will consider how the insurance industry can play a role in meeting Ireland’s long-term care challenge, drawing on international examples for context.

As outlined in the first paper, Ireland’s population is ageing rapidly, causing significant demographic pressures that may threaten the long-term sustainability of the Fair Deal scheme. Therefore, there is a need to explore new approaches to funding long-term care, one of which is long-term care insurance (LTCI).

LTCI is a specialised insurance product designed to cover the costs associated with long-term care services, which are generally not covered by traditional health insurance. These services support individuals with chronic illnesses, disabilities or conditions that limit their ability to perform basic activities of daily living (ADLs), such as bathing, dressing and eating. This is particularly relevant for addressing the needs of older adults who may experience incapacity due to ageing.

LTCI policies provide financial assistance for various forms of long-term care, including care in nursing homes, assisted living facilities, adult daycare centres and in-home care. To qualify for benefits, policyholders typically must be unable to perform a specified number of ADLs or require substantial supervision due to cognitive impairment.

The provision of LTCI has been in steady decline globally for many years. This downturn is primarily due to rising costs for insurers, driven by ageing populations and increased life expectancy, which have either pushed premiums beyond the reach of potential policyholders or led to the complete withdrawal of these products from the market.¹ However, as outlined in the first paper in this series, the need for such insurance has not diminished; in fact, it has grown more pressing.

This paper explores whether insurance could form part of the solution to the challenges facing Ireland’s long-term care system. Could the integration of an LTCI model, operating alongside the Fair Deal scheme, provide a more sustainable approach to financing care? To explore this, the paper first examines the structure of LTCI in other countries before looking at some potential options available to the insurance industry to help address the challenge.

What does LTCI look like in other markets?

As part of our analysis we have examined three countries with established LTCI markets—Germany, France and the United States. In order to understand the LTCI market of these countries, it is first important to understand the social environment in which they operate. Germany and France have established social programmes to address the needs of their ageing citizens. They have implemented various models of public and private partnerships to ensure that long-term care services are accessible and affordable. However, the funding models they use in order to provide such care are quite different. Meanwhile, in the United States, the landscape of long-term care is markedly different, characterised by self-financing care, a private insurance market and significant reliance on Medicaid—the government’s safety net health benefit for low-income individuals.

In the following sections we discuss the various LTCI markets in more detail.

Germany

Germany has established a comprehensive long-term care system that blends social and private funding mechanisms to address the needs of its ageing population. At its core is the Social Long-Term Care Insurance (Soziale Pflegeversicherung—SPV), a mandatory scheme that covers all employees and retirees. It is financed through payroll contributions shared between employers and employees. As of 2026, the contribution rate for SPV ranges from 2.6% to 4.2% of gross salary, with the amount charged dependent on the number of children an individual has. The gross salary figure used to determine contributions is also subject to both minimum and maximum thresholds. These contributions are automatically deducted alongside other social security payments and form part of Germany’s broader social insurance system, to which most employees contribute approximately 20% of their gross income. This system not only funds LTCI, but also provides coverage for health insurance, pensions, unemployment benefits and accident insurance—offering a robust and quite broad safety net.

The SPV provides a tiered system of benefits based on assessed levels of care need, including cash allowances, in-kind services and financial support for home modifications. However, despite this coverage, individuals often incur substantial out-of-pocket expenses—particularly for higher levels of care or services not included in the standard benefit package. Families frequently contribute to bridging the gap between what insurance covers and the actual cost of care. While supplementary private insurance is available to help close this gap, we understand that uptake remains relatively low. For those whose care needs exceed the support provided by insurance and personal finances, means-tested social assistance programmes are in place to ensure access to necessary care regardless of financial circumstances.

In addition to the SPV, employees who earn above a certain income threshold have the option to opt out of the statutory system and instead purchase private LTCI (Private Pflegeversicherung—PPV) from an insurance provider, allowing for more tailored coverage. PPV policies are typically risk-based, with premiums calculated according to individual factors such as age, health status and desired level of coverage. Unlike the SPV, which provides standardised benefits based on assessed care levels, PPV offers greater flexibility in terms of benefit design, often covering a broader range of services or higher reimbursement rates. However, private insurers may also impose waiting periods, underwriting criteria or exclusions based on pre-existing conditions. Once enrolled, individuals usually remain in the private system and cannot return to the statutory scheme. Although PPV can provide more comprehensive financial protection, especially for those seeking access to premium care services, it generally requires higher personal contributions and is more complex to navigate than the universal SPV system.

