As consumers delve deeper into the details of health care reform, many are discovering that a new government-run long term care program is part of the law. It is called the CLASS Act, which stands for Community Living Assistance Services and Supports Act, and is set to become effective Jan. 1, 2011.
When discussing this new option with consumers, it may be instructive to look back at the last major piece of legislation that affected long term care insurance — the Health Insurance Portability and Accountability Act (HIPAA). HIPAA, passed in 1996, clarified the tax treatment of LTCI policies, creating a new type of plan — tax-qualified (TQ) LTCI. When that happened, many agents fell into either the TQ or the non-TQ camp. They would passionately point out the “problems” with the other camp’s TQ or non-TQ approach. As a result, consumers became confused and ultimately did not trust the advice they were getting from either side.
Similar arguments have taken place about different types of inflation coverage, cash versus reimbursement contracts, asset-based combination products versus traditional products, and multi-life individual products versus group products. Of course, there will always be legitimate differences between products, but conflicting opinions create a problem when they cause consumers to distrust the entire process.
A better approach is to let the client know that, regardless of what they’ve heard, there are really only two choices: planning for long term care expenses, or not.
If they do decide to plan, there are no “wrong” choices — only educated guesses as to the outcome of a planning method, based on past history and experience.
For example, someone who only sells LTCI with 5 percent compound inflation protection may be recommending the perfect inflation protection — or they may be asking their client to pay too high of a premium if the actual LTC inflation rate turns out to be much lower. No one can say for certain what will happen in the future.
There are bound to be a lot of opinions regarding the new CLASS Act program. Many are predicting it will blow up and create massive government debt. There are legitimate reasons to think that this might be the case, but no one knows for sure. On the other hand, for those who can’t obtain private coverage, CLASS may turn out to be a helpful way to plan for LTC.
Don’t let personal biases, political views, or current trends affect your advice and counsel to people who have made the decision to plan for long term care events. When you move from just selling a product to helping clients with their LTC planning process, there will be times when the recommended solution won’t result in immediate commission dollars.
Nevertheless, the reputation built over time through this approach will more than compensate through additional clients who trust your advice and buy products.
Tom Riekse Jr. is managing principal at LTCI Partners, a brokerage general agency specializing in long term care insurance. Email him at [email protected].