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Shelton Details The Changing Long Term Care Insurance Scene

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Long term care insurance has seen significant changes in the past few years that could have a significant impact on sales for years to come, noted Phyllis Shelton, president, Long Term Care Consultants, Nashville, Tenn.

Speaking at a session on successful sales techniques here at the annual meeting of the National Association of Health Underwriters, Shelton noted the Deficit Reduction Act enacted in February is behind much of the transformation. The DRA has made access to Medicaid more challenging for many seniors, she said, and seeing that, consumers of all ages will recognize self-insurance of LTC costs is a much less attractive option.

On top of that, consumer awareness of LTC insurance is growing, thanks in part to help from state and federal promotional efforts and attention to the increasing cost of care and tighter underwriting rules making it harder to get a policy as people age, Shelton said.

Another trend has been toward younger buyers. LTC producers increasingly are realizing the younger prospect is an easier sale for a number of reasons, including the fact that 40-year-olds generally have fewer health issues than do 60-year-olds.

In addition, the growth of worksite marketing has helped open up a younger LTC insurance market. The advent of health savings accounts is a huge factor in feeding the growth of LTC insurance in worksites, she noted. Shelton said the average age of individuals buying the product through their employers is 46, compared to 59 for those buying individual policies on their own.

The average premium of $576 for worksite sales is also much easier to handle than the average of $2,700 for the typical individual policy paid up at age 65, she noted.

Another key trend Shelton has seen in LTC insurance selling is in the selection of benefits. She noted the growth of relatively limited coverage periods vs. lifetime benefits. “Lifetime benefits are going away, but if everyone bought a three year benefit period, it would keep a lot of boomers off Medicaid,” Shelton said.

To a 40-year-old couple, $1,800 a year in premiums would buy three years of benefits at a daily payout of $140, she noted. “If they waited 10 years to buy, they would be paying $3,900″ because inflation would drive up the cost of care.

In addition to being influenced by projections of higher premiums at older ages, younger buyers also are impressed by estimates of the probability they would need have had at least one LTC episode by the time they reached their 60s, she said.

There are a number of important things about selling LTC insurance that have not changed, Shelton observed. Among them is that market penetration is still low. “Sales activity has not kept up with the aging population,” she lamented. She noted market share of the population aged 45 and up is only 8%, while for those 65 and up, it’s just 16%.

Another issue that hasn’t changed is the increasing cost of care. There is still a 6% annual growth in those costs, about the same as 20 years ago. “The cost of care is still tripling every 20 years,” she said.

Also immutable is the main objection producers still hear: LTC insurance is “nursing home insurance.” This despite the fact that less than 20% of long term care is delivered in nursing homes, she pointed out.

And that brought Shelton to the final timeless truth of LTC insurance sales: Teaching the consumer about why it’s needed is paramount to making the sale. “The style of selling to boomers must be educational, or they won’t be buying,” Shelton insisted.

Education has to be in the language the prospect understands, she explained. That requires comfort with emotional issues. However, most LTC producers are not at ease making that kind of sale, she said.

But it’s the emotional aspect of the sale that buyers understand, she said. “You have to talk about ‘this is how you protect your family,’” she said, adding “not about asset protection.”


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