Close Close

Life Health > Health Insurance > Health Insurance

LTCI Watch: Canaries

Your article was successfully shared with the contacts you provided.

I don’t want to spoil anyone’s enjoyment of a movie, but, if you are involved with long-term care insurance (LTCI) planning, or any other type of long-range financial planning for people under about age 60, you really ought to go see “Soylent Green.”

The basic gist of “Soylent Green” is that, a few decades from now, the situation for older people could be way, way worse than most people who show up in articles would ever dare to talk about.

For many years, the United States seemed to be doing great, and science fiction writers and futurists would point to “Soylent Green” with relief, as an example of how a lot of the scary things we worry about really don’t come try. Partly because, as the economists tell us, free people in a high-tech society will quickly come up for substitutes for resources that run out and patches for other types of problems that crop up.

And, of course, those optimists were probably right. Life as we know it has had many opportunities to end in my lifetime and hasn’t. The big differences between the quality of life in my neighborhood now and what it was like, say, 40 years ago, when “Soylent Green” came out, are that the Hudson River is a lot cleaner, beautiful condos have replaced abandoned factories, and there’s a lot more artisanal organic cheese for sale.

But then, I see the article about Detroit wanting to back out of the retiree health benefits promises it made. 

Go to the actual Detroit city financial document, and you see that Detroit’s current “other post-employment benefits” (OPEB) obligation — retiree medical cost obligation — is about $5.7 billion. That’s about one-third of Detroit’s total long-term debt.

“The entire OPEB obligation is unfunded,” according to Detroit’s emergency manager, Kevyn Orr.

“As part of his comprehensive restructuring plan, the emergency manager will evaluate options to reduce or eliminate certain health care costs for both active and retired employees,” Orr said.

Today, I just posted an Associated Press story about some more canaries in the coal mine — who just happen to be coal miners.

Members of a coal company’s union are protesting efforts to kill the company’s retiree health benefits program through bankruptcy, saying a bigger energy company spun off the coal company purely to shrug off retiree benefits obligations.

Of course, you could argue, persuasively, that the employers in question only promised such absurd benefits because of a combination of worker pressure and general, population-wide ignorance about how math works and about how unpredictable investment returns are.

But I think the big issue here is just that our society as a whole has made all kinds of promises to retirees and near retirees that society probably can’t keep.

A few years ago, everyone was yelling at Penn Treaty for promising LTCI benefits the company couldn’t really afford to keep.

Now regulators are yelling at most LTCI carriers for promising benefits they couldn’t really afford to keep.

Soon, everyone will be yelling more loudly at the Postal Service and municipal governments for making promises they couldn’t really afford to keep.

Eventually, we’ll have to yell at ourselves and recognize that we collectively as a civilization made promises that we have to figure out some way to restructure. We got into this mess because we’re human and we make stupid mistakes. If we get out of this, we’ll get out because we yell less and plan more.

See also: