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7 (relatively) easy insurer ideas for saving long-term care insurance

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Insurers have many ideas for saving the U.S. market for stand-alone long-term care insurance market that require the Democrats and Republicans in Congress to work smoothly together.

Executives from Genworth Financial and John Hancock talked about some of those big, complicated, well-known ideas recently during a conference call with members of the Long Term Care Innovation Group, but they also spent some time talking about some smaller-scale proposals that might be easier to implement.

The Kansas City, Missouri-based National Association of Insurance Commissioners, a group for state insurance regulators, started the group in response to the problems now crippling the U.S. long-term care insurance market just as many baby boomers are starting to think vague thoughts about long-term care planning.

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The subgroup has been hearing from consumer group representatives, long-term care policy researchers and consultants, and even some insurance agents.

In July, the subgroup listened to presentations from Marie Roche and Alex Silva of John Hancock, which is a Boston-based unit of Manulife Financial Corp., and Debapriya Mitra and Patrick Redder of Genworth, which is based in Richmond, Virginia.

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The insurer reps said their companies would like to see policymakers moving beyond the mindset of the 1980s and 1990s, when interest rates were much higher and actual LTCI experience was scarce. They said their companies also could use a law that would let 401(k) plan and individual retirement account holders use account funds to pay long-term care insurance premiums, and a new federal income tax break for people who buy private long-term care insurance policies.

Congress has been debating those kinds of proposals for many years. The debates typically grind to a halt because of Democrats’ concerns that the proposals would mainly help higher-income taxpayers who would find a way to pay for long-term care even if they had no private long-term care insurance 

For a look at some of the insurers’ other, less gridlock-sensitive ideas, drawn from conference call slidedecks posted on the Long Term Care Innovation Subgroup’s section of the NAIC’s website, read on:


(Image: Thinkstock)

1. Make states’ long-term care insurance rules more uniform.

The Interstate Insurance Product Regulation Commission already offers a uniform set of long-term care insurance standards for member states.

National Guardian Life Insurance Co. of Madison, Wisconsin, recently used the compact standards to speed a new stand-alone long-term care product into the market in 28 states. The insurer became the first insurer to enter the U.S. market for stand-alone long-term care coverage in more than 10 years.

If the states that have avoided adopting the compact’s long-term care standards would do so, that would help all long-term care issuers, the insurer reps said.

Related: Nevada to use compact LTCI standards

Congress would probably have to help states harmonize tax and Partnership program rules. (Photo: Allison Bell/LHP)

Congress would probably have to help states harmonize tax and Partnership program rules. (Photo: Allison Bell/LHP)

2. Set the same standards for long-term care insurance policies that qualify for federal tax breaks and state Long-Term Care Partnership programs.

Congress lets consumers deduct some long-term care premiums for “tax-qualified” products from taxable income under some circumstances.

Congress has also enacted a law that lets states set up Long-Term Care Partnership programs, or programs that try to protect state Medicaid programs from nursing home bills. A state with a Partnership program encourages residents to buy private long-term care coverage by turning Medicaid into a nursing home bill backstop program, rather than the obvious source of nursing home bill help.

A Partnership program tells state residents that the Medicaid program will ease the benefits eligibility requirements for a holder of certain types of long-term care coverage if the holder ends up having to live in a nursing home for many years and exhausts the private long-term care benefits.

All policies eligible for the Partnership program must be tax-qualified, but not all tax-qualified policies are eligible for the Partnership program.

If states and Congress could make modest changes in the tax rules and the Partnership program rules, so that all tax-qualified long-term care products would be eligible for the Partnership program, that would help the issuers, the insurer reps said.

Related: Partnership LTC: The Impact and Implications of Exchange Offers

Insurers say LTCI training requirements hurt efforts to recruit producers. (Photo: Thinkstock)

Insurers say long-term care training requirements hurt efforts to recruit producers. (Photo: Thinkstock)

3. Put long-term care insurance education in the standard training for all life agents or all health agents.

Today, life and health agents have to get separate training to sell long-term care products. That hurts long-term care producer recruiting, the insurer reps said. 

Related: On Professional Designations

Ben Franklin, to represent cash value

(Photo: Thinkstock)

4. Let a long-term care insurance policy offer a cash value as a standard feature.

Today, an insurer can sell a life insurance policy that has a cash value and also offers a benefit for a policyholder who needs long-term care.

The same insurer cannot sell an long-term care policy that comes in with a built-in cash value, other than a provision that lets the insured get the premiums paid in back, the insurer reps said.

Letting an insurer offer a better cash-value option could make stand-alone long-term care products more appealing, the insurer reps said.

Related: 10 reasons financial professionals need asset-based LTC in their retirement toolbox

Hybrid image, based on a USDA photo by Susan Rachlin

John Hancock wonders why it can’t somehow combine long-term care insurance with critical illness insurance. (Image: Allison Bell/LHP and Susan Rachlin/U.S. Department of Agriculture)

5. Encourage insurers to develop new types of hybrid insurance policies that offer long-term care benefits.

Insurer reps said another way to make buying long-term care benefits more appealing might be to make it easier for insurers to build long-term care benefits into products such as medical insurance, disability insurance and critical illness insurance.

Related: Health-LTC multi-tools

Rubber band

Insurers want the payment schedules for long-term care products to be more like a rubber band. (Image: Allison Bell/LHP)

6. Bless the sale of flexible-premium long-term care insurance policies.

Consumers can buy universal life insurance policies with flexible premium payment schedules.

Allowing the sale of stand-alone long-term care insurance policies with payment schedules that can stretch would be a way to accommodate changes in consumers’ circumstances, the insurer reps said.

John Hancock reps suggested, for example, that consumers who know their income is likely to rise might prefer to buy long-term care policies with premiums that are set to rise over time. 

Related: Indexed universal life: It’s just a great investment

Today's Medigap products offer no coverage for long-term care services. (Image: Centers for Medicare & Medicaid Services)

Today’s Medigap products offer no coverage for long-term care services. (Image: Centers for Medicare & Medicaid Services)

7. Create a Medicare supplement long-term care insurance product category.

The Genworth reps said creating a long-term care benefits component in the Medicare supplement, or “Medigap,” program could expand consumer access to long-term care benefits and make the products more affordable.


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