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Long Term Care discussion Group John O'Leary May 2014.

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Presentation on theme: "Long Term Care discussion Group John O'Leary May 2014."— Presentation transcript:

1 Long Term Care discussion Group John O'Leary May 2014

2  Think Tank Co-Chairs ◦ Roger Loomis ◦ Ron Hagelman  Project oversight group (POG) ◦ Steve Schoonveld ◦ John Cutler ◦ Ben Wolzenski ◦ Jason Bushey ◦ Clark Ramsey ◦ Julie Flaa ◦ Brian Grossmiller ©OLeary Marketing Associates 2013

3  Background and context  System overhaul  Government role  Social insurance  High deductible/catastrophic coverage/short term care/Medicare LTC  Re-insurance  Medicaid reform  Regulatory reform  Next steps and implications  Questions ©OLeary Marketing Associates 2013

4  Expectation: LTCi would play a prominent role in financing LTSS  Traditional LTCi products turned out more expensive for consumers and more risky for carriers than expected  Some carriers exited the market for many different reasons and a market consolidation ensued  Traditional LTC insurance, short-term care and hybrid products continue to attract a variety of consumers  Middle income solutions are evolving  Overall market penetration below 10%, not including Hybrids

5  How should the US deal with the long-term care financing situation facing us?  Beginning in Jan 2013, a study of long-term care experts was undertaken by The Long-Term Care Think Tank  The study was sponsored by two SOA committees: ◦ Long Term Care Section and ◦ Forecasting & Futurism Section  The panel was comprised of more than 50 LTC experts chosen by the Think Tank POG  Group included mix of well known and respected actuaries, public policy experts, regulators, other insurance industry experts

6  Delphi allows participants to anonymously take positions, explain them, listen, and react to opposing viewpoints  Then, ideally move toward consensus opinions  Represents the collective opinion of expert panelists-not statistically significant  Combines quantitative and robust qualitative responses- not just the what, but also the why  To be clear-This presentation does not represent the opinions of The Society of Actuaries but rather the results of research conducted by the Long- Term Care Think Tank with SOA support.

7 Three rounds: Increasingly detailed questions that built on the responses from prior rounds:  Round 1- 30 questions; completed in March 2013  Round 2- 6 Principles; completed in June 2013  Round 3- Included review of several product concepts; completed in September 2013 Study output:  Approximately 250 pages of quantitative responses and qualitative comments  Here is where to find the full report: Projects/Ltc/research-2014-ltp-ltc.aspx Projects/Ltc/research-2014-ltp-ltc.aspx

8  A systemic overhaul of the Long-term care financing system is needed (86% agreed)  Private Insurance needs to be part of the financing solution (100% agreed)  A revised long-term care financing system should: ◦ Incent responsible long-term care planning (100% agreed) ◦ Incent healthy lifestyles (79% agreed) ◦ incent household and family participation (86% agreed)


10  The government needs to take an active role in defining the overall Long-term care financing solution (91% agreed)  It should include ◦ A government sponsored LTC awareness and education campaign (90% agreed) ◦ A more flexible LTC Partnership program (83% agreed) ◦ Tax credits for the purchase of LTC insurance (82% agreed)

11 Active government role Panelist’s comment

12  Panelists words and phrases ◦ Organize ◦ Incent ◦ Monitor ◦ Educate ◦ Influence ◦ Define ◦ Structure (Medicaid) ◦ Comprehensive set of solutions ◦ Not another unfunded liability ©OLeary Marketing Associates 2013

13  Social Insurance is a necessary component of a future LTCi system (84% agreed)  Need for a limited SI program for people who can’t buy LTCi due to cost or U/W (73% agreed)  Could accept SI even if they didn’t agree with the specific principle (90% agreed)  Necessary characteristics of SI include: ◦ Catastrophic coverage (81% agreed) ◦ Mandatory participation (78% agreed)

14 Social Insurance Panelist comment Tracking Panelists’ Evaluations by Round: Social Insurance Round 2Round 3 AgreeDisagreeRatio A/DAgreeDisagreeRatio A/D Social insurance required 81%18%4.584%11%7.6 Social insurance principle 62%26%2.473%14%5.2 Could accept SI principle 90%10%9.0 Necessary Characteristics of a Social Insurance Program YESNO Catastrophic coverage81%19% Mandatory participation78%22% First-dollar coverage11%89% HCBS coverage only15%85% Institutional coverage only9%91%

15  Definition in study was official actuarial definition  Highlights included: ◦ Benefits and financing method prescribed by law ◦ Explicit accountability (e.g. trust fund) ◦ Funded by contributions and investment income which in some programs are government income from other sources ◦ Universally or almost universally compulsory, for a defined population, or contribution is at such a subsidized level that vast majority of the population are eligible to participate

16 Social insurance product concepts  LTC Savings program (68% agreed was viable)  High deductible plan (67% agreed was viable)  Short-term care (60% agreed was viable)  Universal LTC (63% agreed was viable)  Mutual LTC (53% agreed was viable)  Medicare LTC (52% agreed was viable-43% disagreed)

17 SI and Other Concepts Social Insurance Product Concepts: Viability Ratings AgreeDisagree Ratio A/D Consumer Viability Carrier Viability Govt. Viability Positive Impact LTC Savings Program 68%25%2.781%87% 66% High-deductible plan 67%26%2.674%86% 77% Short-term care 60%35%1.779%80% 65% Medicare LTC 52%43%1.275% 39%52% Universal LTC 63%28%2.356%90% 44% Mutual LTC 53%28%1.953%80% 40%

