LTC Bullet: Virtual Visit to the 9th LTCI Producers Summit
Tuesday, April 12, 2011
LTC Comment: Last week's LTCI Producers Summit in Las Vegas caught the wave of surging industry optimism. Details after the ***news.***
*** CALIFORNIA HEALTHLINE published a "Think Tank" yesterday titled "How Should California Handle Eligibility for Long-Term Medi-Cal?" Read the contributions by Steve Moses and Center member/supporter and veteran LTCI producer Barbara Hanson here. ***
*** GREAT REPORT CARD: The CLASS debate at the 11th Annual Intercompany Long-Term Care Insurance Conference in Atlanta last month got rave reviews. Steve Moses and John Greene (NAHU) debated CLASS proponents Connie Garner (AdvanceCLASS) and Rhonda Richards (AARP) with Peter Goldstein (Univita) as moderator. Attendees loved the point/counterpoint format. The only complaint? Get a bigger room! More here. ***
*** LTC DISCUSSION GROUP: "The Long Term Care Discussion Group, a nonpartisan networking group focused on educating the policy community about long term care, announces the launch of its new website: www.ltcdiscussiongroup.org." Details here. You can follow their monthly meetings by "call in." Often very worthwhile. Check it out. ***
LTC BULLET: VIRTUAL VISIT TO THE 9TH LTCI PRODUCERS SUMMIT
LTC Comment: The 9th LTC Insurance Producers Summit, held April 3-5 in Las Vegas, was the best so far. I said the same thing about the 8th in the series 18 months ago, so it looks like a trend.
The meeting's theme was "Get Over It!" Get over lagging sales, disappearing carriers, premium increases, and bad publicity. Get over it and, one might add based on the content of the conference: Get On With It!
I'll share some of the meeting's highlights below, but don't miss this chance to check out the presentations yourself. Jesse Slome and the American Association for Long-Term Care Insurance posted free PDFs of many presentations here. They'll add more as they become available. Watch too for audio versions you can purchase soon.
550 attendees and 27 exhibitors converged on the Tropicana Hotel on The Strip. Proceedings got underway with a standing-room-only crowd for the "3 in 4 Need More" campaign's second press conference. That creative LTC awareness campaign continues to build steam. Check out a video of their first press conference here.
Cameron Truesdell, CEO of Long-Term Care Financial Partners, delivered the "Keynote Address." He pointed out the desperate need for responsible long-term care planning and insisted: It's up to us to make it happen. Echoing a patriotic appeal, he asked "If not us, who? If not now, when?"
Evidently, Summit attendees took the motivational message and the "Get Over It" theme to heart. They packed the auditorium for each of the early morning, 8:00 AM general sessions. The program warned that breakfast starts at 7:30 AM and "Food Services Ends at 8:00 AM Sharp." Early birds even in Las Vegas! That's dedication.
Award ceremonies recognized people and companies who have contributed most to the LTC insurance market.
Highlights from some sessions I attended follow. Find session descriptions, times and presenters here:
"Key Pricing Issues that Should Concern Those Selling LTC Insurance": Regulation has reversed direction. Instead of rate stabilization which forces companies to keep rates low to justify loss ratios, regulators are now forcing companies to charge more so they can pay claims without rate increases in the future. Typical lapse rate assumptions in the past were 6% to 8%; they're .5% to 1% now. Expected investment income on reserves is down to 5% and harder than ever to achieve. Moving toward more conservative mortality tables. Morbidity is the most volatile factor. Older LTCI products were developed before latest advances in longevity, availability of assisted living and home health, clearly defined triggers, and risk selection understood. In a nutshell: the good news is reasons for past premium increases are being dealt with; the bad news is new reasons for future increases are developing. Baby boomer attitude: less risk averse than parents; wealth transfer not a primary goal; less patient, need simpler sales; want a product with a cash out; old products and distribution don't work so well with them.
"Class Act Round Two: The Window To Everyone's Future Success": This luncheon session was presented as a "fireside chat" with Jesse Slome interviewing Bob Yee, actuary for the CLASS program and Hunter McKay of the Department of Health and Human Services. Here's some of the unusually and refreshingly frank back and forth, paraphrased:
Slome: Why CLASS and not above-the-line LTCI tax deductibility to encourage LTC planning?
Yee: The credit or blame rests with Connie Harner. Whether we like it or not, CLASS is the law of land. Somebody has to make it happen. 15 people are working full time toward that end. Regardless of how it happened, it needs to be enacted in the best way we can.
Slome: Is CLASS going to change? What will stay? What go? Where are we today?
Yee: In the language of the law, there are numerous inconsistencies and contradictions. It makes no sense. CLASS has to be self-sustaining. We're going to do the best we can to make it self-sustainable.
Slome: When will you have pricing and benefit features established?
