Ronald R. Hagelman

“Don’t cry for me Argentina. The truth is I never left you. All through my wild days my mad existence I kept my promise, don’t keep your distance.”

I guess it just seems too many appear to have somehow wandered off, lost purpose, ignored urgency and abandoned focus. Even though stand-alone LTCI sales have experienced substantial decline over the last 10 years, the truth is the relative number of consumers doing “something” and buying some level of protection to blunt the impact of the risk has been consistent. Buyers of some level of chronic risk have been hovering around about a half a million Americans each year for over 10 years. Unfortunately the chronic risk conversation remains far too often a limited choice scenario. It may not be what is meant exactly but what I seem to hear from the field is: “I tried but it’s just so hard. Rate increases, carrier flight, onerous underwriting and continued consumer confusion forced me to take a path of least resistance. Either I defer or ignore the conversation or simply recommend one of those ‘living benefit’ riders.” The readers of this column know that at that point my internal mind is screaming at the top of my lungs, “OK I get it, but I don’t like it and it’s simply all wrong!”

This is the problem that will not go away. There were never enough soldiers to win a war in the first place. Frankly we never understood our enemy and we fought some of the wrong battles in the wrong locations. But our intentions were of the highest order. I know many began earlier but the advent of the modern comprehensive stand-alone LTCI policy began with the birth of the TQ policy. The “Special Forces” that have valiantly fought these battles each day for over 20 years have placed billions of dollars of potential coverage in place and created a rising tide of insurance funded care all across the caregiving landscape and none of it was easy. Long term care specialists do share a common bond. It is specifically the intensity of emotional commitment to the cause that clearly identifies us and keeps us pushing forward.

We deal with some truths that may even be considered “politically incorrect.” Even though it may be an intrinsically desired goal of our great Republic, we do not live in an egalitarian society. We have always had two clear approaches to this protection. First, to transfer as much of the potential risk as possible to the insurance company for those who can afford the cost. Next, and I might argue more important, dedicate ourselves to preventing as many as possible from becoming a ward of the state. “Private Care and Freedom of Choice” is our battle cry. We know the truth about this future potential family tragedy. It simply doesn’t take that much additional insurance to supplement existing assets and retirement income to guarantee that common goal. One size has never fit all and, now that you clearly have an abundance of alternatives to deal with the problem, there is no excuse to step back from your responsibility.

I have long predicted a 1035 firestorm gaining momentum as a direct result of the PPA provisions. I believe that storm is now moving inland. It took longer than anticipated, but there has never been a greater need for policy review. Again, please carefully read policy benefits and riders. Chronic illness riders are not created equal and some may come back to haunt your future fiduciary health. There are no perfect and easy answers as we approach each client. I would, however, again remind all concerned that the “Suitability” provisions of Section 24 of the NAIC LTC Model Regulations, as I read them, require a complete and thorough comparison of all the good and all the bad of all the choices when comparing the benefits of chronic illness alternatives with existing coverages.

For those who may have temporarily lost their way, please understand that the party is not anywhere near over. With new adequate and informed LTCI stand-alone pricing the future profitability, potential growth and rate stability of those traditional sales are stronger than at any time in our past. There are at last count approaching 70 life companies that have filed competitive chronic illness Section 101g ADBRs, and most of them have the correct definition of risk not requiring a permanent disability. Single premium hybrids are competing for a larger audience with more premium payment option strategies. Worksite sales are reviving. Association discount sales are again on the move. Conversations about corporate premium deductibility are again gaining momentum. It doesn’t really get any better than no FICA, no FUTA and no W-2s culminating in tax free benefits. The drumbeats of 1035 efficacy are getting louder. New and innovative approaches to help those who failed to plan ahead are now available.

We do indeed live in exciting times. Don’t cry for me… some of us never left the party anyway! I would invite those who may have become distracted or disoriented to belly up to the bar again and join us. The drink selection is prolific and everyone goes home happy.

Other than that I have no opinion on the subject.

