Market Changes Pushing Update Of LTC Model Act
A discussion over updating current long term care regulation offered some interesting observations about how the market is developing.
Regulators talked about reopening the Long Term Care Insurance model act and regulation during the spring meeting of the National Association of Insurance Commissioners here.
One change in the LTC market is the increase of sales through financial planners, LTC specialists and worksite market programs in the last two years, according to Bob Glowacki, chair of the LTC committee of the American Council of Life Insurers. The average age for those sales, he said, is between 58 and 62.
“This is a clear indication that financial planning and worksite marketers are making huge inroads. It is no longer a senior age product.”
Glowacki also told regulators that lapse rates are 1.2% per year. “That tells us that older blocks of business are not lapsing.”
Older LTC policies were tied to hospital stays with a trigger that could vary from a minimum of three days and more depending on the contract. Those policies since have been changed to reflect changing options in the LTC marketplace.
Many companies with older policies on their books have offered a 0-day stay to replace a three-day stay that were in contracts. Speaking from experience with a company he had worked with, Glowacki said that when such a switch was offered, 60% of contract holders elected to take the 0-day option.
Another feature being elected by significant numbers of contract holders, particularly younger buyers, is inflation protection, he said.
Care coordination was also touched upon. This occurs when a carrier contracts with a care coordinator to go out and assist contract holders in locating and providing services. It can be particularly valuable when there is a distance between family and a contract holder, he added. “We dont see any health care coordinators trying to skinny down benefits,” he said.
On that issue, Bonnie Burns, a NAIC-funded consumer advocate and a director of consumer education with California Health Advocates, Scotts Valley, Calif., said “the independence of the care coordinator from the carrier as well as payment for ongoing care management after the initial care coordination is put in place” are two points that need to be examined.
“There is still a lot of confusion about the marketplace,” she said, which may be compounded because it continues to change.
Consequently, uniform regulation is important to the consumer, she said, but what LTC insurance counselors are finding when consumers come to them for help is that there is not much uniformity. What companies and agents are and are not allowed to do varies by state, Burns said.
One goal of any regulatory efforts should be to remove the guesswork consumers face with what is a complex product, according to Burns.
Uniformity is also important to companies, said Glowacki. With the increase in sales through worksite marketing, uniformity will become more important because lack of uniformity can cause differences in the same contract for employees in the same company, he said. For example, Glowacki continued, employees of the same employer in different states with the same contract could conceivably pay different premiums because of variations in state regulation.
Burns raised another issue regarding the ability of a producer to self-certify and assume the role of LTC specialist. Most states dont require training and when they do, there are so many different programs, she said.
Proper training is needed, she continued, because “there is a lot of activity in this marketplace and not all of it is high caliber.” However, she also noted that there are a lot of hard-working agents.
The NAIC could set the standard for what is good training, Burns said.
And, as the current model is examined, it will be important to pay close attention to language, she explained. Companies can avoid being subject to the requirements in current laws, Burns said. As an example, she said a requirement of 12 months of coverage for products advertised or marketed as LTC insurance can be circumvented by offering contracts with coverage for shorter durations. In California, that issue was resolved by including language that says “any product that provides a benefit,” Burns added.
Going forward, one goal that will be more important to consumers is to preserve insurability, she explained. Consequently, an option to guarantee that insurability could be a valuable part of a companys LTC offering, Burns said.
Having strong regulation in place will be important because “in the next few years, claims will put pressures on the industry that were not there before, and there is pressure now,” said Van Ellet, health and policy team leader in AARPs state legislation department, Washington.
One step that should be taken, he said, is to coordinate information so consumers can make comparisons among LTC products.
Other areas he suggested regulators could look at are agent training and reserving requirements for LTC products.
Adequate capital will be needed not only to pay claims but also to make sure there are proper reserves for LTC business, said Bill Weller, a spokesman for the American Academy of Actuaries, Washington. As the product is sold to younger people, having an adequate reserve of capital will become more important both for the financial well-being of the company as well as the potential impact the cost of capital could have on pricing, he said. (See NU, March 17.)
Another issue raised was what happens to a long term care rider if a universal life policy does not have sufficient cash value to remain in force.
Reproduced from National Underwriter Edition, March 24, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.