Genworth Financial Inc. (NYSE:GNW) lured a wide range of business and personal finance reporters to a briefing in Manhattan today to try to get them to think about the aging of the U.S. population.
Tom McInerney, Genworth’s president, faced questions during the Long Term Care Awareness Month event about the impact of the recent announcement that the company has had to add more than $500 million to its long-term care insurance (LTCI) claim reserves. He also reacted, indirectly, to a new Boston College retirement center analysis in which economists suggested that the percentage of consumers with catastrophic long-term care (LTC) costs may be lower than commonly believed.
But he seemed to be most passionate when he talked about serving on the commissions that have tried to shore up U.S. and global efforts to deal with the aging of the population, and especially about the likely future impact of LTC costs.
“The crisis is going to have a huge impact on the economy of the United States,” McInerney (photo, right) said.
McInerney said serving on the various reform commissions has been sobering.
“You realize how bad it is,” McInerney said.
More than 60 percent of U.S. baby boomers will likely be totally dependent on government programs, and the government will have no choice but to raise taxes and slash benefits, McInerney said.
People who have the ability to save and insure for retirement income and LTC needs have a moral obligation to do so, to reduce the burden on government programs as much as possible, McInerney said.
Members of the private LTCI community often cite statistics suggesting that as many as three-quarters of Americans will need some kind of formal or informal long-term care at some point in their lives. The Boston College economists suggested that only 20 percent may run up the kinds of big nursing home bills people typically think of when buying LTCI.
McInerney said that, even after recent rate increases, the cost of good private LTCI is comparable to the cost of homeowners insurance. The risk of losing a home to a fire or other catastrophe is only about 1 in 200, but “a lot of people buy homeowners’ insurance,” McInerney said. He said “it’s kind of crazy” that people insure their homes without getting angry about their homes failing to burn down but are upset by the thought of owning LTCI and getting through life without ever needing long-term care.
A reporter in the audience asked McInerney about the effects of Genworth’s recent reserve announcement on consumers’ views on whether to trust LTCI issuers.
“That’s our promise,” McInerney said. “That we’ll be around. We think we’re in good shape.”
Genworth has needed help with adjusting the premiums on old policies, and still needs the ability to get much smaller increases on an annual basis, and regulators seem to understand those needs, McInerney said.
McInerney said actuaries and top-level officials at the Centers for Medicare & Medicaid Services (CMS) came face to face with the challenges involved with managing LTC costs when they reviewed financial projections for the Patient Protection and Affordable Care Act (PPACA) CLASS Act program. The Obama administration ultimately killed the voluntary LTC benefits program after CMS actuaries declined to predict that the program would be sustainable.
“They wanted to cover long-term care for all Americans,” McInerney said. “They looked at it, and saw all the things we’re seeing on our own [LTC] blocks.”
Also during the briefing, McInerney:
- Said Genworth is revamping its group LTCI products.
- Predicted that the Bipartisan Policy Center — a think tank formed by former Democratic Senate Majority Leader Tom Daschle and former Republican Senate Majority Leader Bill Frist — will come out with a proposal that would let retirement account holders use the money tax-free to pay for long-term care expenses or to buy a single-premium immediate annuity that could be used to pay LTC-related bills.