As we look ahead to the New Year and ponder what changes lie in store for our beloved long-term care insurance industry, this author finds it easiest to place into five categories the major influences which impact whether 2014 will be sweet or sour.
THE ECONOMY: When I look at our production from year to year, it seems as if the economy plays an outsize role in our sales metrics — exasperating since we exert no control over it. Although academics tell us the recession ended in 2009 — and many economic indicators have either returned to normal or surpassed their 2008 lows — a malaise continues to dog the American psyche. Influential author and researcher Harry Dent agrees that “the everday consumer never came out of the last recession.”
Turning his attention to demographics, Dent adds that “an aging US will cause deflation that will weaken the economy from 2014 – 2019.” With the Fed telegraphing an indeterminate end to punishing interest rates, we can say, “So goes the economy, so goes LTCI.”
THE GOVERNMENT: There’s no greater impediment to LTCI sales than government’s “free inheritance insurance for prosperous heirs,” as Steve Moses describes Medicaid. 2014 will see 9 years since the Deficit Reduction Act was passed — the last real attempt to curb Medicaid abuse — and time for renewed attention. Next year’s elections will prove if sentiment toward the Tea Party ethos materializes into Congressional seats, and whether any resultant power is wielded to reign in entitlement spending.
While the Patient Protection and Affordable Care Act (PPACA) is here to stay — including its devil’s-bargain Medicaid expansion — ACA has had a negligible impact on Long Term Services and Supports. Instead, we enter 2014 with talk of repetitous studies by well-meaning public servants, whose results will be quickly forgotten. Those who hope for better tax breaks for the purchase of LTCI will be disappointed again.
THE CARRIERS: During the last few years several insurers took overt steps to moderate sales, whose successful implementation led some pundits to misinterpret ours as an industry on its heels. Such is the outsize power of the ratings industry, which also used its indirect might to encourage carriers to de-risk certain benefits or withdraw them entirely. In 2014 we expect many carriers will ask for and accept as much business as producers can give.
Unprecedented in 2013 were the excessive spikes in volume caused not just by so-called “fire sale” business — at junctures where new products replace old series — but because several carriers’ fire sales coincided with the introduction of gender-distinct pricing. Although new products are expected from several leading carriers in 2014 (and some remaining state rollouts from others), we don’t anticipate nearly the spikes (or the delays in cycle-times that ensue), since the upcoming transitions will rarely involve a change from gender-neutral to gender-distinct pricing.
How many carriers will offer LTCI at the end of 2014? The correct number.