Long Term Care discussion Group
John O'Leary
May 2014
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Think Tank Co-Chairs
◦ Roger Loomis
◦ Ron Hagelman
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Project oversight group (POG)
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Steve Schoonveld
John Cutler
Ben Wolzenski
Jason Bushey
Clark Ramsey
Julie Flaa
Brian Grossmiller
©OLeary Marketing Associates 2013
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Background and context
System overhaul
Government role
Social insurance
High deductible/catastrophic coverage/short
term care/Medicare LTC
Re-insurance
Medicaid reform
Regulatory reform
Next steps and implications
Questions
©OLeary Marketing Associates 2013
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Expectation: LTCi would play a prominent role in
financing LTSS
Traditional LTCi products turned out more expensive
for consumers and more risky for carriers than
expected
Some carriers exited the market for many different
reasons and a market consolidation ensued
Traditional LTC insurance, short-term care and hybrid
products continue to attract a variety of consumers
Middle income solutions are evolving
Overall market penetration below 10%, not including
Hybrids
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How should the US deal with the long-term care
financing situation facing us?
Beginning in Jan 2013, a study of long-term care
experts was undertaken by The Long-Term Care
Think Tank
The study was sponsored by two SOA committees:
◦ Long Term Care Section and
◦ Forecasting & Futurism Section
The panel was comprised of more than 50 LTC
experts chosen by the Think Tank POG
Group included mix of well known and respected
actuaries, public policy experts, regulators, other
insurance industry experts
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Delphi allows participants to anonymously take
positions, explain them, listen, and react to
opposing viewpoints
Then, ideally move toward consensus opinions
Represents the collective opinion of expert
panelists-not statistically significant
Combines quantitative and robust qualitative
responses- not just the what, but also the why
To be clear-This presentation does not represent
the opinions of The Society of Actuaries but rather
the results of research conducted by the LongTerm Care Think Tank with SOA support.
Three rounds: Increasingly detailed questions that
built on the responses from prior rounds:
 Round 1- 30 questions; completed in March 2013
 Round 2- 6 Principles; completed in June 2013
 Round 3- Included review of several product
concepts; completed in September 2013
Study output:
 Approximately 250 pages of quantitative responses
and qualitative comments
 Here is where to find the full report:
http://www.soa.org/Research/ResearchProjects/Ltc/research-2014-ltp-ltc.aspx
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A systemic overhaul of the Long-term care
financing system is needed (86% agreed)
Private Insurance needs to be part of the financing
solution (100% agreed)
A revised long-term care financing system should:
◦ Incent responsible long-term care planning (100%
agreed)
◦ Incent healthy lifestyles (79% agreed)
◦ incent household and family participation (86%
agreed)
Tracking Panelists' Evaluations by Round
Systemic overhaul
Private insurance needed
System should incent:
Planning
Healthy lifestyles
HH & family involvement
Agree
82%
100%
Round 2
Disagree Ratio A/D
13%
6.3
0%
Agree
86%
100%
Round 3
Disagree Ratio A/D
5%
17.2
0%
100%
74%
84%
0%
12%
4%
100%
79%
86%
0%
9%
5%
6.2
21.0
8.7
17.2
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The government needs to take an active role in
defining the overall Long-term care financing
solution (91% agreed)
It should include
◦ A government sponsored LTC awareness and
education campaign (90% agreed)
◦ A more flexible LTC Partnership program (83%
agreed)
◦ Tax credits for the purchase of LTC insurance
(82% agreed)
Tracking Panelists’ Evaluations by Round: Active Government Role
Round 2
Active government role
LTC awareness campaign
More flexible Partnership
Tax credits for LTCI
Impose filial responsibility
Agree
89%
77%
76%
85%
18%
Disagree
10%
23%
24%
15%
82%
Round 3
Ratio A/D
8.9
3.4
3.2
5.7
0.2
Agree
91%
90%
83%
82%
15%
Disagree
7%
10%
17%
18%
85%
Ratio A/D
13.0
9.0
4.9
4.6
0.2
Panelist’s comment
The playing field is a mess and CANNOT be solved by private-only actions. The free market needs to have some
guidelines that only federal presence can define.
The government's role should be more (to) organize a workable LTC system with ample choice of settings, services,
and adequate financing. It should incentivize higher- and middle-income people to save for LTC and, if they don't
tax them in a progressive way, to finance basic needs. The government also needs to make sure programs are well
run.