I am perpetually amazed at the degree of cognitive dissonance stirred up in my own mind every time I ask myself this most basic rhetorical question:  “How can anyone in their right mind ignore the probability of an expensive and extensive need for care?”  The absolute unvarnished truth is that no matter how well you have constructed your plans for retirement and the disposition of your estate, an extended need for custodial assistance can blow up all your carefully crafted expectations. A lifetime of savings and financial planning for retirement hopefully culminates in an introspective consideration of a classic estate plan that defines how assets are to be transferred to the people to whom you wish them to go, and when and under what circumstances you want them to go there.  Wills, powers of attorney, medical directives and trusts establish the mechanics and basic structure. Insurance strategies should then arise to facilitate the preservation of assets, leverage risk more economically, address issues of fairness and ameliorate potential taxes.

After all that careful introspection, family soul searching, insurance leveraging and brilliant financial planning, why would anyone leave such a well thought out structure twisting in the wind of a highly possible catastrophic risk? Why would anyone question the validity of building a firewall around that plan?  To paraphrase our good friends at CLTC “What is your Plan to protect the Plan?” 

How can anyone governed by fiduciary obligations avoid a conversation about chronic illness risk? More important, why would an insurance professional not only avoid a clear and present danger to everyone’s hard work, but apparently blindly step away from the opportunity to review and illuminate possible insurance solutions and product revisions particularly in the light of the available plethora of combo policies that now come in all sizes, shapes and dimensions?

Readers of this column recognize that LTCI has never been the main insurance event—we have always seemed to turn up further down a client’s dance card. It just seems there may very well be some major considerations that have been overlooked. Therefore, in no particular order of significance, I humbly submit for your consideration:

• When an estate plan is under construction, that is the time to express concern about Living Revocable Trusts. “Incapacity” is the primary ingredient of that exercise, determining  what happens if you cannot make  your own decisions. Cognitive deficiencies are of course the most likely claim. When you are putting those decisions in place it might be nice to provide the monies to fuel the plan.
• Every interview begins with an evaluation of what is already in place. Policy review that considers ownership, beneficiary designations and whether original objectives are still progressing as planned should not avoid a conversation about chronic illness. A frequent point of departure is that new product has now become available. The PPA has given us license to 1035 freely in behalf of establishing chronic illness protection.
• Establish a relationship with a law firm that has estate planning expertise and a clear understanding of the importance of an estate plan protected by long term care/chronic illness protection. A reciprocal referral opportunity should be your goal as you move forward with common cause. Contracts and expectations are always subject to review.
• Establishing the ultimate availability of protection as early as possible is always our immediate goal. Health will change and premiums will rise. There are now term life policies that can guarantee insurability and conversion to the best permanent policy available that holds the most current definition of chronic illness that does not require a permanent disability. This conversion privilege is less than 10 percent of premium and allows an early planning and highly affordable opportunity to begin the conversation about ultimate mortality and morbidity.
• We now live in a world of creative and effective “supplemental benefits.”  The concept of living benefits rolls smoothly off many tongues. Just make sure your definitions are the most current. I remain concerned that many still speak with forked tongue in this regard.
• There is a new market in development working diligently to address the reality that is the direct converse of our lack of success with stand-alone sales. The great and vast majority of Americans simply failed to plan at all. We simply cannot abandon those in greatest need. Medically underwritten single premium annuities, life settlements used exclusively for care, and reverse mortgages should be readily available in every agent’s briefcase. 

Build it, leverage its purpose with life insurance, and then demand that the big bad wolf stalking the caregiving landscape continues to need an inhaler.

Other than that, I have no opinion on the subject.

In an ongoing effort to maintain the commentary integrity and political distribution neutrality of this column, it is important to disclose that on a “consulting” basis my partner Barry Fisher and myself have been directly involved in the creation and management of a new, and we certainly believe innovative, approach to helping those seniors and their adult children who find themselves facing an impending claim without adequate protection already in place. Our efforts to help coordinate a new private non-denominational field force will be outlined in detail at this year’s ILTCI meeting in a panel presentation with all the stakeholders in the project titled: “Long Term Care Insurance for People Who Failed to Plan.”  We have found ourselves helping to create from scratch what we believe will eventually become a neutral and independent standing private army of professionally certified, trained, managed troops. Thereby creating a coordinated national presence to address the serious funding needs of all those standing before the emotional and financial precipice that has left far too many Americans without strategic planning solutions when they need them the most. It is our intention to do all we can to make sure that at the moment in time that the question arises—“How will we pay for the level of care that is needed and desired?”—a Care Funding Specialist (CFS) is there to answer all questions as to what may be possible.

