Long-term care insurance will get a temporary respite, but the chance for reform is moving further away

After turbulent years, the long-term care insurance sector will likely enjoy relative calm in the coming years, following Clalit's announcement that Ayalon will operate its long-term care insurance starting in January. This comes after four years of incessant drama, during which insurance conditions changed and deteriorated beyond recognition, the financial responsibility that insurance companies had was erased as if it never existed, and Clalit's policy almost disappeared from the shelf due to the depletion of the claims fund and the failure of the previous tender — a move that could have led the entire industry to anarchy.

1. The fact that Clalit, as the health fund that bore the greatest risk, managed to sign an agreement with Ayalon, means temporary stability in the entire industry, which may last for a period of eight years — the duration of the agreement between the two. Another significant variable is the end of the term of the Director General of the Ministry of Health, Moshe Bar Siman-Tov, who threatened throughout the last year and a half to order the health funds to stop managing the insurance policies. The threat stemmed from his perception that the management of a group policy by the health funds is a "historical accident" and that it should be replaced by another model, such as long-term savings. Although not implemented, this threat contributed to undermining the stability of the industry.

2. But the operational calm, as welcome as it may be, inherently contains bad news: the stabilization of the system is expected to bury efforts for a root-and-branch change in the long-term care model in Israel. The consensus among most professional circles, excluding certain elements in the Budget Department of the Ministry of Finance, is that the uncertainty in the long-term care sector is inherent and requires a structural solution — whether by expanding the response of the National Insurance Institute or by shifting long-term care towards the pension model of long-term savings, alongside the promotion of dedicated savings accounts as proposed by the Capital Market Authority. Just last December, at a conference held at the Netanya Academic College that dealt with the crisis, the Commissioner of Capital Markets, Amit Gal, said that in light of the high uncertainty in the field of long-term care, it is difficult to rule out the possibility of another future surge that will again throw the system out of balance. "We cannot be at ease that such a change cannot happen again," he said, adding: "There needs to be a new and clear contract in Israel — what can be received and what the eligibility is," and that this is "one of the most significant socio-economic issues that should be on the agenda."

3. Bottom line, the existing model was not saved thanks to a sustainable solution, but through constant erosion of the product that the public pays for: raising premiums, cutting the benefit amount, tightening the definition of a person in need of long-term care, and removing insurance responsibility from the managing companies. In the long run, given the aging of the population and the increase in life expectancy, and also in light of the competitive dynamics between the health funds that make it difficult to raise premiums and the inherent difficulty of the Capital Market Authority in further worsening insurance conditions, it is doubtful whether even these moves will be enough. But despite the consensus regarding the need for a new vision for how people can age with dignity in Israel, and even though essentially nothing has changed in the structure of long-term care insurance in Israel, it is likely that the Ministry of Finance will not promote any significant reform until the next crisis.