Plenty of other wealthy countries in the world have huge numbers of baby boomers aging toward the oldest old category.
Some of those countries have leaders who can make up their minds about what kinds of public and private long-term care insurance (LTCI) programs to implement, and how to implement them.
So, what are those other countries’ leaders doing with their freedom to lead?
Reinsurers have been putting analysts to work scouring the world for creative ideas for meeting the world’s long-term care (LTC) needs.
Reinsurers’ views on the topic carry weight because reinsurers employ hard-headed number crunchers with actuarial training; they know exactly what lurks in the dark, smelly crevices in insurance companies’ claim departments; and they often assume so much risk that they become the ghostwriters of the direct writers’ business. The direct writers may get all the credit, and keep whatever level of financial responsibility the regulators require them to keep, but, in many cases, the reinsurers take over as much of the risk as they’re allowed to take.
Gen Re, a reinsurance arm of Berkshire Hathaway Inc. (NYSE:BRK.A), recently published a review of world LTC funding solutions by Sabrina Link, an actuary who works as one of the company’s LTCI product designers. Her ideas might help shape what products LTC planners can offer five or 10 years from now.
See also: Gen Re: New Medigap enrollment rises 23%
Link looked at the design of the LTCI programs in France, Germany, Singapore and the United Kingdom. For a look at five of the ideas she found in use in those countries, read on.
1. Single-premium annuities
One challenge insurers and LTC advisors face is knowing how to handle consumers who already need LTC services.
Link found that insurers in the United Kingdom are serving well-to-do families with LTC needs with “immediate needs annuities,” or single-premium immediate annuities (SPIAs) that provide guaranteed, tax-free income, Link says.
Not every family can afford a SPIA, but, when a family can afford a SPIA, buying a SPIA can be a way to create a funding stream to pay LTC bills.
2. Long coverage waiting periods
In France, about 15 percent of the people over age 40 have some kind of private LTCI.
One way the issuers there hold down costs, and premiums, is to set a coverage waiting period of three years for dementia, and one year for other covered conditions. If new policyholders need LTC services for reasons other than accidents during the waiting period, the issuer returns the premiums and cancels the contract, Link writes.
See also: 5 top LTC risk awareness drivers
3. High deductibles
In the United States, issuers of private LTCI usually start paying claims after the insureds get through an elimination period of 30 days or more, then pay out about $100,000 to $500,000 in benefits.
Medicaid programs typically require people in need of LTC services to spend most of their assets, then pay a modest amount for LTC services for a patient’s life.
In the United Kingdom, the government is phasing in new restrictions on public LTCI benefits, Link says.
Starting in April 2016, the government will require individuals to spend at least £72,000 on LTC services, and all but £118,000 in assets, before government benefits kick in. At that point, the government will provide “full state support.”
But “full state support” does not include general living expenses or hotel type costs other than those paid for by the local government, Link says.
See also: Can the wonks save private LTCI?
Image: TS/Sergey Sundlikov
4. Tight benefits limits
In the United States, drafters of the Patient Protection and Affordable Care Act (PPACA) infuriated the private LTCI community by including the Community Living Assistance Services and Supports (CLASS) Act program. The CLASS Act was supposed to create a voluntary, worker-premium-funded LTC benefits programs.
Critics argued that the program was impractical because even workers who were already disabled enough to qualify for private LTCI benefits would have been able to enroll in the CLASS Act program. Actuaries at the Centers for Medicare & Medicaid Services (CMS) declined to say that the program would be sustainable, and Obama administration officials ended up pulling the plug.
Singapore has created a voluntary LTC program of its own that seems similar in some ways but different in others.
Singapore enrolls all workers in a mandatory savings plan that provides assets workers can use for retirement, housing and health care. All workers with the accounts ages 40 to 69 are enrolled in an ElderShield LTC benefits program automatically, Link says.
Workers can opt out, but the opt-out rate dropped to 8 percent in 2011, from 38 percent in 2002, when the program was launched.
One way Singapore has kept the program affordable is to limit the monthly benefit to 400 Singapore dollars per month, even though nursing home care in the country costs at least 1,200 Singapore dollars per month.
Image: TS/Jeffrey Collingwood
5. Carrots for private insurers
In the United States, developers of the CLASS Act program tried to simplify the program and minimize the costs by shutting private insurers out. That decision turned LTCI agents and LTCI issuers into enemies of the CLASS Act program, and, in many cases, of PPACA as a whole.
The developers of the Singapore LTC program won over private insurers by letting ElderShield enrollees put up to 600 Singapore dollars of fund cash into private LTCI premiums per year. The private LTCI plans can pay up to 3,500 Singapore dollars in benefits per month.
About one-third of the 3.1 million Singapore citizens with savings plan accounts have ElderShield accounts, and about 265,000 of the ElderShield account holders have private LTCI coverage, Link says.
“Managing the care costs of those opting out may pose a political and economic challenge in the future, but at least the vast majority of the population enjoys some basic protection,” Link says.