At the point in time when a claim is immediately pending or already in play there are limited choices to pay for care. At that time it should be everyone’s intention to do everything possible to remain a private pay patient with the highest possible level of service. Even if the endgame is to fall back on government assistance, every day that a claimant remains free of government control and not the victim of inherent benefit limitations created by discounted funding is a day of victory for personal choice and quality of care. The ability to leverage each available dollar to accomplish that goal should be explored and investigated thoroughly. A Care Funding Specialist will be prepared to intercede when the claimant and their adult children are anticipating planning their approach to preparing for what may be an expensive and open-ended economic adversity.

When a claim falls upon those who have not adequately prepared, there are only a few possibilities available to pay for needed care. A CFS will be trained and certified to either make informed recommendations as to where to access professional assistance or to address directly enhanced financing possibilities and to then help where requested. These include reverse mortgages, VA benefits and bridge loans in the former category, and direct offerings in the form of medically underwritten single premium immediate annuities and the present value of dormant life policies in the latter.

Please understand this marketing project is very much a work in progress and a subject to which this column will return as the program develops. There are a number of marketing issues which will continue to make this an exciting and evolving endeavor:

• This is a brand new and as yet unexplored market. New and different is always a challenge.
• The opportunity is as much about family members as it is the care recipient.
• The care recipient is usually not making the financial decisions.
• The need is immediate and time sensitive, and ultimately funding strategies are limited and relatively finite.
• Planning alternatives exist in a severely regulated consumer protection environment.

Providing insurance and life settlement options is fraught with fiduciary concerns which can only be addressed with sufficient education and certification processes in terms of regulated requirements for LTC, annuities and life settlements. It is also important that the product vendors conduct their own controlled training processes. Leveraging assets requires risk. The burden of understanding and acceptance of risk falls most heavily on the heirs. The potential for substantial loss is real. This inherent truth must be clearly understood and acknowledged by all concerned. A Care Funding Specialist will be provided with marketing and sales support from the Program Director. The Program Director will be responsible for maintaining the credentials of those recommended to the program. Once all credentials and certification are in place, a CFS will be provided with sponsored center of influence “leads”. Introductions and appointments are then initiated from an extensive inventory of endorsed relationships with nursing homes, assisted living facilities, home care agencies and elder law attorneys. These local connections are to be established and maintained on a permanent basis. All follow up sales activities are monitored and documented by the Program Director. As long as the CFS maintains adequate service parameters, their territorial access will be protected. The national marketing program is responsible for SPIAs medically underwritten specifically for caregiving needs and life settlements used exclusively for caregiving purposes.

The opportunity to be of service clearly exceeds the direct funding needs of the care recipient. The relationship between those who take action to protect themselves earlier in life and intimate contact with a caregiving event involving a loved one has been well documented in every consumer research exercise for the last 20 years. The corollary sales available to a CFS will be abundant and focused. Our initial efforts to establish a standing private army of trained and field-coordinated professionals available to help those most in need has been challenging. Our recruitment efforts have been encouraging and initial sales activity is certainly promising. Until now the industry has only been able to address the care conundrum for those with sufficient wealth and health to be able to plan ahead earlier in life. The ability to now approach the problem from the exact polar opposite end of the caregiving spectrum for those who failed to plan is, in my humble opinion, a cause for celebration.

Other than that, I have no opinions on the subject.

“You may not have saved a lot of money in your life, but if you saved a lot of heartaches for other folks, you are a pretty rich man.”—Seth Parker

My prejudices and biases expressed repeatedly in this column concerning those who have chosen to make a difference in blunting the full force of chronic care are if nothing else well documented.   However, I am not sure I have adequately expressed the well from which I continue to draw my eternal optimism and blind faith that we will get this done. It is simply because it has been my privilege and honor to know and hopefully help represent those who have chosen to stand up and confront what we believe constitutes America’s greatest threat to retirement security and financial peace of mind. It requires being stated once again: “The common denominator for all LTCI specialists is the fervent and emotional degree to which they care about protecting others.” The only counting that was ever done was not based on premium but how many we had been able to shield from the storm which we know is approaching.

A deeper examination of one of these courageous volunteers in a cause that has never received the popularity or recognition that it deserves is perhaps in order. For all those who rise each day and explain again and again the need for long term care planning and intentionally choose to not leave the playing field without emphasizing its importance (if not making it the starting point of every conversation). 

