Israel Proposes Major Overhaul of Long-Term Care Insurance

Israel's Capital Markets, Insurance and Savings Authority is advancing a sweeping reform of the long-term care insurance provided by health maintenance organizations (HMOs), a change expected to impact approximately 5.2 million insured individuals in the country. The proposed plan involves a significant restructuring of the existing insurance system, including a separation between older and younger policyholders and a transition for younger individuals to a model incorporating personal savings accumulation.

The core elements of the plan have been presented to relevant government professionals, but implementation will require legislative changes and is not anticipated to be immediate. Under the proposal, older policyholders would remain in a closed group, preserving their existing rights and coverage continuity. Younger policyholders, however, would be moved to a new model where they would be allocated among insurance companies through competitive tenders.

This reform aims to address a key issue in the current long-term care insurance structure, where premiums from younger individuals are used to cover the higher costs associated with the elderly population. The authority seeks to replace this system with a model that includes personal accumulation of funds over time alongside insurance coverage.

The move follows significant steps taken in recent years to stabilize long-term care insurance, including reductions in monthly benefit payouts from around NIS 6,100 to NIS 5,000 and adjustments to the criteria for recognizing individuals as requiring long-term care during 2023 and 2024. However, the authority concluded these measures were insufficient for a long-term solution, prompting the push for a broader structural change.

Data indicates that about 85% of long-term care claims are filed after age 70, with the monthly cost of in-home care estimated at NIS 10,000 and institutional care at up to NIS 15,000. The average care period is approximately 40 months. The current system also faces issues such as disparities in HMO fund reserves, regulatory duplication, lack of transparency, and frequent policy changes.

The new framework intends to create a more stable system where younger policyholders build personal savings, leading to more stable premiums. If approved through legislation, this reform would represent a fundamental shift in how HMOs provide long-term care coverage to millions of Israelis.