The Economic Effects of the Provision and Regulation of Long-Term Care Insurance

Abstract

This dissertation is comprised of three essays on various aspects of the long-term care insurance (LTCI) market. In Chapter 1, I document the effect of state regulator election cycles on insurance premiums and equilibrium supply. Utilizing the differential timing of commissioner election cycles across states, this paper shows that insurance regulators' political climates - including their election cycles, political capital, and political affiliation - significantly affect insurance prices. Comparisons of commissioners nearing the end of their term relative to commissioners just beginning their mandates suggest that premium increase approvals fall most when regulators are up for re-election. Further correlative evidence shows that high regulator stringency is related to increased insurer dropout rates across states. In Chapter 2, I focus on the effect of LTCI provision on caregiver labor force participation and poverty. Comparing couples with and without insurance before and after a disability shock, I find that spouses in families with long-term care insurance are significantly more likely to work and significantly less likely to fall into poverty five years after disability onset. In Chapter 3, I develop a stylized structural model of the LTCI market to analyze the effect of changing regulator incentives and other reforms on market stability. Though the unpredictability of costs plays a larger role in limiting LTCI supply than election frictions, addressing regulatory inefficiencies alone can still improve social welfare.