As March roared in like a lion across parts of the US, the sun began to shine in Sacramento on March 1, 2018 when the California LTCI Task Force agreed and voted unanimously to implement the “Sub-Task” force recommendations regarding the “Revitalization” (Noun: the action of imbuing something with new life and vitality) of the California Partnership for Long-Term Care program in California.
After five (5) long and strenuous years of debate, discussions, illustrations, white papers, meetings, conference calls, and much distress, the Task Force agreed that the California Partnership product and program is the most viable Long-Term Care insurance option for California’s “middle class” population.
The Genesis of the program was built around the concept of providing more “Affordable” lifetime coverage for those “moderate to middle income” Californian’s who could not afford the “traditional” lifetime/unlimited products of the late 80’s and 90’s and beyond!
The product was designed to be “simple and affordable” for the masses. It was also designed to provide “meaning benefits” for those of the modest means; or according the original studies of the late 80’s & 90’s, those who were most likely to “spend down” and become impoverished if they had to “self insure” the first “Two” (2) years of “Catastrophic” Nursing Home Care.
In the spirit of brevity, I will attempt to be succinct and break this announcement into five categories:
- California Market
- Opportunity
- Players
- Products
- Future
California Market
According to the University of California Report “Will Boomers Bust the Budget?” California is the most populous state in the Union, home to 12 percent of the county’s total population.
Over the next decade, California’s elderly population is expected to grow significantly due to the aging baby boom generation— the population born between 1946-1964:
- Numbers: 76 Million
- Ages in 2018: 54-72
Right behind them is Generation X— born from 1965-1984:
- Numbers: 60 Million
- Age in 2018: 38-53
Opportunity
According to recent government and industry studies, the total number of LTCI policies in force, including group, traditional, and hybrids: roughly Seven (7) Million.
California, a State of forty (40) million people and according to the California Partnership current population survey report, March 2017 Data the California “Target Population” of individuals between 50-74 years of age in 10,853,313 million (Regardless of income and asset bracket).
Roughly 2.5 million fall in the “At Risk” population—these are the people who don’t have LTCI Coverage but because of their moderate income and asset parameters, they are most likely to “spend down” and become impoverished due to experiencing a “Long-Term Care Event” in their lives.
It is estimated that California has less than a 5% penetration rate in LTCI Sales!
Players
The Partnership has been referred to as a “Public Private Partnership”:
The Public Side (3 entities)
Department of Health Care Services
They now “clearly” understand the issues, concerns, & urgency regarding the “Review and Approval” process of getting products Reviewed and Approved as well as allowing “all interested” Companies in becoming approved to sell partnership.
Department of Insurance
They are “well aware” of the concerns that the companies have in “Timely” approvals as well as past & existing filling of older products. They have assured the task force of a timely review and follow-up to current and new product fillings! Thirty to Ninety days assuming timely responses from companies. If companies take pieces of their current approved policies and packaged like what Genworth did with its element product approach Thirty (30) to Sixty (60) day approval is a possibility.
Department of Aging
Is willing to Assist the Partnership in outreach and seminar workshops to spread the word as well as educate consumers on the new offerings. As well as retrained their volunteers on the new changes impacting the Partnership Product Offerings.
The Private Side (The Companies)
There is only one Carrier currently active in the California Partnership, Genworth. They could rapidly adjust their current partnership policy to meet the new/allowed changes and be actively on the street with the new provisions within months.
The Partnership will shortly (within weeks) be sending out invitations to all “Interested Parties” inviting them to participate in the “New” and Improved Partnership Product. The current suggested list includes:
New York Life
TransAmerica
Mutual of Omaha
Bankers Life & Casualty
Thrivent
Mass Mutual
The Partnership will consider any life company the offers “Certain Types” of hybrid product to apply if interested.
Products
In this section, it will review the new changes that have been agreed upon by the task force. As taught in our Long-Term Care courses as well in the Partnership Class we will break it down to the six (6) basic issues of plan design:
Type of Coverage
According to the 2017 “Who buys Long-Term Care Insurance?”, 96% of the buyers have purchased “comprehensive” LTCI. The State allows by law for carriers to offer 1)Facility only 2) Home Care only 3) Home, Community and RCF only or 4) Comprehensive/fully integrated LTCI, assuming they choose to do so. However, the Partnership focused on “Simplicity” and elected to focus on “consumer best interest” approach and continue to allow the carriers to make those decisions.
Minimum Daily Benefit
Here comes one of the biggest changes. The Partnership is dropping “the minimum daily dollar amount must be NO less than the State’s Average Daily Private Pay Rate (ADPPR) of a Nursing Home in that year!” Which means that in 2018 the ADPPR for nursing facility care is $310 per day and at 70% of that amount is $220 for NH and 70% for RCF coverage which is $154 for RCF benefit is “NO LONGER Required”.
Due to the “Realities” of current claims data which indicate that the claim is looking like 60%-70% home care based a minimum of $100 per day (or 4 hours of home care at $25 per hour) is a good starting point!
So here are the new Partnership “Minimum Daily Dollar Amounts”: Daily $100 per day or $3000 per month, base line. Carriers can offer increases in $10.00 increments with “NO Capps” if they choose.
Duration, “Pool or Bucket of Money”
The Partnership, once again, is offering more flexibility for consumers/carriers. They agreed to require a minimum of $73,000 as a starting point for ASSET protection, pool of money, so, If a carrier wants to continue to offer a 1 year plan (365 days) in order to meet the $73,000 minimum the agent/consumer would have to buy at least $200 per day benefit to meet the $73,000.
However, companies could start the minimum pool offering at $75,000 to $100,000, $150,000, $200,000 and so on up to $500,000 if they choose in “pools of money or buckets of money” approach. For the middle income client, the decision would simply come down to “How much ‘non exempt assets’ do you have?” and “How much do you want to protect?”
Elimination/ Deductibles
Again, some changes have occurred, if the $73,000/75,000 minimum is being offered then a 0, 20 or 30 “Calendar Day” deductible must elected. However if the Duration or Pool is greater than the minimum, a deductible greater than 30 days but no greater than 90 day “Calendar” can be offered.
Inflation Protection
This is where the biggest changes have occurred! A minimum of 3% compounded, at any age, can soon be offered with an additional mandatory offering of 5% simple or compounded at any age. Companies can offer, 3%, 4%, or 5% if they choose, but it must offer 3% compounded for any age. This feature alone could reduce premium by over 40% in new premiums offering, making the CA Partnership very competitive.
Future
What does the future hold for you?
Will you roar like a lion in the LTC Insurance market or fall prey like a lamb to agents who seize the greatest marketing opportunity in the history of insurance?
You are working in the largest market in the country and the opportunity with people who need a long-term care plan is extraordinary.
The players on the public side have finally shown up and all we need now are more carriers to get back in the game.
The products have always provided superb protection and now that the inflation option is reasonable, affordable solutions are within reach.
Join us for LTC Insurance and California Partnership Continuing Education training. Education. Enlightenment. Empowerment.
Let’s roar together in 2018!
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