In touch with the ground
I’m on the hunt I’m after you
Smell like I sound, I’m lost in a crowd
And I’m hungry like the wolf
Hungry Like the Wolf
Duran Duran
It’s the hot new thing in Long-Term Care; the new product that will reverse the trends and drive sales into the stratosphere.
The LTC Insurance journey has taken us through Nursing Home Insurance to stand-alone Home Care, to Comprehensive and Partnership plans and finally to hybrid Life/LTC and Annuity/LTC plans. Based on declining sales, those products are just too hard to sell. We need something where we can push the easy button.
Introducing Short-Term Care, the alternative to LTC Insurance.
What is Short-Term Care?
Is it simply vertically challenged Long-Term Care, or is it something else?
There appear to be many similarities between Short-Term Care and Long-Term Care. Both provide benefits in nursing homes. Both provide benefits in assisted living facilities. Both provide benefits for home care, although some policies offer those benefits as riders.
The similarities don’t stop there. You’ll find many similar terms in the outlines of coverage for both types of products – daily benefits, lifetime maximums, elimination periods, inflation options. You will feel like you are reading a LTC insurance policy – except it’s shorter.
What’s the premise regarding the need for STC Insurance?
Medicare only pays for 20 days, then has large co-pays for 80 days, then nothing – and with many restrictions. Medicare Supplements only pay the co-insurance and deductibles based on what Medicare does pay. We’ve known Medicare does not pay for long-term care for a half-century.
But Short-Term Care’s taller brother is just too expensive! Besides, over 40% of Long-Term Care Claims are for one year or less. So if you can’t afford LTC Insurance or you can’t qualify for LTC Insurance, surely the easy underwriting and affordability of STC Insurance make it the perfect solution to bridge the gap between Medicare and Long-Term Care.
What about the Carriers?
We examined the policies of a half-dozen insurance companies offering Short-Term Care Insurance. Five of the six carriers had A.M. Best ratings of “B++” through “B-.” Not necessarily a kiss of death, but at least some cause for concern.
The one carrier with an “A” rating had what we feel is a fatal flaw in their product. Their policy was the only one we found that was NOT guaranteed renewable. Those provisions were outlawed a quarter century ago in the LTC Insurance arena due to the risk of post-claims underwriting.
Speaking of underwriting, STC underwriting is far less extensive than LTC underwriting. The carriers we evaluated asked between 6 and 15 health questions, with the option of conducting a phone interview with the client.
Who Needs STC?
Short-Term Care is typically marketed to address three scenarios:
- as a “supplement” to LTC Insurance
- for those who can’t afford LTC Insurance, and
- for those who can’t qualify for LTC Insurance
Closing the LTC Gap
If your client has an LTC Insurance policy, the purpose of STC Insurance is to provide coverage to offset the costs that are neither paid by Medicare or paid by the LTC Insurance policy during the elimination period … after satisfying the STC policies elimination period, of course.
If those costs are a concern for your prospective client, why not just select a shorter elimination period with their LTC Insurance policy?
Yes, that will increase their LTC Insurance premiums. But is an additional policy really the best way to address this? How will you explain all of this when the client starts submitting claims and someone has to figure out how to coordinate benefits between the two policies?
It’s Too Expensive!
If the issue you are trying to address is affordability, why not design a better LTC Insurance policy?
If you have been designing plans that are LONG and FAT, SHORT and FAT or LONG and THIN, read our LTC EXPERTS Members-Only Special Report “Secrets of LTC Insurance Plan Design” to understand how selling SHORT and FIT Partnership plans provides affordable asset protection for your clients.
We’ve Been Declined!
If the issue is health, why not look at a hybrid policy? These products provide substantially greater Long-Term Care benefits for those clients who do have assets to invest in a life insurance or annuity product.
Suitability
If your client does not have the assets for a hybrid product and will not qualify for an LTC product, should you then look at a STC product?
Perhaps. But that client may be better served by understanding their path to Medicaid. We know if the premiums are greater than 7% of their income, that LTC insurance policy would not be considered suitable.
Where’s Your Market?
If STC were being marketed as a product for low-income, low-asset people in poor health, it may make sense for a very narrow segment of the population who aren’t quite poor enough for Medicaid and aren’t quite affluent enough for LTC Insurance.
But marketing it as an alternative to LTC is simply dressing up a wolf in sheep’s clothing.
