On May 22, 2014 for the 19th Annual Elder Law Forum we will once again bring together virtually all of the stakeholders in Long Term Care (LTC) – providers, attorneys, financial advisors, caregivers, administrators, government staff and others – as we share the latest developments in this dynamic, ever changing field. As of this writing there are 175 registrants for the Forum, with each discipline facing challenges as the ever-increasing “senior” baby boomer population continues to make its way into retirement years, turning 65 at a rate of 10,000 a day!
On the financing front, momentum may finally be on our side. There is a growing consensus that no one exclusive solution – public or private – is the answer for all people or all situations. Medicaid Managed Care has finally made its way to us, and a big reason for the gravitation to that model is cost containment, seeking to capitate the State’s cost (see our prior blog entry on Medicaid Managed Care).
The private LTC Insurance industry has struggled as well. Underestimations of the percentage of people keeping their policies over the long term, and the ongoing low interest rate environment have led, by extension, to higher than expected claims experience. The result for consumers has been higher premiums than we’ve ever experienced (on both new policies and some of those that have been in force for some time), tougher underwriting standards that have prevented some people from being able to qualify for LTC Insurance, and a less profitable product that has led some carriers to exit the market.
Also, carriers are moving toward “gender-specific” pricing for their products. That means that women – especially single women and women who apply with a spouse or partner but only the woman is approved for coverage – will pay higher rates than before when rates were the same for men and women.
In spite of all that perceived (or real?) negativity, there are signs of some bright spots in New York State. Although we saw the exodus of a few carriers in recent years, we’ve seen some stability in the remaining carriers in the last 12-24 months. Many people believe the market is going through a similar evolution to the Disability Income Insurance market in the early to mid-1990s. The result of that shift has been a more stable DI market.
In addition, unlike most of the other states in the nation, at least as of press time, here in NY there is currently only one carrier that has rolled out gender-specific pricing. So, there is still time for women to lock in lower rates before the other carriers follow suit.
The other factors affecting rates – interest rates and persistency rates – have also seen a “bottoming out.” Interest rates, for good or for bad, can’t get much lower, lessening the potential susceptibility of policies issued now to future rate increases of the magnitude we’ve seen in some instances. And, the premiums for LTC Insurance now incorporate higher persistency rates, further insulating them – though not protecting them completely – from the possibility of future increases.
Importantly, here in the state of NY, the NYS Partnership for Long Term Care recently enhanced its program with significant results. The Partnership, as you may know, rewards New Yorkers who plan in advance by purchasing a Partnership-certified policy, by providing Medicaid asset protection for those policyholders who exhaust policy benefits and still need care.
The New York State Partnership made two important recent changes that make it possible for a higher percentage of New Yorkers to afford coverage. They rolled out a 2-year plan, and an optional 3.5% compound inflation rider, so that policyholders can purchase a policy that provides total asset protection while keeping the premium affordable. No other state has anything close, and combined with New York’s 20% income tax credit policies are far more affordable now for many people.
Finally, newer generations of products have evolved whereby one can combine life insurance and long-term care insurance into one policy. Doing so may ensure that policyholders have long-term care protection, while also ensuring that the premiums paid – and then some – come back to the policyholder’s heirs in the event the policy is not needed for long-term care. The so-called “Hybrid” policies can offer life insurance benefits, indemnity payments for LTC and a guaranteed return on investment that has attracted a variety of new policyholders, including the affluent, who did not buy traditional LTCI.
We’ll examine what ALL these changes mean to us, as well as to the clients, patients and constituents we serve on May 22 – don’t miss it!
By: Louis W. Pierro, Esq. and Bob Vandy, CLU, ChFC, LUTCF, CLTC – V.P. Marketing at New York & National Long-Term Care Brokers