Consumer group pans LTCI rescue efforts

Long-term care insurance regulation

The Center for Economic Justice says insurance regulators should go back to the drawing board and rethink their approach to long-term care risk. (Photo: Thinkstock) The Center for Economic Justice says insurance regulators should go back to the drawing board and rethink their approach to long-term care risk. (Photo: Thinkstock)

A group that speaks for consumer interests at the National Association of Insurance Commissioners for years says the NAIC should give up on trying to save stand-alone long-term care insurance.

The Center for Economic Justice says state insurance regulators should instead encourage insurers to add long-term care benefits to products that protect consumers against other types of risk.

Related: 7 (relatively) easy insurer ideas for saving long-term care insurance

The Austin, Texas-based group made that argument in a comment letter sent to the NAIC's Long-Term Care Innovation Subgroup. The subgroup posted the letter on its section of the NAIC's website Tuesday.

The NAIC is a Kansas City, Missouri-based group for state insurance regulators. The Health Insurance and Managed Care Committee, a major arm of the NAIC, formed the LTC Innovation subgroup to come up with ideas for improving the state of the market for private stand-alone long-term care insurance.

Issuers have argued that factors such as competition from Medicaid nursing home benefits, low levels of consumer awareness of long-term care risk, and rigid, complicated state regulations have made offering affordable, sustainable stand-alone LTCI difficult. Issuers have also complained that years of very low interest rates on high-quality bonds and insurers' inaccurate ideas about how stand-alone LTC might work have hurt the profitability of LTCI products.

The LTC Innovation subgroup has held a series of conference calls over the past year to hear from insurance company executives, trade group representatives and others about proposals for overcoming those problems.

Related: 6 ideas for this week's big long-term care hearing

The Center for Economic Justice is encouraging the sale of simple, broad insurance and retirement products. (Photo: iStock)The Center for Economic Justice is encouraging the sale of simple, broad insurance and retirement products. (Photo: iStock)

The Center for Economic Justice contends that the subgroup members should take a different approach.

"Stand-alone LTCI is a failed and defective product," the center says in its letter. "Regulators should be leading the transition away from stand-alone LTCI to other methods of financing LTC services."

Marketing and administrative costs eat up too much of the LTCI premium dollar, and insurers have a hard time competing for the attention of workers who are struggling to pay for other, critical insurance products and retirement savings arrangements, the center says.

Teresa Miller, the Pennsylvania regulator who heads the subgroup, recently suggested that insurance regulators should focus more on promoting a "savings mentality" rather than stand-alone LTCI.

The center says promoting simple, broad insurance and retirement products is a better strategy than, for example, promoting new tax credits for purchasers of LTCI.

New LTCI tax credits would shift income from low-income and moderate-income taxpayers, who would not be able to afford LTCI, to the higher-income taxpayers who could afford to pay for LTCI, the center argues. 

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