June 2019 California Agent/Advisor Alert

Protect your renewals, understand rate increase notifications and options and make the best recommendations … and for a limited time get re-certified for California Partnership via live Webinar, hosted by Tom Orr.

The first half of 2019 has almost come and gone, and much has happened. With the close of 2018, we saw 7 years of efforts to revitalize the California Partnership and LTC Insurance in California come to completion. The Partnership LTC Insurance Task Force achieved its goals to modify and simplify the product offerings and filings with the California Partnership for Long-Term Care and the California Department of Insurance.

Carriers can now offer more flexibility and inflation protection options, with 3%, 4% and 5% compound inflation at any age. The minimum Daily Dollar benefit can now be as low as $100 per day, with the monthly minimum being $3,000 per month and the annual minimum of no less than $73,000.

The elimination period is now based on calendar day accumulation and the annual benefits can be reflected in pools of dollars such as $75,000, $100,000, $150,000, $200,000 and so on.

All of this was designed to provide more flexibility and affordability within the Partnership product offerings. The main objective behind these changes was to simplify the product offerings and to keep premiums between 1% to 3% of income vs. the outdated industry/NAIC antiquated model of 7%.

However, as we wait for the companies, which are all approved LTC insurance carriers in California and invited to apply and to expand to the middle market of California consumers, an event has occurred that is causing great concern amongst many industry observers.

In-force Rate Increases

Beginning in the second half of last year, many California policyholders began to receive their new in-force rate increase notices in the mail for both traditional and California Partnership policies. With the exception of those who purchased the TransAmerica partnership policy back in 1994 through 2004, with Transamerica being the first company to invoke a rate increase on California Partnership products back in 2006, this was the first in-force rate increase for both Genworth and John Hancock in California since 1994, the year of the partnership launch.

The timing could not be worse, according to many industry experts, including myself. “Why,” you may be asking? Well, some of you sold both traditional and Partnership to clients who are receiving two different rate increases, such as an 80% rate increase for a non-Partnership policy vs. a 40% increase for a Partnership policy.

But, even though the size of the rate increases are different, it is even more confusing! As an example the non-Partnership rate increase occurs all at once, while the Partnership rate increase must be spread over 3 year equal increments.

For example, Genworth asked and received the maximum rate increase allowable per request, which is 40% on Partnership policies. Those clients will see their rates increase by 13 1/3% each year over the next three years.

This presents an interesting dilemma for you and your client. Again, you may ask “why?” Well, because the current carriers who are sending out their notices have yet to file new products with the 3% compound inflation, it cannot be offered as a current step down option.

Could it be offered next year when they received the second notice of the second 13 1/3% increase? How about the third-year?

Also, could I drop the daily dollar amount? If so, to what amount and why and why not and what amount?

When it comes to asset protection, what step down choices will impact my pool / asset protection value?

You should know by now that the two variables that will impact asset protection are the daily benefit you choose and the duration or length of coverage that goes with that.

You simply need to be ready to address these reduction of benefit issues in lieu of these protracted rate increases.

Now remember, we are just tapping into some of the key questions and concerns regarding California Partnership policies, not the traditional policies rate increase options that may have a different set of options and concerns.

In fact, you all need to be updated on the new Step Up, Step Down and Conversion/Replacement options as it relates to in-force rate increases versus annual renewal options. You also need to know how they come into play in reducing future rate increases now and in the future.

We here at Senior Insurance Training Services have held a couple of webinars with the ad hoc LTC Insurance Task force on these very issues, with consumer advocates, regulators, one of the nation’s foremost senior actuaries who has been involved in working with the California Department of Insurance on the Partnership SB 898 as well as the most recent AB 999 rate stability.

We have created a checklist of variables and issues when analyzing these rate increases as well as the options that there are companies are offering the insured from issue age to current age. Benefits purchased today, current cost of care in the area vs the current daily benefit, as well as many of the considerations including conversions, contingent nonforfeiture, lapse, cancellation of coverage and/or request for additional reduction of benefits not listed and why and what to consider.

Save Your Renewals

Do you want to protect your book of business, protect your renewals and demonstrate a level of confidence and professionalism, while creating opportunities to create new business and referrals?

One of the greatest concerns of this state’s leading consumer advocate is the number of poor, orphaned insureds who don’t know where to turn for advice and recommendations in lieu of these rate increases. Because of all these issues and concerns, we have been given an opportunity, for a limited time frame to conduct live California Partnership Webinars in order to recertify any and all agents and advisors who have ever sold or have existing Partnership as well as non-Partnership policyholders.

These webinars will recertify all those who have not renewed their partnership courses over the last four or more years. Stay tuned for next week’s agent alert on this and the debate regarding the California issue of consumer best interest versus our suitability standards and how they impact you now and in the future.

More companies have requested new and additional rate increases on existing traditional and Partnership policies, so stay educated and create new and future opportunities to assist California consumers on their LTC Insurance option, choices and alternatives.

Call 800-460-7487 or simply go to ltcce.com and book a California LTC Insurance or Partnership Webinar, hosted by Tom Orr.