Panelists words and phrases
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Organize
Incent
Monitor
Educate
Influence
Define
Structure (Medicaid)
Comprehensive set of solutions
Not another unfunded liability
©OLeary Marketing Associates 2013
Social Insurance is a necessary component of a
future LTCi system (84% agreed)
 Need for a limited SI program for people who can’t
buy LTCi due to cost or U/W (73% agreed)
 Could accept SI even if they didn’t agree with the
specific principle (90% agreed)
 Necessary characteristics of SI include:
◦ Catastrophic coverage (81% agreed)
◦ Mandatory participation (78% agreed)
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Tracking Panelists’ Evaluations by Round: Social Insurance
Round 2
Social insurance required
Social insurance principle
Could accept SI principle
Round 3
Agree
Disagree
Ratio A/D
Agree
Disagree
Ratio A/D
81%
18%
4.5
84%
11%
7.6
62%
26%
2.4
73%
14%
5.2
90%
10%
9.0
Necessary Characteristics of a Social Insurance Program
YES
NO
Catastrophic coverage
81%
19%
Mandatory participation
78%
22%
First-dollar coverage
11%
89%
HCBS coverage only
15%
85%
Institutional coverage only
9%
91%
Panelist comment
A Social LTCI program MUST be catastrophic only.… If we want a public-private solution in which some LTC
coverage comes from the government and some comes from insurers, we need to create a situation in which the
insurance component can be sold. That can occur ONLY with a catastrophic-only government program….
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Definition in study was official actuarial definition
Highlights included:
◦ Benefits and financing method prescribed by law
◦ Explicit accountability (e.g. trust fund)
◦ Funded by contributions and investment income
which in some programs are government income
from other sources
◦ Universally or almost universally compulsory, for
a defined population, or contribution is at such a
subsidized level that vast majority of the
population are eligible to participate
Social insurance product concepts
 LTC Savings program (68% agreed was viable)
 High deductible plan (67% agreed was viable)
 Short-term care (60% agreed was viable)
 Universal LTC (63% agreed was viable)
 Mutual LTC (53% agreed was viable)
 Medicare LTC (52% agreed was viable-43%
disagreed)
Social Insurance Product Concepts: Viability Ratings
Agree
Disagree
Ratio
A/D
Consumer
Viability
Carrier
Viability
Govt.
Viability
Positive
Impact
LTC Savings Program
66%
68%
25%
2.7
81%
87%
High-deductible plan
77%
67%
26%
2.6
74%
86%
60%
35%
1.7
79%
80%
52%
43%
1.2
75%
75%
63%
28%
2.3
56%
90%
53%
28%
1.9
53%
80%
Short-term care
65%
Medicare LTC
39%
Universal LTC
52%
44%
Mutual LTC
40%
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Baseline coverage for catastrophic LTC
Consumers responsible for first 1, 2, 3 years-their
choice
Healthy living credits to reduce deductible
Mandatory offer
Private underwriting but federally sponsored (FLTCIP)
Preferred vs. Short-term care
Issue-Many may not be able to fund deductible
Panelist’s comments
The insurance premiums for a three-year elimination period would be much more affordable than for today's
typical 90-day elimination period.
Up-front private/back-end public seems like a good partnership—win/win.
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Considerable support in prior rounds for LTC
Savings plan 78% and 89% respectively
Tax favored treatment/unused could be passed on
Mandatory
Issues
◦ Can’t save enough for catastrophic problem
◦ Mandatory not viable politically
◦ Current low retirement savings
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Interest in combining with supplemental insurance
Panelist comment
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Limited, modest benefit encourage use of informal
care and care management
Supplemental help during first 1-2 years
Mandatory offer
More affordable premiums
Underwritten by private insurance; federally
sponsored i.e. FLTCIP
Panelist’s comments
Like this because it provides a "something is better than nothing" answer and it helps consumers when they most
need it, at the beginning of an episode. As long as it is marketed correctly, and does not over-promise protection;
should not mislead.
This would only work with a catastrophic backstop provided by government
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Federal govt. establish mandatory program with
standardized catastrophic LTC benefit for all
Standardized supplemental benefits would dovetail
with basic benefit and fill gaps and pay deductibles
i.e. inflation protection, informal care, deductibles
and co-pays
Like Medicare available at age 65
43% disagreed viable (highest in study)
Only 39% thought was viable for govt.- step too far
Panelist’s comments
The general idea of mandating LTC makes sense to me. The idea of allowing supplemental coverages to provide
beefier, more costly benefits also appeals.
I don't know that there's enough money in the federal coffers to pay for it.
Other significant concepts
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Tax Deferred savings- 77% agreed was viable
• Funds in tax deferred accts. (401K, 403B, IRAs) can be
moved to qualified LTC protection on a tax and penalty
free basis
• potential to offset forgone tax revenues with Medicaid
savings
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National re-insurance Plan- 61% agreed was
viable
• Federally sponsored LTC re-insurance corporation
• Would provide re-insurance for catastrophic claims that
exceed certain pre-defined levels
• Would limit required capital requirements
• Provide a backstop that would assure consumers
Tax-deferred savings
National reinsurance
Agree Disagree
77%
11%
61%
27%
Ratio
A/D
7.0
2.3
Consumer
Viability
88%
81%
Carrier
Viability
95%
79%
Positive
Impact
75%
62%
Panelist’s comments-re-insurance
I don't know if the reinsurance structure can be made financially viable, especially given
the reactions of virtually ALL of the reinsurers that exited the market for LTC.