L. Nicholas Hogan left the front lines of our struggle December 29, 2016. He, like so many in our small cadre of dedicated soldiers, never retreated from the challenge to save as many as time and circumstance would allow. He chose each day to defend the honor of our chosen line of attack.  He never wavered in what he clearly saw as his duty and responsibility to help others. Because he was a close and dear friend, I know this was true of both his personal life and professional career. My respect for his character and stamina in the face of adversity is in every measurable way “huge”. My relationship with Nick and so many more in  “The Profession of LTC Risk Management” is structured by a long and truly positive history. Every month for the last 14 years I have talked about the importance of what we do, but not nearly enough about those brave souls who rise each morning to confront denial, intransigence, inertia and cosmic lack of forethought. I have been continually re-inspired by the camaraderie and friendships of so many who simply refuse to quit!   Just in case you haven’t noticed, the last ten years in LTCI have been rugged—particularly for those who chose early on to focus all their efforts on a new and frankly somewhat experimental attempt to manage the risks of a claim that was clearly not yet fully understood. Folks like Nick didn’t just build an agency, they helped create a movement. They have helped recruit and train a new and dedicated field force where none existed. Folks like Nick have repeatedly risen from their seats to walk to the front of the room and teach!  Folks like Nick  never stop educating and training agents and consumers. Folks like Nick don’t just teach CE, they create the courses as they go. Folks like Nick have never hesitated to proudly and loudly (Nick was a little hard of hearing although as he often explained it was really only in one ear) proclaim what they do for a living.

Nick Hogan began his crusade before HIPAA and the advent of the modern tax-qualified comprehensive LTCI policy. Like so many of my great friends  in our corner of insurance protection,  Nick was there at the beginning, chose to face the challenge head on and then chose to saddle up for what he knew would be a long and tough ride. Folks like Nick never fell off, and even if they did they would then immediately get back up on the horse.

Folks like Nick never hesitate to volunteer to help because folks like Nick continually contribute their time and creativity willingly and enthusiastically. Nick was a frequent author in industry publications including Broker World. Folks like Nick are always prepared to share in the responsibility of representing our intrinsically understood brokerage wholesale philosophy. Nick served as president of Diversified Marketing Group for multiple terms, constantly inspiring his colleagues to help paint the LTCI fence.

I’m not sure this column is the place for an individual memorial—I therefore wanted this column to be about “folks like Nick”. But for his wife Karen, daughter Elizabeth, and son Ryan who has chosen to keep the flag flying, my most sincere condolences. I must acknowledge what constitutes a catastrophic loss to all those other folks like Nick. To a friend and fellow compatriot—

 “I can no other answer make but, thanks and thanks.”—Shakespeare.

It is that time again where many of us make promises to ourselves to hopefully reform our most aberrant concerns. These self-reflective and intended to be self-fulfilling prophecies are usually based on our oldest and most worrisome personal shortcomings. Topics which we have probably unsuccessfully attempted to address in the past. Therefore not categorizing by severity of concern or intentional personal bias, I would simply like to once again list those impediments and required resolutions which clearly block a path forward to solve America’s chronic illness conundrum.

