LTC Bullet: SOA Delivers on LTCI Again

Friday, July 27, 2018


LTC Comment: New product ideas originated by the “LTC Think Tank” are formalized in a report sponsored by the Society of Actuaries. Details after the ***news.***

This week’s LTC Bullet is sponsored by LTC Consumer, an online resource that’s helping individuals understand and plan for long term care. LTC Consumer is managed by Nathan Sanow, Executive Director. Sanow leads an experienced team of Long Term Care Insurance Specialists educating consumers on the need for long term care insurance planning and to identify the best solution that meets their long term care needs. Resources on LTC Consumer can be found at


LTC Comment: Remember the LTC Think Tank’s extraordinary effort to address the long-term care insurance puzzle? We summarized it and its report, titled “Land This Plane,” in LTC Bullet: Inspect This Plane, April 18, 2014. Now, two of the product ideas proposed in that study have received detailed description and analysis in a new report written by Maddock Douglas’s Cindy Malone and sponsored by the Society of Actuaries. Read “Long-Term Care and the Middle Market: Sizing the Opportunity for New Ways to Finance Long-Term Care” and/or its highlights here. Following is the report’s summary from page 6:

“Section 2: Summary of Findings

“The combination long-term care (LTC) insurance product concepts developed in this project, LifeStage Protection and Retirement Plus, both show promise for success in the consumer marketplace. The forecasts projecting these results are based on above-average self-reported purchase intent scores and other real-world assumptions. In addition, modeled tax revenue and Medicaid spending projections suggest that both concepts create the opportunity for significant government savings.

“In addition, both concepts have been well received, with key diagnostics providing clues to what is driving the strong self-reported purchase interest. Most significantly, many consumers can envision a personal need for each (although more commonly in the future than today, regardless of current age). While some seek additional information, the majority find both concepts to be easy to understand and believable. Many also feel these products are unique compared to other offerings designed to help them plan for their future financial needs.

“Price is a likely barrier for many as “interest in investigating further” drops sharply after exposure to price. Of note, however, is that purchase intent is higher among those who selected a larger benefit level, suggesting that those who recognize the benefits of the products may be willing to pay more to get the coverage they desire.

“Consumers would prefer to purchase both concepts through their employer or online, directly from the insurance company. However, offering either product only through employers may lower overall interest. About one in five would prefer to purchase through an agent.

Here are the findings specific to each concept:

  • LifeStage Protection. An insurance policy that starts as term life insurance during prime income-earning years and then switches to long-term care insurance during later years gathers positive initial impressions. The concept fills a need for consumers in the future. Being a combination product that transitions as you get older is a top-liked element. However, there is some concern about not choosing the “right” transition age. Survey data indicates that the option to pay more to receive a death benefit after the transition age or to be able to use long-term care benefits prior to the transition age is likely to increase interest and could help alleviate some of the concerns.

  • Retirement Plus. A flexible retirement plan like a 401(k) or IRA, but with long-term care insurance built in also generates positive initial reactions and the perception that it fills a personal need. The flexibility to use saved funds for whatever the buyer needs is appealing. Highlighting the benefits of this product compared to other separate savings and insurance options will be important to converting hesitant or skeptical consumers. Survey results show adding an option to pay more to have access to the insurance benefit early is likely to increase interest.”

LTC Comment: We congratulate all associated with the project that generated these ideas and the report that published them. They’re too many to mention by name here, but key contributors acknowledged in the report included LTCI veterans Vince Bodnar, John O’Leary and Eileen Tell as well as “the members of the Long-Term Care Think Tank, whose collaborative thinking generated ideas for what evolved into the LifeStage Protection and Retirement Plus concepts.” (p. 5).

Not to rain too heavily on their parade, but I’d be remiss in my role if I didn’t point out a couple problems with these ideas:

“LifeStage Protection” is based on combining term life insurance and LTCI. Point 1: People don’t need a special product to combine those two kinds of coverage. It always made sense to buy term life when young and convert to LTC insurance later. But few did it. Why? Point 2: Because Medicaid always paid for most high LTC costs after the insurable event had already occurred desensitizing people to LTC risk until it was too late for private insurance. Besides, term life insurance, in any amount, does not deter Medicaid eligibility.

“Retirement Plus” relies on tax-deferred retirement accounts, but those aren’t at risk for Medicaid spend down either, at least under federal law and regulations. Some states do count them in spite of federal rules to the contrary.

For more details and links to the federal laws and regulations that apply, see especially Medi-Cal LTC: Safety Net or Hammock? (2011), pages 19-21.

Unfortunately, the report’s estimates of Medicaid savings are vastly over-optimistic. Ignoring Medicaid’s ease of access after care is needed and its true effect of crowding out consumers’ concern for LTC risk and cost is like an engineer disregarding gravity when constructing a bridge. Anything seems possible.