How Would You Design a LTC Insurance Plan for Your Prospects?
At this moment, you have a better understanding of:
- Long-Term Services and Supports (LTSS) and Their Costs (Part 3)
- Who Needs LTC Insurance based on the Six Suitability Issues (Part 2)
- “Who Buys LTC Insurance?,” through 2015 (Part 1)
This leaves you with these dilemmas:
We have more work to do to Design a LTC Insurance Plan that Sells and helps your client transfer the appropriate risks to insurance.
While you have a better understanding of the PRICE of LTSS, we really don’t yet understand the COSTS.
Now we need to understand how, when, where and how often LTSS are utilized.
Let us examine how the delivery of Long-Term Services and Supports has changed, based on LTC Insurance Claim Utilization:
What does this data tell us?
- Home and Community Care is on the rise …
- Residential Care/Assisted Living Facilities care is on the rise …
- … and Long-Term Care in Nursing Homes is declining – dramatically!
Formal Care Starts at Home …
Let’s go back to the Costs of Care Study and lock in on the $20 per hour rate for Homemaker and Home Health Aide Services.
Those LTSS Services often start out at 4 hours per day, 3 days per week.
That would result in costs of $80 per day, $240 per week, $960-$1,200 per month and $12,480 per year.
As their condition declines, those need for services would increase to 6 hours per day, 5 days per week.
Now the costs will escalate to $120 per day, $600 per week, $2,400-$3,000 per month and $31,200 per year.
You may think we now move to 8 hours per day, with costs increasing to $160 per day, $800 per week, $3,200-$4,000 per month and $41,600 annually.
But that doesn’t happen!
Care Shifts to the Community
At the threshold of needing care for 8 hours per day …
when stand-by assistance shifts to the need for on-demand human assistance …
the need for care increases to 24 hours a day!
When they reach the tipping point at approximately 8 hours per day, the person simply cannot be left alone in their home!
The first step a family takes is to transition from Home Care to Community Care.
Instead of watching costs increase from $600 per week to $800 per week or more, costs actually decline!
How does that happen?
The family takes advantage of services offered in the community such as Adult Day Care, if available, where costs are $69 per day!
Now we’re looking at costs of:
- $345 per week, $1,380-$1,725 per month and $17,940 annually,
- instead of $800 per week, $3,200-$4,000 per month and $41,600 annually!
Think About the Implications!
Your prospective clients want to stay home rather than go to a nursing home.
The LTSS delivery system has evolved to make it affordable for them to do just that – stay home for as long as possible.
Once they can no longer stay at home, LTSS have further evolved to allow them to avoid entering a facility by providing community services such as Adult Day Care.
Insurance carriers have improved their products to support providing care in the home and community.
Today, that’s where 52% of the services for which claims are paid occur … and it is rapidly headed for 56% of the service or more!
This scenario works if a spouse, family members or friends are available to provide informal (unpaid) care in the home.
The path to a facility for a single person living alone is accelerated.
Your Client May Need a Facility, but ….
It is less and less likely that they will need services in a Nursing Home.
Let’s go back to our LTC Insurance Claims data, where 32% of claims paid are for LTSS costs incurred in Residential Care (RCF), Assisted Living (ALF) and other similar Facilities that are NOT Nursing Homes!
What are the costs?
$3,600 per month or $43,200 annually. Although this translates to average daily costs of $120 per day, services in these settings are not paid on a daily basis, but on a monthly basis.
Charges for additional ancillary services and supports are not reflected in those costs due to the wide variability in services.
Compared to Semi-Private and Private Room rates in Nursing Homes of $220 and $250 per day, respectively, we’re looking at costs of approximately 50%.
The “Dreaded” Nursing Home
Let’s go back to our LTC Insurance Claims data, where claims paid for LTSS costs incurred in Nursing Homes are headed towards less than 10%!
The entire LTC industry has shifted away from Nursing Homes over the past quarter century. In fact, most care provided in Nursing Homes today is either Short-Term Restorative Care or Short-Term Pre-Death Care.
Today, as always, your clients want to avoid the Nursing Home.
The LTSS delivery system wants them to receive care in the Home and the Community, and if they need Facility-based care, to provide that care in RCF’s/ALF’s.
Payors of LTSS, especially Medicaid, want your clients to stay at home or community and only go to the Nursing Home as a last resort. Insurance companies strongly agree!
Some people, of course, will still need Long-Term Care (90 days or more) in a Nursing Home … but overall that percentage continues to decline dramatically!
The Big Lie!
Do you remember the days when you would explain to your prospect that they had a one in three chance of needing Long-Term Care?
Consciously or unconsciously, you may have hoped they would think that they now had a one in three chance of needing Long-Term Care in a Nursing Home.
Depending on your level of LTC Expertise, that may have been your sales approach yesterday or even earlier today, but we hope you NEVER use that fear-based approach again!
Because it is and always has been the BIG LIE!
The chances of someone going to a Nursing Home at some point in their lifetime remains high.
But the chances of them entering a Nursing Home for Long-Term Care (90 days or more) are less and less … and they will continue to decline as the delivery and payment systems evolve and encourage NOT sending people to nursing homes for LTC.
- There remains a very good chance that your clients will enter a Nursing Home for Short-Term Restorative Care after a Hospital stay, leaving long before 90 days has passed.
- There also remains a very good chance that your clients will enter a Nursing Home for Short-Term Pre-Death Care, leaving one last time long before 90 days has passed.
Fewer and fewer Nursing Home admissions will be for long-term care.
The number of people who enter a Nursing Home for LTC will not be zero … but the chances of needing LTC in a Nursing Home will continue to decline.
Now before you run down to your local nursing home and inventory all of the residents who have been there for more than 90 days, we are NOT telling you that no one will ever enter a nursing home and stay for greater than 90 days.
We are NOT telling you that there are not people in nursing homes today who have been there for more than 90 days.
But what we are telling you to stop tethering your LTC Insurance sales approach and LTC Insurance Plan Design to the Nursing Home!
Are You Able to Shift Your Paradigm?
Most agents have been selling LTC insurance the same way for decades – tethered to the nursing home as the catastrophic event.
The nursing home has been the basis for:
- Where your client may ultimately need long-term care services …
- How much those services may ultimately cost them …
- How long they may need long-term care services …
- How much they may have to pay for long-term care …
… creating the basis for designing the LTC Insurance plan you recommend for your clients and the corresponding premium.
Often leaving them in “sticker shock” and showing you the door while they “think about it.” Which of course they never plan to do again!
The great motivator – the FEAR of going to a Nursing Home – will no longer be the basis of your LTC Insurance sales approach and plan design.
What will you sell and design now?
What If …
- What if … you stopped selling the fear of going to the nursing home?
- What if … you completely understood how people access long-term care services and supports and the costs of those services?
- What if … you were able to design LTC Insurance plans that were not only affordable, but also provided benefits for care and services that they will actually need and use?
Mr. and Mrs. Prospect, LTC Insurance has evolved
to become simply a pool, a bag, a pot of money …
designed to keep you at home for as long as possible.
How do you feel about that?
How do you think that statement will change your LTC conversations?
You would not only sell more LTC Insurance but you would also help more people protect themselves from their highly inevitable need for Long-Term Services and Supports.
Follow Our Blog next week to read Part 5 of 5:
Designing LTC Insurance Plans That Help Your Prospects Buy!
If You Can’t Wait to Get More Secrets of LTC Insurance Plan Design,
attend one of our LTC Continuing Education Courses in Your Area Today!