18  Baseline coverage for catastrophic LTC  Consumers responsible for first 1, 2, 3 years-their choice  Healthy living credits to reduce deductible  Mandatory offer  Private underwriting but federally sponsored (FLTCIP)  Preferred vs. Short-term care  Issue-Many may not be able to fund deductible Panelist’s comments

19  Considerable support in prior rounds for LTC Savings plan 78% and 89% respectively  Tax favored treatment/unused could be passed on  Mandatory  Issues ◦ Can’t save enough for catastrophic problem ◦ Mandatory not viable politically ◦ Current low retirement savings  Interest in combining with supplemental insurance Panelist comment

20  Limited, modest benefit encourage use of informal care and care management  Supplemental help during first 1-2 years  Mandatory offer  More affordable premiums  Underwritten by private insurance; federally sponsored i.e. FLTCIP Panelist’s comments

21  Federal govt. establish mandatory program with standardized catastrophic LTC benefit for all  Standardized supplemental benefits would dovetail with basic benefit and fill gaps and pay deductibles i.e. inflation protection, informal care, deductibles and co-pays  Like Medicare available at age 65  43% disagreed viable (highest in study)  Only 39% thought was viable for govt.- step too far Panelist’s comments

22 Other significant concepts Tax Deferred savings- 77% agreed was viable Funds in tax deferred accts. (401K, 403B, IRAs) can be moved to qualified LTC protection on a tax and penalty free basis potential to offset forgone tax revenues with Medicaid savings National re-insurance Plan- 61% agreed was viable Federally sponsored LTC re-insurance corporation Would provide re-insurance for catastrophic claims that exceed certain pre-defined levels Would limit required capital requirements Provide a backstop that would assure consumers

23 Tax deferred savings and re- insurance Panelist’s comments-re-insurance I don't know if the reinsurance structure can be made financially viable, especially given the reactions of virtually ALL of the reinsurers that exited the market for LTC. I would rather see creative ideas used to entice more private competition, which would be preferred to another government entity. Don't put the government in a risk management position on a reinsurance pool. Perhaps allow credit guarantees for reinsurers.

24  Federally sponsored corporation to provide re- insurance for catastrophic claims  Spread risk beyond individual carriers  Limit needed capital requirements  Encourage lower risk charges, hence more affordable premiums; Provide consumer assurances  Issues: Federal stepping into private role ◦ Fanny Mae/Freddy Mac reaction? ◦ Not another federal organization

25 Principle: Medicaid needs to be changed to tighten eligibility by closing loopholes, strengthening eligibility requirements, and enforcing the rules strictly. At the same time, it also needs to be modernized to enable care on a national basis in the full range of settings. This includes home- and community-based care if appropriate and cost-effective  Medicaid Tightening described above (80% agreed)  Medicaid Modernization as described above (86% Agreed)  Among strongest responses in study

26 Medicaid reform Panelist’s comments

27  NAIC Model Act and LTC regulations need substantial revision (79% agreed) ◦ Balance affordability and meaningful benefits for consumers with predictable risks for carriers ◦ Modify regulations to allow more consumer cost sharing (examples included)  Eliminate minimum periodic benefits (60% agreed)  Allow benefit periods less than 1 year (59% agreed)  Make adult day care a home care option (74% agreed)  Make personal care services a homecare option (60% agreed/40% disagreed)

28 Modify regulations including NAIC Modify Regulations: Round 2 Results AgreeDisagreeA/D Ratio Modify NAIC Model Act 79%12%6.6 Competitive decline obstacle 76%19%4.0 Modify Regulations: Round 3 Results Benefit periods < 1 year 59%34%1.7 Eliminate periodic benefits 60%19%3.2 Unbundle home care 52%29%1.8 Adult day optional 74%26%2.8 Care by home aides optional 60%40%1.5

29 LTC Marketing and Sales need to be improved by mainstreaming the message (67% agreed) ◦ Advisors have a fiduciary responsibility to discuss LTC risks and costs with their clients (88% agreed) ◦ NAIC partnership training should be integral to CE credits (86% agreed) ◦ LTC knowledge should be a core requirement professional designations (79%)

30 Improve Marketing and Sales Improve Marketing and Sales: Round 3 Results AgreeDisagreeA/D Ratio NAIC/PART training should be integral to CE credits 86%10%8.6 LTCI knowledge should be core requirement of prof. designations 79%2%39.5 L&H companies encouraged to offer CI options 43%40%1.1 For training, CI accelerated death considered LTCI 50%29%1.7 Improve Marketing and Sales: Round 2 Results Agree mainstream message 67%16%4.2 Partnership certify agents to sell LTCI 39%28%1.4 L&H companies have obligation to sell LTC 26%50%0.5 Prof. designations should mandate LTCI training 39%34%1.2 NAIC should require training for CI riders 42%24%1.8 Improve Marketing and Sales: Round 1 Results Advisors have fiduciary to talk about LTC risks & costs 88%05%17.6

31  No single silver bullet  Total system re-definition required  Private insurance needs to be part of the solution  Medicaid reform needed as part of the solution  Social insurance needs to be part of the solution  Catastrophic and savings concepts resonated  Government needs to play an active role in system definition, guidance, incentives and education  National awareness and education program needed  Legislation and regulation needs to be revised  Consumers need to be encouraged to plan and incented to take responsibility for their care;

32  National LTC plan- joint committee of government, industry other stakeholders- Bi-partisan Policy commission a good start  Economic analyses ◦ Tax deferred savings ◦ High deductible catastrophic plan ◦ Short-term care ◦ Medicaid  Carrier/industry reaction and feedback ◦ National re-insurance or other catastrophic risk management  Consumer reaction/feedback ◦ Consumer feedback on system framework ◦ Research on concepts ◦ System and concept refinement  Regulatory and legislative changes

33 Questions

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