In 1986, Dr. Mark Meiners from the University of Maryland Center on Aging wrote a paper on the issues surrounding Long-Term Care and the ability of the insurance industry to provide affordable coverage.
In the late 80’s, when the LTC Insurance market expanded from twenty-five carriers to well over seventy-five, the average age of the buyer was 66, with over seventy percent married couples. They were being sold lifetime, unlimited nursing home only coverage with about $100 a day daily benefit with no inflation.
In 1990, the first of many buyer/non-buyer national surveys of who purchased LTC Insurance and why was published.
Based on the products purchased, what became very evident was what many of us called “Long & Thin” with no inflation. The study also revealed that the number one reason for not buying the insurance was cost! Apparently, selling lifetime/unlimited back then to 66 year old couples with a $100 daily benefit and no inflation; was considered “expensive”. (Request our white paper “Secrets of LTC Insurance Plan Design” for further discussion)
A Partnership is Born
Thus the dawning of the California Partnership for Long-Term Care, which was established by the legislature on 1990 as a pilot program to link private long-term care insurance plans covering LTC with the state “safety net” Medi-Cal.
The idea was to make private LTC insurance “more affordable” by reducing the length of coverage from lifetime/unlimited to a more affordable option like coverage ranging from one to five years.
To address the concerns of what happens if a person “exceeds” the one to five years of coverage and still needs care; rather than “self insuring”, simply apply for the states “Safety Net” Medi-Cal; and for every dollar of benefits paid by the “private Insurance”, the state would/will disregard (dollar for dollar) any or all of your “non-exempt” assets from Medicaid’s spend down rules.
In essence, one can protect some or all of their “non-exempt” assets via purchasing a Partnership Policy and receive lifetime/unlimited coverage without the premium associated with a lifetime unlimited policy.
Most important, however; Partnership policies provide people with “modest to middle incomes”, the option of choosing a “shorter benefit duration” policy with the “high quality protection” they need and can afford!
The purchase of “high quality protection, includes such provisions as automatic built-in inflation protection, adequate daily per diem, a “monthly, rather than a “daily” cap on home and community based benefits, and a “unique” care management feature that exceeds the state and federal standards, especially at the time of claim adjudication, which is critical in today’s environment of claims denials and recession.
These and other “key” benefits such as “asset protection”. Make the Partnership policies more attractive than non Partnership. Also, the fact that these policies are approved and “certified” by the state. Whereas “Traditional Policies and Hybrids are just approved”.
However, within the last six years, two of these features, have made the Partnership product “unaffordable” to the masses.
They are the “Mandatory Minimum Daily Benefit” which is based on the state’s Annual Daily Private Pay Rate (ADPPR) for a nursing home stay. Partnership regs state that the minimum shall never be less than 70% of the ADPPR for that year.
So, in 2017, the ADPPR for California Nursing homes is $300 per day and 70% of that is $210 per day! That has also made the Partnership “unaffordable to the masses!”
In 2016, a group of us, after four years of discussions, illustrations and with the departure of two of its key Partners (John Hancock and New York Life) took action with the Passage of SB 1384. However, key “stakeholders” (the LTCI Carriers) took no action!
Why? They say SB 1384 is not specific on what minimum inflation amount is acceptable and how low they go with the minimum daily benefit. Plus, they say “so what” with these changes if we can’t get a product/Rate and marketing approval done in a timely fashion. As well as more, flexible product design! All are valid concerns!
So, here we are again, except its 2017, first week of February.
In two weeks, it is expected that a series of conference calls, face to face meetings with some carriers are expected to occur. These meetings will involve industry actuaries, ACLTC (the LTCI’s lobby group) NAIFA/NAHU (the Agents association) State legislators and the Nation’s foremost “consumer advocate”.
The purpose is to see who wants to play in the “Expanding of the California Partnership!” The goal is to allow “All Carriers” to participate in the program by making this insurance “more affordable” to the masses and review and approve products and rates and all marketing material in a timely fashion (3-months or less).
Why Won’t Carriers Participate?
So why wouldn’t a company want to participate in the California Partnership?
The product that is approved and “Certified” by the state and CA Department of Insurance (According to the “New” 2017 Buyer/Non Buyer of LTCI Report.” Three-quarters of buyers indicated that “State Participation” in the Partnership Program was “important” to their “purchase motivation”). Especially if this allows more reasonable inflation options, lower daily benefits, critical care management feature that insures timely claims review and approval!
That feature alone, an agent, advisor or planner would be “stupid” not to see the value of that feature as well as the additional consumer protections including “agent E & O protections “ that are built into the Partnership minimum requirements.
When the industry is experiencing rate increases, pressure on claims paying ability for those 5, 6 and lifetime plan offerings, low interest rates, zero lapse assumptions, reserve pressures and so on, why would a company not want to reduce/lower its risk/exposure by reducing its coverage (i.e. length of coverage) which actually exposes the client to the greater chance of “exhausting coverage” and “still needing care!”
Why not give the client the “ASSET Protection” Component of the Partnership (which has no cost to their carrier) which opens more choice, flexibility and control to the client/spouse/children including their attorney in providing options to continue their coverage/payment choices for their loved ones and or client!
Look, if any of the Carriers that my readers represent are considering not participating in the California Partnership, I will be more than happy to send them over six (6) reports from Government agencies, independent “Think Tank Groups”, State and Federal Commissions as well as Academia “stating that “one” of the ways to ensure the future viability of the LTCI industry is a Partnership, three of four prong, approach program!
The Time is Now!
It’s time to see who is committed to this market and opportunity and to see who really knows what they are doing!
That includes the state of California DHCS, DOI and Department of Aging as well as the Carriers.
Remember, that is why it’s called/referred as a “Public/Private Partnership to help California’s and ultimately the state of California! (See the Cal Berkeley study: ” Will Boomers Bust the Budget?)
Make sure you stay ahead of the LTC Insurance Selling Curve and stay “certified” to market both LTC insurance and the California Partnership.