During the past 40 years, we as an industry have introduced many long-term care insurance (LTCi) products yet consumers still aren’t buying in significant numbers.
Our customers and our nation need a successful long-term care insurance industry. Consumers need protection from the financial devastation of end-of-life long-term care expenses. Our nation cannot afford to pay LTCi expenses for the increasing number of people turning 65.
The aging baby-boom generation has arrived. About 78 million boomers were born 1946-64.
We estimate that 70 million boomers will age into Social Security and Medicare. This is often referred to as the “silver tsunami.” Millions will spend a lifetime of savings paying for long-term care services. Most nursing-home expenses are paid by Medicaid, and this ever-increasing liability will break Medicaid.
I first began hearing about nursing-home policies in the 1970s. These were primarily small policies and some agents were accused of aggressive tactics in selling them. Agent education and consumer protections improved the industry’s reputation in the 1980s. From the mid-90s to the about 2005, LTCi policies evolved and greatly improved. Long-term care insurance coverage grew more comprehensive and benefits became richer.
During the same 40-year period, increased awareness of diet and exercise combined with advances in healthcare to expand life expectancy. Morbidity became a greater risk than mortality, to individuals and society. The market was growing and so were our products.
Unfortunately, in the past decade a nearly perfect storm hit long-term care insurance. Persistency exceeded actuarial models resulting in a consistently growing liability to the insurance carriers. At the same time, a long-term low-interest-rate environment continually reduced returns on investments.
This perfect storm has resulted in several prominent long-term care insurance carriers leaving the marketplace. Others who remain have restructured and re-priced their long-term care policies. Neither of these results is good for the stakeholders involved — not the consumer, not for the insurance industry, and certainly not for the American economy and society.
Our free-enterprise system can solve any problem, and we will solve this one as well. If we can send people to the moon and back and land a golf cart on Mars, we can solve society’s challenge with long-term care. Dedicated, intelligent collaboration among insurance companies, consultants, distributors, universities and government regulators will create better solutions.
Government should introduce more incentives for people to purchase individual long-term care insurance. People respond to meaningful tax deductions or tax credits. During this extended period of record-low interest rates, our insurance regulators can also relieve some pressure by making adjustments to reserve requirements. Insurance carriers will continue to refine the pricing and profits of this relatively new insurance coverage.
Unfortunately, some people will never be able to purchase LTCi and they cannot be ignored. Some cannot pass medical underwriting and many others will never be able to afford the purchase of a policy. The price of long-term care services is not cheap, and neither are long-term care insurance premiums.
Our nation’s Medicaid budget will require the best minds and money management to support this vital service. Waste and abuse must be dealt with harshly. Fines are not enough. Real jail time for offenders is needed to stop the very profitable Medicaid fraud industry.
A wide array of participants in the insurance industry (including many on the life/health/employee benefits sector) gather annually at the Inter-Company Marketing Group meeting to try to tackle such challenges. ICMG promotes strategic alliances to solve challenges and maximize results. Working together we will solve this issue just like we’ve done many times before.
When we deliver a successful long-term care insurance industry, our customers and our nation will reward us greatly. The next round of products is already beginning to appear: Carriers are partnering, for instance, on new solutions with companies that specialize in underwriting, actuarial work, health care and claims administration. As carriers uncover the right combinations of price and benefits, success will follow – for the carriers, the customers, and society.
Our industry has solved every problem we’ve faced. We have the capacity to solve this one. Let’s work together and turn this big challenge into an even bigger opportunity. Society needs long-term care insurance to succeed.
- About those hybrids …
- Moody’s: LTCI could have miserable company
- Moody’s: LTCI could have miserable company