In our last article “Is the California Partnership for LTC Insurance Dead or Alive?,” we discussed the key issues surrounding the future viability of the California Partnership, including:
- how a “simple” modification to the welfare and institutions code in allowing the 3% or 2% compound inflation rides to be included in the product offerings
- as well as allowing a 50% minimum daily benefit of the states annual nursing home daily benefit average amount to be used as the daily benefit minimum.
This would be enough to reduce the partnership’s premium to a low that would make the product more affordable for “middle income” Californian’s and much more competitive in the “traditional” LTCI market (that is, products offering the same or equal benefits).
However, during these discussions over the last two and a half years regarding long-term care insurance in California and the Partnership program, many questions have been brought to the legislative table. These questions are regarding the future of this type of insurance in California and its ability to cover the risk today and in the future without experiencing massive rate increases and or the inability to pay future claims.
Policy types, benefit designs, policy features, consumer protections, agent and carrier responsibilities, and California Department of Insurance responsibilities were all bantered around by the various interested parties or stake/share holders, including:
- ACLIC (company lobbying group)
- NAIFA (agent association),
- California Health Advocates (consumer group),
- CA Dept of Ins.,
- CA Dept. of Aging,
- CA Dept. of Health Care Services (DHCS),
- CANHR (Elder Care Attorney’s)
- as well as many individuals from the assembly, senate, and CALPERS.
All of this was followed by reports, studies, letters, commentaries and conference calls, and what is clear is that there is a lot of confusion and concern surrounding this insurance and its future. That’s the bad news!
Now for the good news!
Because of all the confusion, some clarity has emerged regarding the most regulated LTCI state in the union. Because of the “perceived” demise of the California Partnership many questions have arisen regarding “what other types” of LTCI products are there?
Well once again, a little historical background is necessary. This insurance evolved from Medicare Part A, skilled nursing home benefit in the 70’s through the mid-80’s. Covering the “catastrophic” event, the institutional stay in a nursing home (nursing home insurance).
In the late 80’s, the dawning of “Home Health” Care evolved with the offering of “Stand Alone” home health care coverage and quickly followed by adding the two policies together and “voila”, comprehensive evolved.
These policies were “durational” in design, that is, products offered separate lengths of coverage for NH and separates length of coverage for “Home Health Care” (ie 4 year NH & 2 year HCC), making it a so-called 4 & 2 comprehensive LTCI.
In fact, in 1993 California became the most prolific state in LTC insurance by passing SB 1943 by redefining Long Term Care Insurance from nursing home and home health care to nursing home and home care, dropping the word “health” by adding personal care (ADC assistance) and homemaker services (IADL assistance), changing the fare of this insurance.
In that law, they said Section 102321 … here are the three policy offerings a company can offer:
- nursing home only
- home care only and
- only those policies or certificates providing benefits for both institutional (NH) care and home care maybe called “comprehensive long-term care” insurance.
The code did not address life policies with LTC benefits. In fact, it excluded them from being part of the law.
In 1994, the dawning of the California Partnership in which these policies will be “integrated” in design, no length “durational” but an integrated pool of benefits (take the number of years of coverage, 1 year= 365 x the daily dollar amount selected of $100= 365 x $100= $36,500 of a pool, a bag, a pot of money) and in 1997, SB 1052 required that all policies be “integrated” in design.
That is, one year, two years, three years, etc. … which is really 365 x dollar amount, 730 x dollar amount, 1460 x dollar amount of benefits.
So, what you are really selling today is nothing more than a pool, a bag, and a pot of money.
Then in the late 90’s through today has been the rapid growth of what most people call hybrids, either a life policy with a LTC component or a life policy with a LTC Insurance rider.
In 2006, the expansion of partnership policies offering some form of inflation benefits at certain ages now because partnership approved, asset protected and the dawning of what we have today.
The three types of policies available throughout the country are:
- Hybrids
- Traditional and
- Partnership
There lies the confusion!
Now the questions are being asked amongst the legislators and others, what the difference is between the 3, in benefits, in design, in payouts, in coverage, in consumer protection, and in tax deductibility.
In fact, back in 2013 in California, a bill was passed, SB 281 effective 2014 in which the bill specifically requires carriers offering these products now must “ENSURE” any agents offering marketing, or selling these types of policies must be able to explain the difference between the 3 policies and now when you throw the new federal DOL “fiduciary responsibilities” … Pandora’s box has just been opened.
For more about this and much more regarding California LTC Insurance, get or maintain your compliance and sign up for the California Partnership courses to hear where we are going in LTC insurance in 2017 and beyond.
If you are attempting to write LTC Insurance business in the state in or of confusion, take advantage of our free Secrets of LTC Insurance Plan Design guide by clicking on the image below.
