Increases in long term care costs, federal restrictions on the protection of assets for long term care and continuing publicity about LTC in general are expected to spur now-lackluster sales of LTC insurance, according to industry observers. The Deficit Reduction Act enacted in February made access to Medicaid for LTC services more difficult for many seniors, forcing consumers of all ages to recognize they would have to pay their own LTC costs if they were not insured.
At the same time, the act permitted more states to offer Partnership LTC policies, which allow consumers to protect some assets from Medicaid should they exhaust their policy benefits. By year-end, 21 states had developed legislation or rules enabling companies to introduce such policies.
As of the end of the 3rd quarter of 2006, total sales of individual LTC policies were down around 9% from the year before (see chart), continuing a trend seen in recent years as a number of carriers left the market while others tightened underwriting standards.
Still, some companies report heartening signs of improvement.
UnumProvident Corp., Chattanooga, Tenn., saw individual LTC insurance sales move along steadily, if not spectacularly. It was in group sales where the company saw strong growth in premiums as many employers added LTC coverage for the first time, says Mike Simonds, UnumProvident’s vice president of market development.
As a result, UnumProvident saw LTC premium growth of over 20%, he says.
David W. Simbro, vice president of long term care for Northwestern Mutual Life Insurance Company, Milwaukee, Wis., says his company’s share of the LTC market has grown faster than the industry average for the past 5 years. He credits the increase to a combination of a strong distribution system and a new focus by the company’s agents on including LTC insurance in their needs-based planning for clients.
“Our field force is focusing on doing thorough fact-finding in terms of clients’ financial concerns,” Simbro says. “Long term care fits in well with this practice.”
Northwestern also offered a number of features with its new LTC policies that it made available retroactively to owners of existing policies, Simbro notes. Examples seen this year were expanded coverage for mental disorders and enhancements to coverage for policyholders in Canada.
The company looks forward to increased sales next year after providing for the first time a dividend for LTC policyholders this year that will lower their future premiums.
“Next year we project a little faster growth due to the strengthening of our value proposition with this dividend plus increased momentum by members of the field force who increasingly are making LTC part of their practice,” says Simbro.
Dennis O’Brien, first vice president of long term care for New York Life Insurance Company, reports that through November, the company’s LTC sales were up 11% over the same period last year.
“We are hoping for an increase in 2007 sales of 22% over 2006,” O’Brien says. “We believe the LTC marketplace will be aided next year by publicity surrounding the implementation in the states of the new, easier LTC Partnership programs, as allowed by the Deficit Reduction Act of 2006. New York Life will further benefit by our introduction of certain new riders, including a level premium funded inflation rider providing for automatic increases in benefits based on either the CPI, the CPI plus 1% or the CPI plus 2%, as selected by the insured at time of original issue.”