• Let’s begin with the observation that usually gets me booed from the stage. Our industry far too often takes the path of least resistance. ”Universal Certification” however achieved needs to be moved forward. Hiding behind a loophole in suitability provisions so that health riders masquerading as chronic illness so called “living benefits” life riders that are long term care insurance in all but name must stop.  How can anyone holding themselves out as a professional planner helping to alleviate a severely exposed national risk not be certified and regularly trained to offer any and all solutions to the problem?  Because of regulatory neglect and company timidity to upset their field force, far too many conversations about dealing with long term care concerns are being hidden behind an intentional façade of oversold IRC Section 101g life riders. Fiduciary responsibility is always a double edged sword, and there should be no avenue of escape or avoidance for professional chronic illness planning.
• Please explain to me why current “qualified” savings of  any kind should be unavailable to protect the very retirement that creates the tax exercise in the first place? At the very least a separate and “new” qualified long term care account should be available on a stand-alone basis or in combinations with other insurance disciplines.  If ever there was a governmental need to influence behavior it has to be the giant sucking noise created by the drain of Medicaid dollars from state and Federal coffers. Any and all existing privileged tax strategies should be available for long term care expenses beginning with FSA’s and IRC Section 125 privileges.
• There must finally be a clear understanding that those with the financial ability have multiple options to leverage as much of the risk as they have the presence of  mind and care for their family to accomplish, and no one really cares which product or combination of product strategies they may choose as best or even most efficient. For those who chose to do nothing I can only say: “The only thing necessary for the triumph of evil is for good men to do nothing.” Edmund Burke.
• The much greater issue is how much supplemental coverage is necessary to prevent someone from ever being dependent on government largesse. There is nothing more important than quality of care and freedom from government control. Every time I  hear “Yea but, what about Medicaid?” my response is spontaneous—“What about it? I am here to do everything in my power to make sure that never happens to you.”  How little does it really take to add to what is already in place to provide someone with those most important choices?
• We must continue to press for much greater flexibility from the NAIC including:  Expanded deferral periods; reduction in benefit periods; and the allowance of any creative structure that allows for sharing of  financial risk with individuals—such as higher deductibles and coinsurance limits as well as the sharing of the morbidity and investment risk with consumers.
• For far too long, far too many who wanted and needed our help have been told: “Sorry, you waited too long.” (And now the entire burden must fall squarely on you and your loved ones.) We can do better. Wasn’t independent brokerage founded on finding alternative coverages for those who had developed medical impairments? Why do we continue to tolerate an industry where 40 percent of traditional applications are declined and  no one cares to meet the problem head on?

I do realize I may have already worn out the above themes in this column. It was nonetheless at least for me a healthy, cathartic experience and a rare privilege to once more rage against the darkness. Obviously, what continues to amaze me is the entrenched inertia and the continued fantasy that somehow this problem will solve itself.  Recent information from the SOA has made it crystal clear that we have resolved pricing concerns involving persistency, benefit selection and investment return.  Why is there still a lack of adequate industry commitment?  What we must do is take to heart the persistent demand from consumers for our help, and that when you add stand-alone, combo life/annuity and short term sales we have just had another banner year in the wonderful world of chronic illness risk abatement. Although once again it is likely that far too much protection was taken from us and not nearly enough offered by us.

Other than that I have no opinion on the subject. 

Indeed something profound, devious and game changing is happening quietly that will forever alter the trajectory of chronic illness planning. On multiple occasions in this column I have taken the position that all life and health agents should be required to be “certified” and held to a basic fiduciary standard concerning the necessity of addressing long term care risk. 

I have also frequently suggested that all that is required to accomplish this goal is to remove one word—“not”—from the sentence in the Suitability provisions of the Model Regulations that states that (101g) life riders are “not” LTCI. This well-known deceit could be perpetuated as long as those riders required that the chronic illness risk in question mandated a permanent disability. 

I serve on many industry committees all dedicated to moving our industry forward. I have made my position crystal clear for years on this subject. I continue to believe that everyone should be certified and therefore held responsible for making sure that a conversation takes place about chronic risk that cannot be ignored.  

To put it bluntly—I lost. Based on expediency and fear of lost sales, a different decision has been made. Quietly and without any real fanfare, life riders that do not require LTCI training are now available. This version of a “chronic illness” accelerated death benefit has now become “health” insurance in disguise. IF ADBRs for chronic illness are filed with the IIPRC there is now alternative language available that does not require a permanent disability. This creates a “New marketing and distribution World” for all concerned.  There is not sufficient hyperbole to explain the significance of this new reality. This changes everything! You now have the possibility of a having an easily priced, inexpensively filed, and quickly available in 42 states, game changing chronic illness ADBR.  It can now appear as an innocent-looking life rider that is by any definition long term care insurance, even if you cannot use those words to describe the purchase. 

Proof of my conclusions is that the majority of companies involved in this subterfuge have hired an LTCI/heath TPA to administer their potential claims. Health/LTCI is now available without the need for training and certification. Personally, I am obviously not pleased with the approach, but I do recognize a sales opportunity when specifically and not accidentally provided.  

