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.