5 possible cures for what ails LTCI

Colorado Springs, Colo.

A century ago, this high, flat town was popular with an early type of long-term care (LTC) facility: the tuberculosis sanatorium.

Tens of thousands of patients with TB came here for the clear, dry air. They spent months, or years, coughing in huge porches at indoor sanatoriums, or in tents at tent-based outdoor sanatoriums.

In 1909, for example, a fraternal society, the Modern Woodmen of America, started setting up TB tent colonies for members with TB. The society hoped spending $250 per year on a member’s tent care could prevent a $1,750 death claim.

Researchers backed by Merck & Company discovered streptomycin in 1946. Streptomycin cured TB and emptied the sanatoriums. Orderlies folded up the TB tents.

The transformation was so complete that, by March 21, when members of the modern long-term care insurance (LTCI) community came here for the 15th annual Intercompany Long-Term Care Insurance (ILTCI) Conference, none of the general session speakers bothered to mention Colorado Springs’ old TB wards.

The speakers and the other attendees were too busy struggling to imagine a future in which someone — private insurers, government programs, families, anyone — will have the resources to cope with the growing demand for LTC services likely to occur as a result of the increasing life expectancy of members of the Silent Generation, and the relentless aging of the members of the Baby Boom generation toward the “oldest old” category.

The Long Term Care Section of the Society of Actuaries organizes the conference. Along with actuaries and other professional services providers, the list of attendees included representatives from private insurers that are protecting more than 4.8 million Americans against LTC risk.

The conference also attracted passionate client-side advisors who have seen what the right LTC plan can do for a family.

Andria Bovey, the owner of my LTC expert of Everett, Wash., said she was at the conference because she knew the sessions would be highly technical, and highly detailed. “I want to have everything in my toolbox,’ Bovey said.

During the opening general session, David Kerr, a principal at Oliver Wyman Actuarial Consulting Inc., urged attendees to do what they can to keep the LTCI market moving forward.

“Never give up on a cause that is too important for all involved,” Kerr said.

But conference speakers acknowledged that they face formidable obstacles, including the effects of record low interest rates, past underwriting mistakes, a history of insurers giving inaccurate assurances that “the worst years are behind us,” insurance company embarrassment, and regulator alarm.

Dean Miller, chief financial officer at LTCG, a business process outsourcing company that administers 1.5 million LTCI policies and 47,000 active LTCI claims for insurers, said during a panel discussion with other LTCI industry financial executives that some life insurers have little interest in the “closed blocks” of LTCI business left over from when they were still actively writing LTCI.

“They’d like to bury it in the desert and forget about it,” Miller said, adding that that kind of attitude can affect everything from administrative systems to customer service to hiring. ”Who wants to go to the closed block that’s dying?” 

Jillian Froment, the chief operating officer of the Ohio Department of Insurance, said the traditional LTCI issuers are pricing themselves out of the market and will have to come up with better products.

Eric Cioppa, the Maine insurance superintendent, said his governor has asked him to try to get stakeholders together to come up with better products. He said he has trouble looking at the current wave of filings seeking 50 percent LTCI rate increases. “My visceral reaction is to cringe,” he said. “I can’t help it.”

For look at some of the ideas for a cure that came up at the conference, read on.

1. Do what the consumer wants.

One idea that surfaced, briefly, from time to time, was to try to give consumers what they want.

Session speakers pointed out that giving consumers what they say they want is not mathematically possible.

Stephen Moses, president of the Center for Long-Term Care Reform, a group that promotes efforts to keep upper-income and middle-income families who could afford private LTCI from using Medicaid nursing home benefits as their de facto LTCI, said in an interview that policymakers should be realistic about finances.

“We have to give up on the illusion that the government can print money and take care of everybody,” Moses said.

But speakers presented preliminary polling data showing that consumers are strongly opposed to the kinds of mandatory LTC benefits programs that would use premiums from healthy people to hold down the cost of coverage for all, and, at the same time, are not willing to spend much on private coverage.

RTI International developed a hypothetical LTCI product that would pay $100 in benefits per day for three years. Only about half of the participants in a consumer survey said they would prefer the three-year plan to no plan, even if the three-year plan cost just $25 per month.

Don Redfoot, a policy specialist at AARP, said the LTCI community has faltered because it has been trying to impose its own set of priorities on consumers.

“Long-term care insurance is at the end of a long list of things that are immediately pressing,” Redfoot said.

In too many cases, he said, insurers are trying to sell private LTCI to people who lack health insurance for some members of the family, lack life insurance and disability insurance for the adults in the family, and have no savings. 

For insurers, the best way to expand the market for private LTCI might be to help consumers meet other financial needs, by, for example, getting them auto-enrolled into employer-sponsored retirement plans, Redfoot said.

2. Create tougher, cheaper traditional stand-alone LTCI.

Distributors at the conference said they see strong consumer interest in LTC planning and in stand-alone LTCI products.

Mike Skiens, president of MasterCare Solutions, a managing general agent and specialty brokerage in Portland, Ore., has set up an LTC planning consumer education site, LTCConsumer.com, and he says the past three years have been good for his firm.

“They’ve been our highest sales years,” Skiens said.

But insurers have responded to concerns about price stability, and product sustainability, by introducing ruggedized products designed to get through hard times.