On September 19, 2018, Governor Brown signed into law SB 1248, authored by Sen. Ted Gaines (R-El Dorado Hills), relaunching the California Partnership for long-term care insurance (LTCI).
Back on August 17, 2018, I wrote the article “The California Partnership is Back! No Really, It Is!” providing an overview of the changes that were about to come. Now the bill has been signed with an effective date of January 1, 2019, many questions are being raised about its implications to agents and brokers, their current and potential California insured of partnership coverage and to the various LTC Insurance carriers doing business in California.
What does this means to you and your clients?
Before we address these critical talking points, let’s first give you all a quick recap of how we got here:
2016: The number one reason for not selling partnership is because it’s too expensive due to the mandatory 5% compound inflation requirement for individuals age 69 or less than! SB 1384 (Liu) is signed into law, allowing a lower inflation escalator option to the 5% compound requirement as well as establishing the LTC I task force! Nothing happens!
2017: Task force conducts at least five (5) meetings and holds equal that amount in conference calls. Carriers come clean that SB 1384 was not specific/clear on its “lower than 5% compound offering.” They also feel that the minimum daily benefit requirement (70 % of the nursing home average daily private rate (ADPPR) that year), causes additional increases in premium and when added to the 5% compound inflation requirement, it makes the product too expensive.
Oh! Since we’re at it, the carriers also expressed grave concern with the California Department of Insurance and their inability to “Review and Approve” in a timely fashion, past, current and future “Rate and Product approval” process, which cost companies hundreds of thousands of dollars in filing, administration and system costs adjustments. So SB 255 is created, but the ‘# Me Too movement” accuses bill sponsors of inappropriate behavior and kills bill for advancement. No, Really!
2018: New bill, new authors create SB 1248, which takes all the above issues and concerns into consideration in addition to SB 1046. This bill enhances consumer protections that apply to long-term care insurance (LTCI) policies when policyholders reduce their coverage both on traditional policies as well as to Partnership policies.
This is a very important bill/law that will impact your “existing” and future policyholders of LTC Insurance in California. So, when the governor signed SB 1046 on September 11th and then signed SB 1248 on September 19th, within 90 days the California Partnership will change dramatically.
Assuming that any LTC Insurance company doing business in California truly understands the market and the opportunity and sees California as the number one state in market opportunity for LTC Insurance sales (Representing 25% of the current market opportunity). Now that that California Partnership has throttled back on major feature requirements associated with the product which will allow more affordable product offerings that will still provide a true value proposition for Californians who purchase the State endorsed/ Certified product. Time will tell!
How will this Impact You – the Agent, Broker, Advisor?
First to your “Existing” Clients:
Now remember, this just represents a “brief overview”! In the next 30 days as we update our LTC Insurance course and more importantly, our Partnership course, we will address this in greater detail.
For all existing partnerships, as well as non-partnership insured’s on or after January 1, 2019, according to current CA LTC Insurance Code Section 10235.50
Regarding “step down “from the current LTC by product with a 5% compound inflation rider to a lower inflation escalator, such as 3% compound for partnership products, as well as for non-Partnerships, can now be offered this option to reduce coverage and or lower premiums. This right may be exercisable any time after the first year of coverage anniversary. Also, in that same section of the code 10235.50 (3) d & e: in the event of lapse (d) the event of rate/premium increase (e). However, there is more to these offerings which can and will impact your client’s decision on what option to select.
For Partnership insured’s, this can jeopardize the product status, “Asset Protection” feature and the amount of future “Asset Protection “ benefit.
This just touches the inflation option. Your partnership client may also reduce the daily benefit option and the duration option! We at senior insurance training services are working with the various stakeholders on the impact and implications associated with the step down options which are designed to allow the insured to retain their coverage in lieu of lapse event or rate increase.
A recent student of ours asked if he/she can no longer “offer Partnership “to their new clients because the “parent company” does not allow it, that they don’t need to be “re-certified.”
That’s true, HOWEVER, if they have current Partnership Clients and due to the fact that California LTC Insurance code, as well as Partnership Regulations, require that in the event that Partnership insurer it is offered to ability to step/down step-up, or update existing coverage due to lapse rate increase or new product offering (Section 10235.52), then they shall maintain that Partnership Certification Status in order to assist or advise their clients of their options and how that may affect their future long-term care benefits.
As for mentioned above regarding my clients options retain their “Existing Coverage” in the event that due to changes in their financial situation in which their current coverage they be unaffordable and/or the event of lapsing the coverage for the same/related reason or in the event of Rate Increase.
One must remember that any time a carrier either enters the partnership or reenters the partnership or all ready is a current partnership provider, any time the offer a new and or improved product they must “within” one year of that offering offer the ability to convert and or upgrade to the new policy. Again the agent, broker, advisor must be able to discuss the various changes associated with the new coverage and how it may/will change from their existing coverage.
See, this is an opportunity to review your clients existing coverage as well as provide them additional options in order for them to retain their existing coverage or to consider dropping from 5% compound inflation to the new 3% compound inflation, which may reduce their premium and make their existing coverage even more affordable. Further discussion is required as it will result in a “replacement” and the 5% premium credits will also come into play.
The more I review these and many other issues associated with all the new changes and enhancements being impacted by these three bills (SB 1384, SB 1248 and SB 1046) and after repeated and extensive conversations with the author of the bill, the State’s leading consumer advocate and the Partnership Staff, I feel that further clarification is needed. However, I will continue to update you all over the course of the next two weeks, addressing the issues of:
- Implications to you and your future new LTC Insurance Clients
- Implications to the Carriers, current and potential “New Partnership Players” on how their new changes will allow them to offer more affordable, sample product design approaches to reflect today’s new realities in addition to more flexible underwriting considerations due to reduced exposure.
All this and more is now being added to our new and extensive training and education platforms. Which will include our new and updated 8-Hour LTCI Insurance/CTQ course, our updated and expanded California Partnership 8-hour classroom program and pending Annuity, Ethics and SB-281 (Hybrids) courses.
We have been providing over 25-years of LTC CE/Partnership training in California, striving to provide you with the most current, up-to-date information in the country. Remember it’s more than just CE … it information and education tools can use.
Go check out our updated site www.LTCCE.com for our new expanded training and educational packages and consider having a personal, private CE training course with Tom Orr.