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The Future. LTCI Product Design. Discuss.

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This is a year when many are clinging to any old idea that offers stability, afraid to look ahead for fear a glimpse of the future might lead to a slip and fall into the abyss.

But the people who will be making big money in 2022 aren’t clutching at any sapling that still seems to be attached to the ground; they’re nurturing the ideas that will sprout into the great new products and marketing strategies of the next decade.

So, what’s germinating in long-term care insurance (LTCI)?

One thing that’s not is any product that was supposed to fill holes in or wrap around the federal Community Living Assistance Services and Supports (CLASS) Act.

The U.S. Department of Health and Human Services (HHS) suspended implementation in October 2011. The Senate has been resisting formal efforts to kill CLASS dead. Creating a federal long-term care (LTC) benefits program was a dream of the late Sen. Edward Kennedy, D-Mass., and few Democrats relish the thought of helping Republicans crush the product of that dream.

But, of course, CLASS is dead. Not even the opponents of the CLASS-killer bills say the CLASS program would have worked.

Malcolm Cheung, a vice-president at Prudential Financial Inc., Newark, N.J. (NYSE:PRU), was part of a group at the American Academy of Actuaries, Washington, that reviewed an early version of the act. “We had recognized as actuaries that there were some 

program design issues that would make the program itself very difficult to manage over the long term,” Cheung said in an interview. “And, so, ultimately when the plug was pulled it certainly was not a surprise to me.”

But Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI), Westlake Village, Calif., said he thinks most LTCI producers and distributors expected the CLASS program to help the private LTCI industry, by creating awareness of the need for LTCI in the minds of prospective insureds without really satisfying that need. “And, so, since nothing had really happened it was like, oh, well, another nothing,” said Slome.

Slome, however, said he assumed the government was likely to roll out a competitive LTC product as part of CLASS. “I was one of the outspoken minority who really felt the CLASS Act could significantly impact private long-term care insurance sales, especially in the group marketplace,” Slome said. “And, so, I personally and professionally was, from a competitive standpoint, glad to see that it wasn’t moving forward.”

So what’s on the post-CLASS LTCI horizon?

Cheung suspects that some benefits managers who were waiting to see what the act produced may now revisit the idea of setting up private employer-sponsored coverage.

Demographic trends are another factor, said Cheung.

The oldest boomers started turning 65 last year. They are increasingly likely to have helped their parents with LTC, and that could spur boomer interest in LTCI. “I think over time, more and more boomers will actually see the light and recognize the risk that long-term care poses and hopefully try to do something about it to protect themselves from that risk,” he said.

Because premiums are higher for these prospective older applicants, Cheung expects to see a shift in plan design away from top-level benefit coverage.

Five or six years ago, policies often had unlimited lifetime maximum benefits with 5% compounded inflation


That kind of plan design is becoming less and less popular, he said.

“In fact, at Prudential, we’re probably selling just as many policies with 3%  compound annual inflation protection as opposed to 5%,” Cheung said. “We’re selling many more policies than we had in the past with 3-year lifetime maximum benefits whereas before 5-plus years was the most common lifetime maximum benefit.”

Slome is expecting to see LTCI marketing change and become more focused.

Many insurance agents still fail to identify prospective buyers properly, Slome said.

“They are still looking at the world thinking the vast majority of Americans do not have long-term care insurance, therefore, the vast majority of Americans are my prospects,” Slome said. “Nothing could be further from the truth. It doesn’t matter what percentage own long-term care insurance. There’s a very specific market for this product just as there’s a specific market for BMWs and a specific market for Kias.”