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Life Health > Life Insurance > Term Insurance

LTCI Watch: Elbows

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I recently wrote up some of the papers presented at the SCAN Foundation’s conference in Washington, and cool, beloved readers said, both in public posts and in private e-mails, that they found the papers disappointing.

I think, really, that that’s partly because the people who wrote the papers are respectable people and are limited by the reality that they have to say respectable, reasonably politically correct things, or they’ll get into huge trouble.

In theory, they may be very theoretical and idealistic and above the fray.

In the real world where budgets are tight and it’s hard to get a job, maybe, say, they’re just on their knees praying every night that the U.S. Department of Health and Human Services (HHS) will give them a grant involving Medicaid nursing benefits administration, or give them a nice, wonky job, or give some other organization that hires them a grant or a contract.

Meanwhile, the folks at HHS may fantasize about getting better-paid, somewhat wonkish jobs at private companies that like the current, Medicaid-based long-term care (LTC) financing system pretty well and don’t really want to go with a private system.

And, of course, a lot of folks in wonky jobs are, like me, Star Trek fans or the equivalent, and haven’t worked much, if at all, outside of government agencies, academia, big law firms, big consulting firms, or other types of wonkish entities. For those folks, the economy may seem, really, to work a lot like the Star Trek universe: The good guys work for Starfleet or research institutes, or possibly as traveling actors or musicians. The private-sector people mainly are brutish miners, at best, and, typically, pirates with a large inventory of green slave girls for sale.

But I think the biggest problem is just that the insurance companies that have been selling private long-term care insurance (LTCI) haven’t really been defending the commercial LTCI turf very well.

Of course, the heads of the commercial LTCI units are ferociously passionate about staying in the market.

But the chief executive and chief financial officers say a lot of wishy washy sounding things during the quarterly earnings calls.

I think one reason is just the Federal Reserve Board’s continuing war against insurance company general account investment returns.

Life insurers seem to have a hard time knowing what they ought to sell these days, period.

The executives know that rising interest rates could give them new, different kinds of grief, even though the increases would help products like LTCI and long-term disability (LTD) insurance, and I think their real strategy is just to use a Christian Scientist, prayer-based approach to healing their finances.

I think another reason is that insurance company executives are actually nice people and definitely don’t want anyone think they’re out to cause problems for old people. They’re embarrassed by the fact that the companies have had to increase LTCI rates. Everyone seems to have some kind of obsession, rooted in scary congressional hearings of the 1970s and 1980s, with the idea that the original LTCI prices ought to be the LTCI prices.

I think the insurance executives should get their game on, sharpen their elbows, and go out and jab their elbows at people, and point out, aggressively, that making actuarial assumptions decades ahead of time about what people in various generations will do is really, really hard, and it’s kind of nuts to expect premiums to be cast in stone.

CalPERS, the most self-righteous nonprofit secular benefits organization that’s ever existed, has had to increase its LTCI rates 85 percent. That shows you how hard setting LTCI rates is.

The whole big budget fuss at Medicare and Social Security is, really, just a big, giant, inside-the-Beltway version of what the LTCI carriers are going through.

One reason to keep private LTCI carriers in the game is that they can do a lot of interesting experiments that the government can’t.

Another reason is that the more people out there trying to round up money for long-term care, the better.

A third reason is that giving the private sector skin in this game gives them skin in the game of fighting Alzheimer’s disease and other conditions that lead to high LTC costs.

If anyone has a stake in making sure that the government, venture capital firms and others invest heavily, and wisely, in reducing the need for LTC services, it’s insurers with financially significant blocks of LTCI business. 

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