For many in the long term care insurance business, the passage of the Community Living Assistance Services and Support Act was another setback.
In a period of declining sales, it’s easy to see why the industry largely viewed the arrival of a competing government-run LTC plan as ill-timed and poorly conceived.
CLASS, enacted in March as part of the Patient Protection and Affordable Care Act, may, however, turn out well for the industry.
The principal reason people aren’t buying LTC insurance is because they are not aware they need it, as Scott Olson, an LTC agent, pointed out in a letter to the editor of NU in November. The CLASS Act would make it difficult to ignore that need for 150 million American workers, noted Olson.
Those workers would be automatically signed up for the government plan in their place of work, starting in 2013.
Sure, the vast majority will opt out of this LTC plan, because it could take an estimated $123 average monthly premium out of their paycheck, depending on age, according to the Congressional Budget Office.
Yet the idea would be firmly planted in the mind of the typical worker that they truly must plan for future LTC needs. Otherwise, why would the government require employers to offer it as a voluntary benefit?
The benefits in the government program are clearly inadequate for most LTC events,. But therein lies the opportunity for LTC carriers and producers.
CLASS would provide only an estimated $75 a day in benefits (again, a CBO projection), a fraction of typical at-home LTC costs today. Those average $20.50 per hour, according to the American Association for Long Term Care Insurance, while Genworth Financial Inc.’s most recent survey of LTC costs found typical outlays for a licensed home health care aide now average over $43,000 a year.
Precisely because CLASS would cover just part of such costs, it creates openings for LTC carriers and producers to sell products that could be woven into the government plan.
It could be exactly what’s needed to awaken slumbering LTC insurance sales.
Individual LTC policy sales have dropped almost every year since 2003, according to LIMRA data.
In the first nine months of 2009, individual LTC insurance sales tumbled 29%, while group and worksite sales were down by 28%, according to LIMRA, Windsor, Conn.
And another LIMRA survey of LTC insurance professionals from 45 companies found that 54% predict flat sales for the industry over the next 3 years, compared to 21% who had made that same prediction in 2006.
There are various reasons for the slump, ranging from the economic recession to carriers either raising rates 20% or more or bailing out of the LTC business altogether.
But LIMRA also reports that more than half of individuals who bought LTC insurance in 2008 got it through their employers.
The workplace, then, is apparently primed for sales growth for LTC insurance. CLASS can help propel that opportunity by alerting workers to a compelling need for protection.