Dilemma: Private LTC For Public Sector

Long term care insurance programs for public sector workers are posing a dilemma for the LTC insurance industry: How to sell the programs and how to compete at the same time. This article will look at some ideas.

First, some background. The federal governments new LTC insurance plans have several positives. For instance, many of the features are common to all LTC policies. And, the government is not contributing toward the cost of coverage. However, the programs modified underwriting approach, plan benefits, exclusion of independent agents and commissions, and lack of preferred health or couple discounts have generated both positive and negative attention.

Even so, the federal entry into the LTC benefits arena is welcome, albeit late. Aetna, CNA, John Hancock, MetLife, Prudential, TIAA-CREF, UnumProvident and LIMRA indicate there are already hundreds of LTC offerings by other public entities (see chart).

Such programs are welcome because they bring what amounts to “free advertising” for the product class. Furthermore, the media often helps to generate interest in the coverage. Both developments help heighten public awareness of, and interest in, the product.

However, industry response to public sector LTC programs sometimes unwittingly damages these positive effects. Some examples follow.

In the case of the federal program, for example, an Oct. 14, 2002 article in the Federal Times notes that one insurer has since launched a competing program to attract federal workers, a program with several benefits the federal plan does not offer.

Meanwhile, a recent announcement about a LTC insurance plan for county government workers in the Southeast got a surprising response. Three group LTC carriers put in bids. So did a local brokerage, but it offered individual products of one of the bidding group carriers. The individual bid not only ignored the group bid from the same carrier, but also disparaged group products in general.

Over in the Pacific Northwest, sales were disappointing on a group product that was offered to public employees and retirees through individual agents. Some observers have posited that agents ultimately sold individual policies to their group customers.

Finally, in some areas, agents have written op-ed pieces for the local press or spoken publicly about the failings of a publicly-sponsored group product. These efforts imply that public dollars were spent on poorly designed products or that “big brother” was somehow encroaching on free enterprise.

These various developments suggest some changes are in order. Naturally, group and individual offerings, and the specialists supporting them, are inherently competitive. But in pursuing this competition, insurance interests need to take care not to trigger distrust or further avoidance of private LTC insurance on the part of employers and potential participants.