Long term care insurance is a purchase many consumers think they can postpone until economic conditions improve. As a result, LTC insurance sales ran into some difficulty in 2008.
Sales of the product were down only 1% from year-earlier levels as of the third quarter, according to LIMRA International, Windsor, Conn.
However, results for the third quarter alone were down from the same period a year earlier by 9% in terms of covered lives and down by 7% in premiums collected. It remains to be seen whether the flurry of corporate layoffs, bankruptcies and assorted bailouts widely reported near year-end suppress sales even further.
Karen Fisherkeller, an associate analyst with LIMRA International, Windsor, Conn., notes the quarter reflected the first decrease in LTC premiums since 2006.
“The economy is the explanation,” she says.
The group side of the LTC market showed one area of growth. In the first three quarters of the year, group premiums were up 2% and participation was up 3% for all group business, including not only employers but also associations and other affiliations, reports Fisherkeller.
Compounding the marketing challenges for LTC insurance in 2008 were notices of premium increases for older policies by 2 major carriers.
John Hancock Financial Services, Boston, asked state regulators for rate increases averaging 13% and 18% on policies Hancock had taken over from Fortis Inc. in 2000. Genworth Financial Inc., Richmond, Va., filed for increases ranging from 8% to 12%.
An awkward development for the industry was a report from the Government Accountability Office that found wide fluctuations in rate increases granted for LTC insurance among different states. Roughly half of the states have adopted some form of rate stability measures, but the report argued that this leaves the rest of the country unprotected.
Whether this report could lead to moves to establish more uniform LTC rate-setting procedures among states remains to be seen.
In another notable development, Conseco Inc. took a major step toward freeing itself of a troubling line of LTC business. In November, the Pennsylvania Insurance Department approved the company’s spinoff of Conseco Senior Health Insurance Company. With about $2.9 billion in assets and 142,000 policyholders, the closed block of business is now held by an independent entity called Senior Health Insurance Company of Pennsylvania. The move relieved Conseco of the largest part of its run-off block of LTC business, which had significant adverse claims experience for the company.
In statements filed with the Pennsylvania Department of Insurance, some policyholders said they feared sharp premium increases or benefit cutbacks by Senior Health. The state’s Insurance Commissioner, Joel Ario, said, however, the deal was necessary to avert an insolvency.
Other developments were more encouraging for the industry. Among them were product innovations that broadened the appeal of LTC insurance for many consumers. Nursing-home-only coverage, for instance, has become outdated as carriers continue to introduce products covering home and community-based care. Some products pay a monthly cash benefit without regard to services used.
A study of more than 60 insurers by the AALTCI found 97% of LTC policies sold in 2007 covered some form of home care, up from 86% in 2000 and 67% in 1995.
Meanwhile, LTC partnership plans continue to spread.
Originally approved under the Deficit Reduction Act of 2006, partnership policies tie into state Medicaid programs. In those states that adopt a partnership program, individuals who purchase qualified LTC insurance can protect some of their assets from Medicaid spend-down requirements if they ever need prolonged care.
The federal government expects LTC partnerships to be implemented in as many as 30 states by the end of the year.
“Surprisingly, the bottom has not fallen out of the market,” observes Jesse Slome, executive director of the American Association for Long Term Care Insurance, Westlake Village, Calif.
“We’re going to go through a tough time and a period of change, and any company that does business the same old way it did 2 years ago will come out of the tunnel being greatly surprised,” he added. “A tough economy forces companies to work harder and smarter and to be leaner.”