 What does this mean?  A speculative conversation:

• At the recent LIMRA-SOA LTC/DI Conference, a representative of the IIPRC stated that 62 companies had filed chronic illness ADBRs. I raised my hand to ask how many were re-files with the new language. The answer was a “substantial number”.
• When I was young and picked something up off the ground that was unsavory by definition, my father’s words still ring in my ears:  ”Put that down, it’s nasty!” Chronic illness riders that require a permanent disability fall into that category.
• There is no longer any excuse for a life company to not offer the correct riders. There is a small difference in pricing. It always costs more to do it right…so what?
• The new riders should be available on all products within a portfolio, including term, allowing full and open conversion privileges.
• There is no longer any excuse for avoiding a conversation about care planning issues.
• Any  pedestrian life sale can now legitimately be presented as a health care concern. (If you have the “right” rider.)
• Stop the whining about certification requirements; but if you are not prepared for all planning contingencies you are simply out of sync and harmony with any rational thought processes concerning the nature of our profession. 
• More Combo sales were made in 2015 than stand alone LTCI.  Care to now guess about the future direction of the market? 

This column has never been short on optimism. It must be said however: These are by far the most exciting times for creativity and innovation, new sales opportunities and market expansion that I have seen since the birth of HIPAA. 

 Other than that I have no opinion on the subject.

The Investment Company Institute publishes weekly Flow Reports that show whether investors, overall, are buying or selling equity-traded, closed-end and mutual funds, and in what quantity. If you look back over the years you find that investors tend to buy more equity funds at market cycle peaks and sell more at market cycle bottoms–the classic “buy high-sell low” bad investing dance. The main reason this happens is due to a decision-making rule of thumb known as projection bias, whereby we take what is happening yesterday and today and think the trend will stay the same tomorrow.

This pattern of buy high-sell low was easily seen during the millennium bear market and the Crash of 2008, but if you look at equity fund flows for the last couple of years you see that there is not a clear direction. For a few months there will be buying, then there will be selling for the next few, then buying for a month, then net selling of equity funds the next month. The reason why is that even though the bull market continues, its rise has been very jagged and volatile. The result is that investors are unable to use their projection bias rule of thumb. Granted, it is a lousy rule of thumb, but it at least gave investors the illusion that they knew what they were doing.

A different rule of thumb from the securities world that has greater validity is to move into bonds from stocks when the future looks dire. This made a lot of sense over the last 35 years as interest rates fell and the value of existing bonds increased. In this falling rate environment it didn’t take genius to make money in bonds. If you look at flows since last winter you’ll notice that people have been steadily selling equity funds and, it appears, putting that money into bond funds. This isn’t a bad strategy if interest rates remain flat or decrease, but it may be bad if rates go up.

From 1946 to 1982 interest rates went up. If you had purchased $100,000 of long-term investment grade bonds in January 1946 and sold them in January 1956 you would have gotten back roughly $90,000, or 10 percent less. The reason for the loss is the value of your bonds was lower because interest rates moved up about one half of one percent over those ten years. Let’s say you turned around and did this all over again buying another $100,000 of long-term investment grade bonds in January 1956. If ten years later you again sold them, you’d have received around $80,000 in January 1966.* The reason for the 20 percent loss is because interest rates moved up about one and a half percent during the period. So, 0.5 percent rate increase equals 10 percent loss; 1.5 percent increase equals 20 percent loss. There are those at the Federal Reserve talking about an interest rate target that puts rates roughly two and a half percent higher than they are now. If that happens, how does that buy bonds rule of thumb look now?

There is an alternative to all this. You could simply buy fixed annuities and transfer the principal market risk to the annuity carrier. It’s not yet a rule of thumb, but it looks like it should be. 

*Standard & Poor’s High-Grade Corporate Bonds 1945-1982.

This column has always been neutral and generic when talking about product, particularly in terms of innovation and market direction. I now have the privilege if imparting some very exciting news. However, I need to disclose at the beginning that my company and I are deeply and personally involved in this month’s subject matter. It can surely never have been a secret that, like the readers of this column, I have the honor of earning a living helping others protect themselves against the emotional and financial ravages of chronic illness. I know my passion to reach as many as possible is shared by those who read this column.

Our most persistent curse has been that far too often we have to tell someone we care deeply about that we are unable to help .

For whatever reason or rationalization they failed to plan ahead. They waited too long to take action and their health has turned too many corners. They had not yet been touched by the angels of caregiving need. Myopic perceptions of insurmountable obstacles, real or imagined financial barriers and ignorance of the caregiving dangers that lie just beyond the horizon prevented them from making an early decision to build the necessary insurance fire wall. It was just too damned late.

