LTC Bullet: The CLASS Act: Implementation and Impact on Consumers
Thursday, April 29, 2010
LTC Comment: Actuaries and others discuss the CLASS Act after the ***news.***
*** NEW GUIDE EXAMINES LONG-TERM CARE INSURANCE CLAIMS. How Long Do Insurance Claims Last? Do Claimants Exhaust Limited-Duration Policies? A new consumer guide to long-term care insurance protection has been published by the American Association for Long-Term Care Insurance. The eight-page booklet provides insights into the duration of long-term care insurance claims based on a study conducted for the organization by Milliman, Inc. Copies of the guide can be viewed on the American Association for Long-Term Care Insurance's website here or call the organization for information at 818-597-3227. ***
*** CORRECTION. A reader pointed out that yesterday's LTC E-Alert about the Genworth 2010 Cost of Care Survey included a quote from a press report that is inaccurate. To wit: "Adult day care and assisted living costs both grew at a 12 percent clip this year compared to 2009, but other forms of long-term care showed more restraint, according to an annual survey from Genworth Financial." If you read the summary of the Genworth survey, says our careful reader, you will find in a footnote that they changed their methodology this year for calculating assisted living costs. Except for that change, the growth rate for assisted living would have been similar to nursing home and home care. Check it out for yourselves here. ***
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LTC BULLET: THE CLASS ACT: IMPLEMENTATION AND IMPACT ON CONSUMERS
LTC Comment: On Tuesday, April 27, 2010, the Society of Actuaries Long-Term Care Insurance Section Council and the American Academy of Actuaries jointly sponsored a webinar titled "The CLASS Act: Implementation and the Impact on Consumers." The SOA-LTCI section graciously granted your humble correspondent a press pass to sit in on the program. Following below are my notes on the webinar without editorial comment.
But let me say just this much at the outset. Actuaries and policy experts are highly professional people. Their public statements are nearly always reserved and precise, as they should be. But sometimes the experts are so careful about commenting on the CLASS Act that it puts me in mind of Hans Christian Anderson's tale, the "Emperor's New Clothes." For example . . .
Does CLASS--with its lack of underwriting, anti-selection, indeterminate premiums, five-year vesting and unlimited lifetime cash benefits--really deserve to be taken seriously as "insurance" by professional actuaries, financial experts and policy analysts? Sometimes during the webinar I wanted to scream like the child in the story: "But he [Emperor CLASS] isn't wearing anything at all!" See what you think.
The slides for this program are proprietary, but my understanding is that an archived copy of the webinar, including the slides, will be available for purchase at a later date. We'll let you know when we get more information.
Steve Schoonveld, FSA, MAAA, Chief Financial Office and Actuary, LifePlans, Inc., was moderator for the program.
The panel of respondents included:
Mr. Schoonveld opened the program with an overview of the CLASS Act including its history, what it does, its current status (signed into law March 23, 2010) and the role of the SOA Long-Term Care Insurance Section Council and the American Academy of Actuaries' Federal Long-Term Care Task Force in analyzing versions of the proposal before it became law.
See for example these items: http://www.actuary.org/pdf/health/class_july09.pdf and http://www.actuary.org/pdf/health/class_nov09.pdf
Next came opening statements from the panelists:
Al Schmitz: Adverse selection is his largest concern with CLASS. It is a price sensitive product. It needs lower premiums to attract larger participation. The Department of Health and Human Services was dealt a tough hand to find a balance between price, participation, benefits, etc. while controlling adverse selection. There must be some changes. Some changes were proposed, but they were not included in the final bill. Can the needed changes be done legislatively or by regulation? That's not clear. Changes to plan design, to the current premium structure, and to eligibility could help. Another important issue is to try to find a way to work with the private LTCI industry. The fear is that it will deteriorate into a head-to-head clash between LTCI and CLASS.
Howard Gleckman: He took a "broader perspective." CLASS is an extremely important change in how we handle LTC. In fact, it is the most important change since Medicaid began. CLASS represents a transition from a welfare-based to an insurance-based long-term care financing system. CLASS does face fiscal pressures. But the real question is whether Medicaid is affordable. The Medicaid benefit is nursing home care which most people don't like. With its cash and home care focus, CLASS is a tremendous step forward. It does raise design questions. The CLASS Act tries to do too many things at once. It's a benefit program for the disabled while trying at the same time to be an insurance program for people who will age into benefits. Most of the problems with CLASS are caused by the voluntary nature of the program. Implied solution: make it mandatory.
Eric Stallard: CLASS is unlike anything currently in existence. It is voluntary, federal, LTC insurance that differs from either a mandatory federal LTCI program or a voluntary private LTCI program. No underwriting, no benefit caps, but still has cash benefits. The funding is different than any other program. It has a trust fund that differs fundamentally from those of Social Security and Medicare. The key difference is no expectation that all future benefits are to be funded in advance. So no "transition costs" as with Social Security if it were to convert from a public to a private program--last estimated by the Trustees to be $16 trillion. The CLASS trust fund would pay in advance but have sufficient funds on hand to transition immediately. The CMS Actuary will have to sign off every year on the actuarial soundness of this program.
Mark Meiners: He's been involved since the late '70s analyzing why there was no private LTC insurance program. Very intrigued by CLASS. It would be easier if we'd had CLASS back in the '80s. Today, the LTC Partnership program is going live in about 40 states with an incentive for middle income people to buy LTCI. The program started in 1989, went live in four states in 1993, and was reinvigorated with the DRA of 2005. CLASS is different than private insurance models. Three especially interesting aspects: (1) It's a solution for the uninsurable. (2) Modest benefit, but sufficient to help people pay for care coordination. (3) Gives positive visibility to the importance of preparing for LTC risk through insurance. Private vs. social insurance advocates have "banged heads" in the past. Hopefully, the message is out now to all players that they need to work together whether through CLASS, private insurance or a combination.
The webinar software allowed for the audience to be "polled" on certain questions, I was unable to follow or capture the results so the questions and responses will be omitted here.
Discussion proceeded on a number of issues related to CLASS "implementation, key provisions, and success factors." Following are some of the more interesting observations and insights I discerned.
Understand please that the conversation moved very fast. Often, it was hard to tell who was talking. What follows does not capture everything, especially the nuances, precisely. On details or technical questions, it would be best to address any follow up inquiries you may have to the program participants or other actuaries.
Better yet, when the archived version of the program becomes available, purchase it and see/hear for yourself what the participants had to say.
Program ended without time for the last polling question: "A sustainable CLASS program will satisfactorily address the long-term care needs of consumers."
A. Strongly agree
What do you think?
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