Yee: We're in a process of roll out. Certain aspects of the CLASS Act are unambiguous: Oct. 2012 is the drop-dead date. The "independent advisory council" will propose three actuarially sound plans to the Secretary, who will select one.
Slome: Do you have an idea what the three plans might be?
Yee: Yes, but I can't tell you. The government has rule-making processes that force us to publish proposed regulations and get comments. So I think you'll know those three plans by the fall of this year.
Slome: The "elephant in the room" is that if price is too high, people won't buy. You have to make CLASS cheaper for it to be saleable. Its benefits must be unlimited, yet the program has to be sustainable. How can you do that?
Yee: Now you know the job. It's like impossible. Fuzzy math. Biggest pricing job I'll ever have. I have ideas but whether it will work or not I don't know. We're going to ask experts: if we try this, what do you think?
Slome: Where do you see CLASS dovetailing with private LTCI?
McKay: This a very fluid, very difficult task. There has to be room in this market for both of us. We'll be taking advantage of what you all have learned. We will have some advantages and disadvantages. CLASS has to have a premium point that works for our market. We're going for a less affluent market. We're looking at a variety of designs and don't know how they will come out.
Slome: We blew it when we had the opportunity to kill a bill that had potential to become our biggest competitor. DC-based organizations didn't do much to oppose it. At this point, its too little too late. Get over it. Deal with reality. You take one part of the market; CLASS will take the other.
Yee: Everyone has their own political view. If I were an agent, I'd see CLASS as free publicity. If you kill CLASS, that money [$93 million authorized for publicity] goes away. If I were an agent, I would keep quiet.
Slome: How will CLASS premiums be invested?
Yee: As usual, junk bonds. Premiums will be invested just like the Social Security trust fund. [Audience laughter] The interest rate is immune from market rates. Treasury bonds are more predictable for pricing product compared to guessing future interest rates.
Slome: What input have you had from the insurance industry? What input would you like?
McKay: The opportunity was given but input was minimal. Kathy Greenlee (head of the Administration on Aging and CLASS implementation) has met with heads of the insurance industry, such as AHIP and others. Tell us the obstacles you see.
Slome: CLASS could lead to Medicare Part E. If you were on the insurance side, what would you say are changes that would benefit the LTCI industry? CLASS wrap around? Where do you see the future for this industry?
Yee: I hope CLASS will help the LTCI industry to grow. CLASS will make LTCI improvement easier to happen.
"CLASS Act - Where It's At - Where It's Going + Experts Answer Your Questions": This was a very informative afternoon follow up session on CLASS with industry actuary Steve Schoonveld and CLASS actuary Bob Yee trading questions and answers. Check out the audio recording when available. Notable paraphrases:
Yee: A lot of the time I don't know what I'm doing, but I do know what I want. My job is to convert CLASS into something that looks and smells like a regular growth policy. I have to get there. Even if I can match the street price, will people buy it? I might even have to beat it. We have some wiggle room. We have to pay 97% for benefits, but private insurers pay only 60 cents on the dollar. Can I build in things with that extra 37 cents that make CLASS unique? Not sure it's doable, but maybe it will work. Vision: CLASS is the catalyst for individual responsibility to promote successful aging. Medicaid phases into a true safety net in 15-20 years. Government incentive to be fully self-reliant (e.g. tax-free withdrawal from 401K to pay for LTCI premiums).
Schoonveld: When the three proposed CLASS designs are published, the Society of Actuaries/Academy of Actuaries review group will respond very apolitically. We'll react rather than prophesy. We'll bring in Medicaid experts. CLASS points to the fact that we need to reform Medicaid; it needs to stop being the payer of only resort for most of the population.
LTC Insurer CEO Forum
Prudential sponsored the closing breakfast and the CEO Forum. National Sales Director Roy Gosselin introduced and showed a 9-minute film about John Horton, a former Prudential agent who has Multiple Sclerosis. He also has a Prudential long-term care insurance policy. Mr. Horton contacted Prudential and asked the company to tell his story. The film explains, mostly in the insured's own words, how his LTCI policy made his life and care manageable, allowed him to stay at home, and helped his family immensely. We've requested a link to an online version of this film and we'll bring it to you as soon as it is available.
Bagshaw (RB), President & CEO, Transamerica LTC,
Audience members I asked thought this session was considerably more lively and informative than the CEO Forum at the other recent industry conference in Atlanta. Here's some of the give and take, in paraphrase. Jesse Slome was master of ceremonies. Refer to the initials above to identify the speakers.
Slome: What will your company look like five and ten years from now.
MH: We've been through some challenges. We need to reshape the industry. Really need new and different products. Simple, affordable. Multiple products for different consumers. Awareness is naturally coming. Boomers retiring. CLASS Act may help us. In terms of sales, slowing down right now. 2011 is a year of transition. Really get going again in 2012. Hancock is not signaling we're leaving market. Taking responsible action. Ten years from now? That's a long way out and I'm not a gambler. Opportunities huge if we can get to a broader consumer base. Double sales in five years.