Never again does that have to be true! There are now a growing number of answers—the advent of a strategically placed market is at hand. New and exciting opportunities to be helpful even on the day the circle of loved ones looks up knowing a claim is now imminent and asks “How are we going to pay for needed care?”  At the point of claim any and all potential sources of financial support are evaluated in terms of how they may best impact the desire to maintain control, avoid government manipulation and provide the best possible care setting. The question becomes:  “How can I  leverage what I have?”  Innovative approaches are currently being “Beta” tested. America’s historically largest provider of stand-alone LTCI is in the process of introducing a new medically underwritten single premium immediate annuity  designed specifically to respond to longevity issues inherent in care settings. Guaranteeing enhanced payments based on caregiving experience is new to our market but has been a staple of the British terminal funding market for many years. Taking existing assets and increasing their inherent value for the purpose of care is a logical extension of any planning process.

Fiduciary concerns should arise any time a life-only settlement is selected. This is being directly addressed by requiring a “Certification” process conducted by the carrier. I believe there are potential advantages at both ends of the economic spectrum. Those with limited assets available for caregiving expenses can simply take the monies that were already dedicated to caregiving expense and stretch their effectiveness to maintain independent caregiving choices. Those with substantial assets can use this approach to “cap” the potential cash drain exposure to the estate.

In addition, we have partnered with a well-known life settlement company that has been working for 10 years to  apply  those dollars exclusively to caregiving purposes. Seniors own over $500 billion of life insurance and 88 percent lapse or surrender their policy for little or no value. Converting that potentially lost or dormant value into guaranteed caregiving cash flow is an option that should be carefully evaluated every time. Again, you are leveraging an existing asset through a caregiving medically underwritten prism to maximize the return. This planning  option also requires a specific “Certification” process.

 Just recognizing that I can now have a meaningful conversation with anyone in need of help transforms my practice. It does not diminish my desire to sell more long term care protection. However, simply knowing it is never too late changes everything.

Other than that I have no opinion on the subject. 

It is certainly widely accepted that rate increases, particularly the big fat and somewhat unanticipated ones, are bad for all concerned. It should not however be a revelation be that individual health insurance is often subject to the variable and often violent wind storms created by medical inflation. Unfortunately, that universally accepted truth does not exactly hold water when viewing the history of rate increases in the world of stand-alone long term care insurance. Medical inflation has been consistent with expectations and was always a planned-for pricing consideration. The fact is that, this time, what did contribute to the creation of what I suspect looks more like an adverse selection rate spiral than anything seen before could simply not have been anticipated by those stakeholders involved in the creation and growth of this market.

Don’t misunderstand—the damage caused by this lack of omnipotent clairvoyance is very real and verges on the catastrophic. All too many have been running for the exit doors, including: reinsurers, companies, agents and most importantly consumers. Consumers point the finger at those old mean and greedy insurance companies. The politicized regulatory universe has done much the same, even though they know better. Companies have retreated moaning about lack of profitability, reserve drain and future claim uncertainty. And those of us out there every day trying to protect our customers have been caught in the crossfire. How do you explain to the most perceptive and intelligent clients in your book of business the cause of onerous rate increases so soon in the history of this “new“ and some would say “experimental”  line of retirement protection?

The truth is, no one could have peered into their crystal ball and seen that this would become the most loved accident and health product of all time. Virtually the only lapse is death—new products are being priced with a one-half percent lapse rate.  15 years ago you would have been laughed out of the board room with so ludicrous a concept. Who could have predicted the collapse of our economy in the Great Recession and that the interest rate environment would remain dead flat ever since with no end in sight? Who would have guessed that the caregiving landscape would shift to assisted living and that the palliative effects of that level of care would dramatically affect longevity and claim duration? Who would have thought that two-thirds of the companies who lined up to help develop this market would throw in the towel so soon?

The destruction caused by what has appeared to be capricious rate actions must be accepted and frankly forgiven so that we can get past the grief and move on. As circumstances have developed, we have repeatedly had to explain that this is health insurance after all and that rate increases on older blocks of business must be proven justifiable to the appropriate state regulatory authority before they can be enforced. We also know that recent research conducted by the SOA clearly indicates that future rate increases on policies sold today are more stable and reliable than at any time in our past. We have explained to consumers that, even with the increase in cost, their policy will remain less expensive than purchasing new coverage today. Most important, we have gently explained the obvious that the new cost remains diminutive when compared to the potential claim.