I would rather see creative ideas used to entice more private competition, which would be
preferred to another government entity.
Don't put the government in a risk management position on a reinsurance pool. Perhaps
allow credit guarantees for reinsurers.
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Federally sponsored corporation to provide reinsurance for catastrophic claims
Spread risk beyond individual carriers
Limit needed capital requirements
Encourage lower risk charges, hence more
affordable premiums; Provide consumer assurances
Issues: Federal stepping into private role
◦ Fanny Mae/Freddy Mac reaction?
◦ Not another federal organization
Principle:
Medicaid needs to be changed to tighten eligibility by closing
loopholes, strengthening eligibility requirements, and
enforcing the rules strictly. At the same time, it also needs to
be modernized to enable care on a national basis in the full
range of settings. This includes home- and community-based
care if appropriate and cost-effective
Medicaid
Tightening described above (80%
agreed)
Medicaid Modernization as described above (86%
Agreed)
Among strongest responses in study
Panelist’s comments
I think tightening the abuses is extremely important. It distresses me to see attorneys who make their living helping
people find loopholes to get Medicaid when they really are not eligible. At the same time, revising the way the
eligibility works would make a lot of sense.
While progress has been made, much more can be done to address a continuing Medicaid institutional bias.
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NAIC Model Act and LTC regulations need
substantial revision (79% agreed)
◦ Balance affordability and meaningful benefits for
consumers with predictable risks for carriers
◦ Modify regulations to allow more consumer cost
sharing (examples included)
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Eliminate minimum periodic benefits (60% agreed)
Allow benefit periods less than 1 year (59% agreed)
Make adult day care a home care option (74% agreed)
Make personal care services a homecare option (60%
agreed/40% disagreed)
Modify Regulations: Round 2 Results
Modify NAIC Model Act
Competitive decline obstacle
Benefit periods < 1 year
Eliminate periodic benefits
Unbundle home care
Adult day optional
Care by home aides optional
Agree
Disagree
A/D Ratio
79%
12%
6.6
19%
4.0
59%
34%
1.7
60%
19%
3.2
52%
29%
1.8
74%
26%
2.8
60%
40%
1.5
76%
Modify Regulations: Round 3 Results
LTC Marketing and Sales need to be
improved by mainstreaming the message
(67% agreed)
◦ Advisors have a fiduciary responsibility to discuss LTC risks
and costs with their clients (88% agreed)
◦ NAIC partnership training should be integral to CE credits
(86% agreed)
◦ LTC knowledge should be a core requirement professional
designations (79%)
Improve Marketing and Sales: Round 3 Results
Agree
Disagree
A/D Ratio
86%
10%
8.6
79%
2%
39.5
43%
40%
1.1
29%
1.7
NAIC/PART training should be integral to CE credits
LTCI knowledge should be core requirement of prof. designations
L&H companies encouraged to offer CI options
For training, CI accelerated death considered LTCI
50%
Improve Marketing and Sales: Round 2 Results
Agree mainstream message
67%
16%
4.2
Partnership certify agents to sell LTCI
39%
28%
1.4
L&H companies have obligation to sell LTC
26%
50%
0.5
Prof. designations should mandate LTCI training
39%
34%
1.2
24%
1.8
05%
17.6
NAIC should require training for CI riders
42%
Improve Marketing and Sales: Round 1 Results
Advisors have fiduciary to talk about LTC risks & costs
88%
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No single silver bullet
Total system re-definition required
Private insurance needs to be part of the solution
Medicaid reform needed as part of the solution
Social insurance needs to be part of the solution
Catastrophic and savings concepts resonated
Government needs to play an active role in system
definition, guidance, incentives and education
National awareness and education program needed
Legislation and regulation needs to be revised
Consumers need to be encouraged to plan and
incented to take responsibility for their care;
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National LTC plan- joint committee of government, industry
other stakeholders- Bi-partisan Policy commission a good
start
Economic analyses
◦ Tax deferred savings
◦ High deductible catastrophic plan
◦ Short-term care
◦ Medicaid
Carrier/industry reaction and feedback
◦ National re-insurance or other catastrophic risk
management
Consumer reaction/feedback
◦ Consumer feedback on system framework
◦ Research on concepts
◦ System and concept refinement
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Regulatory and legislative changes