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LTC Execs: It's Time to Grow

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The U.S. long term care (LTC) insurance market could enjoy 10% to 15% in annual short-term growth, according to the heads of two major LTC insurance businesses.

Malcolm Cheung, a vice president at a unit of Prudential Financial Inc., Newark, N.J. (NYSE:PRU), and Ross Bagshaw, president of Transamerica Long Term Care, Bedford, Texas, talked about that kind of growth earlier this month at the annual LTC Insurance Industry Conference in Las Vegas, which was organized by the American Association for Long-Term Care Insurance (AALTCI), Westlake Village, Calif.

Other conference speakers included some of the U.S. Department of Health and Human Services (HHS) officials involved with launching the voluntary federal worksite LTC program that is supposed to be created by the Community Living Assistance Services and Support Act (CLASS Act), a component of the Patient Protection and Affordable Care Act, by early 2013.

The HHS officials at the conference were Robert Yee, the newly hired actuary for the CLASS Act, and Hunter McKay, who will be responsible for marketing the program for HHS.

Some companies have left the LTC market in recent years, and some have raised rates, but the health of the market should be improved by the growing awareness of the consumers in the prime market that government programs “are not going to be a viable option going forward,” Cheung and Bagshaw said, according to conference recordings provided by the conference organizers.

In theory, if the CLASS Act program survives what many experts say is a structure likely to create a death spiral, that program could fill some gaps.

But the controversy surrounding the CLASS Act program and its limits, and the controversy surrounding PPACA as a whole, have helped draw attention to the need for comprehensive, private LTC benefits.

People in the prime market–ages 55 to 65–also see the intense pressure on Medicare, Social Security, and Medicaid nursing home benefits, said AALTCI Executive Director Jesse Slome, citing comments from industry executives.

“Medicare and Social Security used to be the third rail that no politician would touch; that has now changed,” Slome said. “If every day there is news that Congress and the president have decided that we need to address entitlement programs, then people in the target market are deciding they need private alternatives.”

Slome said the theme for the 2011 AALTCI conference was “Get Over It,” in recognition of the fact that the industry has been in the psychological doldrums for the past 18 months because conversation has focused on “waiting on the next shoe to fall”

But LTC sales have been growing, “albeit at a lower rate,” Slome said.

HHS could help with public education efforts.

Yee and McKay said HHS will spend $90 million or more on an LTC awareness campaign when the CLASS Act program is ready for a rollout.

Under the program, the minimum benefit will be $50 a day, and enrollees will have to pay premiums into the program for five years before becoming eligible to apply for benefits.

The HHS officials said at the conference that no final decisions have been made on the design of the program, but that the consensus is that premiums will be based on age and be adjusted each year to reflect changes in a price index.

“As a result, the premium is likely to be less expensive in the long term,” Yee said.

The HHS officials said they have been told to present three different pricing models to the HHS secretary by October 2012. The proposals will be published in the Federal Register, but the final decision on the pricing model will be made by the HHS secretary, the officials said.

Also at the conference, LTC executives from Genworth Financial Inc., Richmond, Va. (NYSE:GNW) and John Hancock, Boston, a unit of Manulife Financial Corp., Toronto (NYSE:MFC), said their companies are committed to the LTC market over the long term.

Marianne Harrison, president of John Hancock’s LTC company, said John Hancock remains committed to being a “viable player” in the LTC market.

John Hancock raised concerns last year when it announced a request for a 40% rate hike.

Harrison said the rate increase was the result of a diligent and comprehensive analysis of the business and the economic environment, and that state regulators were regularly briefed on what John Hancock was doing. “We explained to them in advance of the filing why the increases were justified,” Harrison said.

Harrison added that John Hancock is limiting its sales of LTC products but that “we are unequivocally committed to this market space and are committed to the product.”


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