France

France's long-term care system is the Allocation Personnalisée d'Autonomie (APA), a public benefit designed to help elderly individuals who need assistance with daily activities. The APA is funded through general taxation and is available to all residents age 60 and over who meet certain criteria based on their level of dependency.

The APA provides financial assistance that can be used to cover a variety of services, including home care, daycare centres, and residential care facilities. The benefit amount is determined through an assessment of the individual's needs, carried out by a multidisciplinary team that evaluates the level (or severity) of dependency and the necessary support. This amount is then adjusted according to the individual's financial circumstances, where a larger copayment is required from better-off persons.

Despite the support provided by the APA, individuals often face out-of-pocket expenses, particularly for higher levels of care or additional services not covered by the benefit. To address these costs, France encourages the use of private LTCI. Private insurance policies can supplement the APA benefits, offering additional financial protection and access to a broader range of care options.

In 2023, approximately 6.4 million people in France were covered by LTCI, with total contributions to LTCI policies reaching €796 million. This represents a small proportion of the estimated 35 million people age 30 to 70—the demographic most likely to consider such coverage. On average, policyholders were 63 years old and paid annual premiums of €389. That year, insurers paid out €307 million in benefits across 43,800 active claims, with an average monthly payment of €549.²

Despite being available on the market, LTCI remains poorly understood by the public. A 2021 survey conducted for French insurers found that 54% of adults were unaware of the product. Nonetheless, overall sentiment is positive as 57% of respondents expressed a favourable opinion of LTCI.³

The United States

The United States’ long-term care system involves limited support from public programmes, with individuals often relying on private LTCI and out-of-pocket expenses to cover their needs. Medicare (which is targeted at those over age 65 and those with disabilities) provides very limited coverage, primarily for short-term skilled nursing care following hospitalisation, and Medicaid (which targets those on low incomes and children) covers a broader range of services but is means-tested, requiring individuals to meet strict financial criteria. Some individual states have introduced state-funded long-term care programmes, with a notable recent development being the establishment of the WA Cares⁴ programme in Washington state. However, such programmes are not yet widely adopted across the United States. Given the limitations of public support, private LTCI becomes an important option for those seeking to manage the high costs of long-term care. However, participation in the LTCI market is relatively low. As of January 2020, approximately 7 million Americans held some form of LTCI, either through traditional policies or linked-benefit products. This represents a small fraction of the roughly 150 million individuals age 30 to 70. Several factors contribute to this low participation rate. Firstly, LTCI premiums can be expensive, often costing several thousand dollars per year, and they can increase over time, making it difficult for policyholders to maintain their coverage. Additionally, the policies themselves can be complex, with various terms and conditions that may be challenging for consumers to understand, which can deter individuals from purchasing insurance.⁵ Many people also underestimate the likelihood that they will need long-term care, leading to low demand for LTCI. There is also a common misconception that Medicare or Medicaid will cover all their needs, without fully understanding the limitations of these programmes.⁶ Moreover, over the years, many insurers have exited the LTCI market due to challenges in predicting costs and setting premiums appropriately.⁷ This has resulted in fewer options and higher prices for consumers.

Policies typically pay a daily or monthly benefit amount for covered services, with total benefit amounts and durations varying based on the policy purchased. Recent trends in the LTCI market include the introduction of hybrid products that combine life insurance or annuities with long-term care coverage. These hybrid products can provide more flexible benefits and may be more appealing to consumers who are hesitant to purchase traditional LTCI.

Of the approximately 7 million individuals covered by LTCI in the United States in 2023, around 6.3 million held standalone policies. The average monthly premium was $155, leading to total premium payments of $13.2 billion. In the same year, insurers paid out $13.7 billion in claims, with the estimated average benefit per claimant totalling $170,000.⁸ Notably, we understand that premiums for new policies are considerably higher, at approximately $280–$300 per month.

