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5 possible cures for what ails LTCI

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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.

Woman choosing from a restaurant menu

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,, 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.

John Hancock, Genworth and other carriers were at the conference demonstrating new families of LTCI products that use tougher underwriting rules to hold down costs, or give consumers and planners more of an ability to adjust costs by adjusting the package of benefits purchased.

Skiens said he was happy to see carriers developing new products. 

“That’s hard evidence that they’re committed” to the market, he said.

Bovey said carriers and others need to adapt marketing strategies to fit with the tougher underwriting rules. Today, she said, LTCI marketing programs have to target younger consumers, not people who are already eligible for Medicare.

“So many people can’t even be insured in their 60s anymore,” Bovey said.

Phyllis Shelton, an LTCI producer, LTC planning sales trainer, and author of Protecting Your Family with Long-Term Care Insurance (LTCi Publishing), said she has always encouraged LTCI producers to reach out to younger consumers, and especially through the employee benefits market.

“You’ve got to go to the workplace,” Shelton said. “You have to convince the employer to buy in by seeing it as productivity insurance.”

Today, marketing LTCI to younger prospects is more important than ever, Shelton said.

 Blanket woven from many types of yarn

3. Stay moving today by using products such as life-LTC hybrids, short-term care insurance, critical illness insurance and reverse mortgages to weave a protective blanket of coverage.

A few years ago, many LTC planners focused solely on selling stand-alone LTCI. Today, more are coping with changes in the product supply by using a broader range of products, including life-LTC hybrids, annuity-LTC hybrids, critical illness insurance, short-term care insurance and reverse mortgages.

Bill Jones, president of the National Alliance of Insurance Agencies Inc. and a former president of MedAmerica Insurance Company, was at the ILTCI Conference to talk about a white paper, “5 Myths About the LTC Industry (and How the Facts Help Everyone!), in which he encourages agents to consider the protection weaver approach.

He also has developed a table that summarizes all of the options available, and which type of client could use each option.

“Every consumer is a prospect for an LTC planning solution, regardless of age, health status or financial status,” Jones writes in the white paper.

In an interview, Jones said the sales numbers show that LTC planners have to get beyond focusing solely on offering comprehensive stand-alone LTCI.

Planners might prefer to see clients have stand-alone LTCI, but “the dog isn’t eating the dog food,’” Jones said.

Shelton agreed that the old LTCI specialists have to take a broader approach to LTC planning, especially now, while insurers are working with regulators to develop new-generation comprehensive LTCI products.

“We have to make use of where we are today,” Shelton said. “We don’t have time to wait for the regulations to be changed.”

Steve Schoonveld, an executive at Lincoln Financial, a company with a well-established product that packages an LTC benefits rider with universal life, said using hybrids can be a win-win for everyone, because a well-designed hybrid can protect both the insurer and the policyholder from some of the risk associated with stand-alone LTCI.

“We’re very happy with the risk we’re assuming,” Schoonveld said.

Gold link in a shiny black chain

4. Make a formal effort to have private insurers work with government agencies.

Preliminary RTL survey figures show that only 18 percent of the participants said they support the idea of creating a mandatory public LTC benefits program, but that 63 percent of the participants were open to the idea of the government creating a voluntary public LTC insurance plan.

See also: National LTC Plan Proposed

About 62 percent of the participants favored using tax incentives to promote the purchase of private LTCI, and 69 percent favored letting consumers using retirement account money to pay for LTCI.

Redfoot pointed out that even many consumers who say they oppose mandatory public LTCI programs support the idea when survey writers describe the idea as “adding LTC benefits to the basic Medicare package,” rather than as “requiring people to join a mandatory public LTC program.”

Schoonveld said during a panel discussion on public-private solutions that program designers must be careful to find ways to preserve the current supply of informal care, and to protect retirees’ access to retirement income.

“Think about the downstream consequences,” Schoonveld said.

Image: Getty Images/Denis Kot

Serious through window

5. Redefine the LTC planning job.

One theme that came up repeatedly was the idea that private insurers, and premium-supported public insurance programs, may have to content themselves with offering limited LTC benefits, rather than promising to provide comprehensive benefits.

Even developers of public programs have been talking in terms of “front-end benefits,” or LTCI that can cover anywhere from a few months to a few years of nursing home care, and “catastrophic benefits,” or LTCI designed to kick in only after a family has paid a high deductible, rather than in terms of comprehensive coverage.

In the United Kingdom, for example, the government will now help a family pay for long-term care only after a family has spent at least about $110,000 on care.

Shelton said she sees the U.S. insurance industry moving toward selling smaller plans that can pay for home care and some assisted living facility care, not the kinds of plans that can pay for long stays in a nursing home. “That ship has sailed” Shelton said. 

See also: 5 ideas from a top LTCI distributor’s playbook


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