What you may not know is what actually happens to consumers in terms of their protection when a rate increase takes place. What is the real dimension and size of the loss in coverage when consumers are facing a rate increase? I asked the largest historical writer of LTCI and the answer is—no one walked away with an empty basket. 85.2  percent kept their coverage and accepted the rate increase, 9.1 percent kept approximately the same premium and reduced their benefits, and only 5.4 percent took the non-forfeiture benefits with access to past premiums in the form of available benefits paid. The cost of caregiving in America remains the problem that will not go away. Although rate actions have been unpopular and unpleasant, they may not have been as disastrous as advertised. We have tried—I believe valiantly—to help, and there is no other answer but to profit from what we have learned and keep trying.

Other than that I have no opinions on the subject. 

There are simply those who, even after repeated exposure to the glare of the truth, are subsequently unable to admit they were wrong.  Our industry suffers seriously from this flaw in human behavior. Far too many have conveniently pointed the finger of blame at  those responsible for our lifeless interest environment ( whoever those people are) and not taken sufficient responsibility for the “mistakes” that were made in our past pricing assumptions. “We” got it way wrong and the damage done to all concerned is much more extensive than many are willing to admit. Stand-alone LTCI sales are a shadow of their former selves. The destruction to new sales caused by repeated rate increases is pervasive and insidious.  We have unfortunately created a general public malaise and aversion to all things LTCI both in terms of those who we said were the smart ones for leveraging their risk early and those prospective buyers considering the security of policy ownership. What is of course much worse is that we have successfully decimated the ranks of those willing to help sell the product. The age-old equation is now painfully obvious to all concerned: rising premium creating falling sales culminating in a drastically reduced field force. This artificially created sales spiral  is much more than just a self- fulfilling prophecy.  We must first admit that it is also a self-inflicted wound.

We must first freely admit and acknowledge our own culpability. Frankly, we over built benefits, underpriced mortality and morbidity, and overestimated potential sales in the initial rush to achieve market share. We completely missed the whole side of the barn in terms of persistency and honestly we were basing our future experience on far too little actual claims data.

That has all changed!  “Ding Dong the Wicked (Rate Increase) Witch is Dead!”  The Society of Actuaries has recently completed a research project designed specifically to evaluate the historical potential for rate increases.   The research clearly indicates that products priced today are much less likely to have future rate increases. What is absolutely certain over the last 15 years is that the need for long term care  services and support, the growth of assets and income needing protection, and the certainty of a need for expensive care is now greater than ever. We have also accumulated a substantial volume of claims information upon which to more accurately base current pricing.

The conclusion of the SOA analysis is that confidence in current pricing “should” be at an all-time high. Claims data is no longer scarce. We  have an abundance of claims to evaluate at this time, meaning we have  reduced the potential likelihood of future rate actions. According to the SOA, “Premium stability on today’s LTCI products is at its highest.” The SOA identified a number of benefits of the new pricing stability as the study found that, “Claim experience nationwide in 2014 was 70 times more credible than in 2000.” The fact that we now have a history to evaluate has laid the groundwork for future carrier optimism concerning this market. Pricing stability contributes to:

• Greater carrier confidence in key assumptions concerning lapse, morbidity and mortality.

• Less operational administrative risk translating into lower expenses. Constant change is expensive.

• Less friction on the regulatory level and potential stress on reserves.

Restoration of consumer confidence at this point is a massive undertaking.

The Study also illuminated the validity of what we knew were serious contributing factors:

• Long term investment return has fallen dramatically from 6.4 percent in 2000 to 4.6 percent in 2014.

• Commissions have crept up during the same period of time, emphasizing first year compensation, and while administration expenses have declined.

• Based on experience, allowable margins for error have also increased. 

What is important is that we have learned from our experience and that the relative predictability of current premiums has risen from a low of a 40 percent chance of a future need to raise premiums to only 10 percent today. The study also pointed out that the regulatory environment has provided evolving strength by implementing the necessity of providing adequate margins for adverse circumstances under the NAIC Model Regulations beginning in 2000 and subsequently enhanced in 2009 and 2014.

The journey now standing before us must certainly begin by joining hands with those new friends willing to take that first step on the yellow brick road as we must ask the wizard to help us restore the faith of consumers and agents alike. Together we must recognize that we have indeed survived the flying monkeys and that our strength of purpose to find a home for the risk that will not be ignored was always built upon our brains, our heart and our courage.

Other than that I have no opinion on the subject.