Long-term care funding: A role for the insurance industry in Ireland?

With Ireland’s long-term care system facing significant challenges, it's worth considering whether the insurance industry could play a meaningful role in addressing these challenges—and if so, what might a sustainable, insurance-based solution entail?

Given the relative high cost of long-term care and the unpredictability of individual needs, insurers may struggle to offer a product that assumes full financial risk while remaining affordable, sustainable and attractive to consumers. A standalone insurance product covering the entire cost of long-term care might require premiums that are beyond the reach of many consumers.

A more feasible approach could involve the insurance industry acting as a complementary partner to the existing Fair Deal scheme. Instead of replacing the state's commitment, private LTCI could support individuals by helping them manage the copayments required under the Fair Deal scheme. This model could alleviate some of the financial burden on the state while protecting individuals and families from potentially catastrophic out-of-pocket expenses.

The partnership approach between the insurance industry and the long-term care system offers several advantages. Firstly, by introducing well-structured LTCI, additional private funds and risk sharing can be integrated into the system, which helps reduce fiscal pressures on the public sector by diversifying financial responsibility. Secondly, insurance-based support can lead to improved health outcomes and expanded care options by encouraging earlier access to care services, including preventive and community-based options. By broadening coverage to include in-home care, assisted living or daycare services, insurance products can offer more-personalised and flexible care tailored to individual needs, while also helping to manage costs effectively, and potentially alleviating demand for nursing home beds. Lastly, insurance has the potential to protect family wealth by safeguarding significant personal assets, such as the family home. By covering copayments, individuals may be less likely to need to sell their homes to finance care, thereby preserving their financial security and peace of mind.

Although Ireland currently lacks an established market for LTCI, there is clear potential for development, particularly if supported by policies like tax incentives or subsidies. Integrating long-term care coverage within existing pension schemes or retirement savings plans could also provide a streamlined, accessible way for individuals to secure protection well before care needs arise.

The mechanism: How LTCI might work in Ireland

In order to deliver a product to meet such a need, we believe there are two main options:

• Traditional LTCI product (standalone or rider)
• Annuity or Approved Retirement Fund (ARF) with a LTCI accelerator

The traditional product is relatively simple and well understood amongst insurance professionals. The policyholder pays premiums during their lifetime, and should they require a level of care in later life, payments to the policyholder are assessed in terms of the level of incapacity and care required by the policyholder.

The annuity-based solution is a more recent innovation that is gaining prominence in the United States. In this model, the policyholder purchases an annuity that provides a regular income stream during retirement. The annuity can be structured as either a fixed or variable product, depending on the policyholder's risk tolerance and income needs. The key feature of this product is the long-term care accelerator, which allows for an increase in the annuity payments if the policyholder requires long-term care.

Upon meeting certain predefined conditions of incapacity or need for care, the annuity payments are accelerated to provide additional funds to cover the costs of long-term care services. This ensures that the policyholder has access to higher income when it is most needed without having to liquidate other assets. The acceleration mechanism can be designed to cover various levels of care, from in-home assistance to full-time nursing home care, providing flexibility and peace of mind for policyholders and their families. This approach not only leverages the existing structure of an annuity but also addresses the financial challenges associated with long-term care, making it an attractive option for individuals seeking comprehensive retirement and care planning.

In an Irish context, a solution of this nature could work in the context of a Personal Retirement Savings Account (PRSA) or an ARF. Effectively a portion of the contributions into a PRSA pre-retirement could be diverted to an LTCI rider, which could then provide for enhanced income post-retirement in the event that nursing home care is required. A similar structure could be used for an ARF with a proportion of the ARF single premium being allocated towards the LTCI rider. Integrating an LTCI rider into the broader pension product structure could help address affordability challenges and could also be managed in a way that allows existing pension tax relief measures to incentivise individual LTCI provision. Consumers are generally more familiar with pension savings than with standalone care insurance products, and integrating care protection into existing retirement planning frameworks may improve participation while reducing distribution friction and administrative costs.