BJ: Yogi Berra said it's tough to make predictions especially about the future. We will be in business in five and ten years. We are strategic to our parent company. Major trends: Buyer behavior changing from belly-to-belly sale to internet or some remote basis. We see that trend continuing. Working on processes to help consumers buy more easily. Help you reach more consumers. Challenges from technical perspective and other ways. Premium projections? "More than today." What we measure against is our share of the market. Is our market share getting bigger? Believe it will.
MC: Very happy to be "Malcolm in the Middle." [Malcolm Cheung had the middle seat on the stage.] We've been waiting for the boomers to buy en masse. Different now. Oldest boomers turning 65, youngest 47; most will have had some experience with parents needing LTC. Our research shows people who have had someone with LTC are twice as likely to have bought LTC already. Potential changes to Medicaid; budgetary restraints; Medicaid eligibility and Medicaid benefits will change and make LTCI a more appealing alternative. CLASS Act effort to educate will net-net be a positive for LTCI whether as stand alone or wrap around. One thing needed to re-enforce growth is product innovation. Encourage producers to embrace innovation. We've been selling same product since 1996. LIMRA found 13% growth last year. Predict industry sales grow at 15% to 20%. Prudential 20% to 25% range over that period. This first quarter volume twice last first quarter. We are in true group market. Whether CLASS or not: 10% to 15% annual industry growth.
RB: Recovering actuary. Transamerica excited about future of the industry. Still in top five of in-place business. Grew 600% last year. I believe growth over next couple years small, then inordinate growth. I believe CLASS if it succeeds and comes to fruition will be huge lift for the industry. About time for government to do something. Social Security notice says Medicare does not pay for LTCI. Stand alone individual market need is clear; market disruption from carriers leaving the business; rate increases. Scare away consumers and distribution. Will calm down, then need will drive the sales. In for the long-term. Our growth rate is going to be spectacular. $6 million last year; not surprised at $20 million this year. Believe sustainable for the long term. Some of distribution running scared right now. This will be an explosive growth industry.
BL: Genworth's goal is to maintain number 1 position in the industry. LTCI is very important to the Genworth franchise. Consistency and innovation. Conservative, consistent with management of in-force block. Vigilant, looking at the LTCI block every month. Painful to our actuaries. From that grows our innovation. Genworth understands the business because we have so much on the books. Some of things we'll do in the future is try to make the product more compelling to consumers and distribution. You specialists don't feel the confusion that other distribution feels when they try to pick up LTCI because client asked for it. Genworth will help you help them understand the product better. I'm contrarian: can't make this product simpler. Insurance isn't simple, the lawyers control it. "Get over it" message. Regulator environment very little understanding at the state level. Genworth is going to come out with ways to make a better consumer proposition.
Slome: Fun question: Please describe the LTCI policy you have purchased with all the details on amount, duration, elimination period, etc. Second part: if purchasing now, would you buy something different?
BJ: I love cash. Simplicity. I own three years at $12,000 a month; short and fat.
MC of Prudential: Group coverage with John Hancock (laughter). Waiting for my rate increase notice (more laughter). $240 per day, 90 day elimination, four-year, inflation guarantee purchase option. Guaranteed issue.
RB: $150 per day, five year pool, inflation 5%, 1/3 cash benefit. Wish it had shared care benefit.
BL: I have three LTCI policies, one from each company I've worked for. CNA, started at $120, has everything. Premium less than $2K a year. One from NYL with 180-day elimination period. Genworth pays for a group policy.
There was much more to the CEO Forum conversation, but the above recounting will give you the flavor of the discussion.
"Sell in the Presence of the CLASS Act"
Claude Thau presented his views on why the LTC insurance industry should push hard for repeal of the CLASS Act even as agents make the most of it in the meantime to open doors and sell coverage. Claude has done yeoman work on this issue. Follow his comprehensive and persuasive arguments in detail here.
Catch Claude's presentation of the CLASS issue from a different angle, i.e. what policy makers, legislators and the media need to know about the program and why it should be repealed, in the following WebEx presentation:
Thursday April 14 at 4 pm Eastern (3:00 Central; 2:00 Mountain; 1:00 pm Pacific) Click here to see the presentation: Repeal CLASS April 14. Call (712) 432-0180 to hear the audio portion. Input this Participant Access Code: 957803#. It is a long-distance call, but is free if you call from a phone with free long distance.
After Claude's presentation at the Summit, Jesse Slome offered his opinions, which included:
"I believe CLASS will put true group out of business. Large employers will offer one program and it will be CLASS."
"I would target major employers and work my way down."
"We should advise people to kick the tires. Don't be an early [CLASS] adopter."