Bonnie Burns is one of many people who have talked to the Long Term Care Innovation Subgroup about ideas for rescuing long-term care insurance in the past few months.

Members of the subgroup, a recently formed arm of the National Association of Insurance Commissioners, have been calling in a long list of consultants, actuaries, insurance agents and academic researchers to provide ideas about how to revive the LTCI product line.

The oldest baby boomers are already 70. In just 15 years, they will turn 85. That’s the age when the percentage of people who need help with the activities of daily living, or with coping with dementia, starts to grow rapidly. But today, as boomers are busy providing informal care for their parents, and starting to hear frightening reports about friends, relatives and celebrities their own age who have early-onset Alzheimer’s disease, issuers of traditional stand-alone long-term care insurance are struggling.

Some insurers are still comfortable selling products that combine long-term care benefits, or similar types of benefits, with life insurance policies or annuity contracts. Those products give the holders the comfort of knowing that they, or heirs, are very likely to get some benefits out of the products.

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Supporters of stand-alone long-term care insurance are still rooting for that product. They say it can offer insureds far more protection against catastrophic long-term care cost risk by directing the premiums paid and the earnings on insurers’ investments solely toward insureds who need long-term care services.

But issuers are suffering from overly optimistic assumptions they made about interest rates, and overly pessimistic assumptions they made about how likely customers would be to let policies lapse. Managers of some of the issuers that are still actively in the market justify participation by saying that selling new policies gives them leverage to persuade state insurance regulators to let them raise rates on in-force premiums.

Related: LTCI lawyers: Regulatory delays contribute to market woes

Bonnie Burns is a training and policy consultant with Sacramento, California-based California Health Advocates. She comes at the product from a completely different perspective.

The NAIC, a group for state insurance regulators, has been paying for her to be one of the advocates who speak up for consumer interests in NAIC proceedings for years. In the 1970s, she helped start one of the first major Medicare enrollee advocacy programs, and her work helped lead to the creation of the Medicare supplement insurance “letter plan” standardization system that shapes the Medigap insurance market today.

Instead of focusing on what insurers can do to hold down long-term care insurance costs and increase the premiums enough to keep the products breathing, she still talks about how the products could be better, and do more to protecting lower-income Americans  from disaster.

For a look at what Burns told the NAIC subgroup in June, based on a copy of a slidedeck posted on the subgroup’s section of the NAIC website, read on.

For long-term care insurance issuers, policyholders' tight grip on coverage can be a problem.

For long-term care insurance issuers, policyholders’ tight grip on coverage can be a problem. (Photo: Allison Bell/LHP)

 

1. Let Medicaid help low-income long-term care insurance policyholders hang on to their policies.

For insurers, the tendency for policyholders to keep long-term care insurance policies in force at a higher rate than originally anticipated, has been a major claim cost challenge.

Burns says states that are hoping private LTCI programs, such as state Long Term Care Partnership programs, ought to consider helping some residents pay private LTCI premiums, to keep even more of the policies from lapsing.

A Long Term Care Partnership program encourages residents of a state to buy long-term care insurance by letting purchasers of certain types of private coverage protect some assets if they exhaust the private benefits and end up needing Medicaid nursing home benefits. Some long-term care policy watchers say Medicaid, a health program for the poor funded by state governments as well as the federal government, is now spending a significant amount of its cash on older people who had good income and assets earlier in life and have intentionally impoverished themselves in old age to qualify for Medicaid nursing home benefits.

Burns presented study data suggesting that four established partnership programs maybe succeeding at reducing use of Medicaid money on nursing home benefits.

In the four states with the oldest partnership programs, 6,937 policyholders have used the long-term care insurance benefits, according to Burns.

More than 1,900 of them died while collecting private long-term care insurance benefits, and 584 exhaused their benefits. Just 35 people with two-year partnership program policy benefit periods have used Medicaid benefits, and only nine people with three-year or four-year benefit periods have used Medicaid.

Burns says states could improve the numbers even more by offering premium subsidies for partnership program policyholders who are about to let the policies lapse.

Related: LTCI: Which insureds have the toughest grip on their policies? 

Different types of long-term care insurance subsidy rules could have different effects on issuers' claim risk.

Different types of long-term care insurance subsidy rules could have different effects on issuers’ claim risk. (Photo: Thinkstock)

   

2. Aim long-term care insurance premium subsidies at lower-income, higher-risk consumers.

Burns says a state could do the most to protect Medicaid nursing home benefit resources by offering better private long-term insurance premium subsidies for older, sicker people with lower levels of income and assets.

Those types of subsidies could increase the odds that the insureds who keep their policies would be insureds who are likely to file claims. 

Related: Some European countries seek private long-term care help

Burns says a long-term care insurance premium subsidy program could try to recover outlays from the insureds' estates.Burns says a long-term care insurance premium subsidy program could try to recover outlays from the insureds’ estates. (Photo: Allison Bell/LHP)

  

3. Let the government try to recover any long-term care insurance premium subsidies provided after the insured dies, from the insured’s estate.

Mortgage lenders offer older homeowners a “reverse mortgage.” A reverse mortgage lets a consumer get cash out of a home’s equity value and continue to live in the home until they die.

Burns says one way a state could finance consumers’ private long-term care insurance premiums would be to advance the consumers the premium support cash, and then, when possible, get the subsidy cash back from the insureds’ estates when the insureds died.

Paying the long-term care insurance premiums that way might, in effect, create a public long-term care insurance premium finance version of the reverse mortgage, Burns says.

Related: Short-term care insurance sales rise 20%

Burns says more long-term care insurance policy design uniformity would help consumers.

Burns says more long-term care insurance policy design uniformity would reduce consumer confusion. (Photo: Thinkstock)

  

4. Do more to standardize the long-term care insurance policies that consumers do buy.

Burns, who played a role in standardizing Medigap policies, says standardizing private long-term care insurance premiums, benefits, durations, definitions and exclusions would help make buying the products much easier.

Related: Critical issues that will make or break an aging America

Burns says caregivers need to be able to file long-term care insurance claims for insureds who may lack the ability to provide much help.

Burns says caregivers need to be able to file long-term care insurance claims for insureds who may lack the ability to provide much help. (Photo: Thinkstock)

 

5. Redesign the long-term care insurance claim filing process.

Burns notes that the person filing an LTCI claim is unlikely to be the insured.

Issuers need to use electronic systems to reduce that amount material claimants need to submit, especially when it comes to verifying whether policy benefits triggers have been met and whether providers have provided covered services, Burns says. 

Related: U.S. Alzheimer’s death rate rises

Burns says commercial convenience services could be part of future long-term care benefits packages.

Burns says commercial convenience services could be part of future long-term care benefits packages. (Photo: Eric Risberg/AP)

   

6. Build in transportation and meal support benefits.

Burns would like to see issuers of long-term care insurance policies make a point of covering public transit costs, Uber costs and other transportation service costs. 

Related: 10 worst states for elder firearm deaths

Future long-term care insurance policies could cover the kinds of robots shown in the film Robot & Frank.

Future long-term care insurance policies could cover the kinds of robots shown in the film Robot & Frank. (Photo: Park Pictures) 

 

7. Build in elder technology support benefits.

Burns says the long-term care insurance policies of the future should cover care-related technology products and services.

Burns says issuers could start by covering fall detectors, stove monitoring systems, and systems for helping caregivers keep track of older people who are prone to wandering. 

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