Conclusion: The potential for an LTCI market in Ireland

This series of papers has examined the landscape of LTCI both internationally and within Ireland, highlighting the unique challenges and opportunities present in the Irish market. At present, there is no meaningful LTCI market in Ireland, with the vast majority of long-term care needs being financed through the Fair Deal scheme.

Against the backdrop of changing demographics and the expected rise in cost to the Exchequer and subsequent strain on public finances, there is a clear case for exploring new approaches to funding long-term care. International experience demonstrates that insurance-based solutions can play a valuable role in diversifying financial responsibility, protecting individuals from catastrophic expenses, supporting greater flexibility and choice in care provision, and facilitating earlier access to care and preventive supports that may ultimately lead to improved health and well-being outcomes for individuals.

In light of this, there is significant potential for insurance to complement the existing state scheme. Innovative solutions, such as integrating LTCI riders within pension products or developing annuity-based products with long-term care accelerators, could make LTCI more affordable and accessible for Irish consumers. Policy support, such as tax incentives or regulatory changes, could further encourage the development of a sustainable LTCI market.

A further challenge highlighted in Part 1 of this series is whether Ireland will be able to scale physical infrastructure quickly enough to meet the projected growth in long‑term care demand. While insurance-based solutions cannot resolve these supply-side constraints in isolation, they may play an important indirect role in alleviating pressure on institutional care, while also potentially helping to fund the provision of additional supply. By supporting a broader range of care settings, including home care, assisted living and community‑based services, insurance can help facilitate earlier intervention and delay or avoid admission to nursing homes for some individuals. In doing so, insurance has the potential to ease demand for scarce nursing home beds, complementing public investment in infrastructure and contributing to a more flexible and resilient long‑term care system overall.

Early action to develop and promote such solutions will be essential to ensure that Ireland’s ageing population can access the care it needs.

How Milliman can help

As a global leader in actuarial consulting and risk management, Milliman is uniquely positioned to support stakeholders in developing innovative, practical and sustainable solutions for Ireland’s long-term care challenges. Our expertise can help guide the design, implementation and ongoing management of LTCI products tailored to the Irish and other European markets. If you would like to discuss how Milliman can support your organisation, please don’t hesitate to contact us.

¹ Cohen, M. A., Kaur, R., & Darnell, B. (30 June 2013). Exiting the market: Understanding the factors behind carriers' decision to leave the long-term care insurance market. Office of the Assistant Secretary for Planning and Evaluation. Retrieved 1 June 2026 from https://aspe.hhs.gov/reports/exiting-market-understanding-factors-behind-carriers-decision-leave-long-term-care-insurance-market-1.

² Treilhou, A., Afrache, H., Rodrigues, H.-P., & Touze, V. (21 November 2024). Le marché de la dépendance: état des lieux, actualités et projets de place. Institut des Actuaires. Retrieved 1 June 2026 from https://www.institutdesactuaires.com/global/gene/link.php?doc_id=19218&fg=1.

³ Ibid.

⁴ More information about the WA Cares Fund is available at https://wacaresfund.wa.gov/.

⁵ Congressional Research Service. (16 January 2013). Factors affecting the demand for long-term care insurance: Issues for Congress. Retrieved 1 June 2026 from https://www.everycrsreport.com/files/20130116_R40601_f4c46a95c58cca9e68b7feb517afb17bc76bb919.pdf.

⁶ Munnell, A. H. (10 March 2025). Most adults greatly underestimate the realities of aging and long-term care. Center for Retirement Research at Boston College. Retrieved 1 June 2026 from https://crr.bc.edu/do-older-adults-understand-healthcare-risks/.

⁷ Eaton, R., Kempen, T., Moench, S., Pahl, A., & Schmitz, A. (February 2024). Risk considerations for innovative products: A case study of the long‐term care insurance industry. Society of Actuaries. Retrieved 1 June 2026 from https://www.soa.org/globalassets/assets/files/static-pages/sections/long-term-care/ltc-medical-report.pdf.

⁸ AHIP. (November 2023). Long-term care insurance coverage: State-to-state 2023. Retrieved 1 June 2026 from https://ahiporg-production.s3.amazonaws.com/documents/AHIP_LTC_State_Data_Report.pdf.