Ronald R. Hagelman

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. 

According to the National Retirement Risk Index:  “52 percent of households are ‘at risk’ of not having enough to maintain their living standards in retirement.” When you bombard this fragility with caregiving costs, substantial emotional and financial suffering awaits far too many Americans. None of this is taking place in a vacuum. The conversations concerning acknowledging the reality of the risk are proliferating.  I  don’t  think any of us have ever witnessed such an overwhelming need juxtaposed with a wasteland of adequate response. My mind remains unable to grasp the dimensions of the sales opportunity in contrast to our on-going struggle to find sufficient troop strength, effective ammunition or carrier support to fight the battle.  To compound the disarray we seem to have become order takers once again, not asking the hard questions or taking the time, effort and energy to shine a light on the obvious. This can happen to you and there is no greater threat to maintaining you and your family’s lifestyle. And why are we continually being forced to round up professional insurance strays to help  abrogate chronic illness risk? 

Markets are reviving. Corporate long term care planning conversations emphasizing premium deductibility and enhancement of selective benefits for the most eligible for incentive compensation are once again threatening the complacency of rigid HR departments. Competitive accelerated modal premiums are again available.  (Ten–Pay and Single Pay). Conversations concerning possible corporate tax avoidance strategies utilizing an IRC Section 105 Medical Reimbursement Plan for stand alone LTCI or an IRC Section 162 Controlled Executive Bonus Plan utilizing combo life both providing the opportunity for “golden handcuffs” for key employees, juicy incentive compensation and corporate premium deductibility.

We do indeed live in strange times. Although stand-alone LTCI may exhibit shrinking availability, alternatives to address America’s caregiving risk are continuing to proliferate. Pricing has stabilized on traditional products and the potential for onerous rate increases on new business has decreased dramatically. We have been herding cats for so long it may be difficult to see that finally many of them seem to be lining up and at least focusing their interest in the same direction. The “Initial Recommendations to Improve the Financing of Long Term Care” report from the Bipartisan Policy Center begins with the painful truth that “the demand for LTSS will more than double over the next 35 years and is fiscally unsustainable.” It is clear the government understands and anticipates a strong role for private insurance. It is also clear there is developing advocacy for some form of additional safety net program for the middle class. 

It is however the work of the SOA sponsored Think Tank on the Future of Long Term Care Insurance that may hold the greatest predictive value at this time. In the most recent report from Maddock Douglas, Inc., “Exploring The Possibilities For Helping The American Public Manage The Financial Burden Of Long Term Care,”  the following areas were thoughtfully evaluated by the experts in the Think Tank:

• Helping people pay for their care differently.

• Making care more accessible.

• Reduce the cost of care.

• Mitigating the cost of care in the first place.

The final concepts developed by the participants coalesced around three “Platforms of Influence”:

1. Data-Driven Decision Support.  The effort here would be to focus on caregiver education and managing current information so that care recipients can be informed as to best practices in terms of care coordination to improve pricing and future recommendations. The object here is to continue to explore new ways of coordinating data collection. Examples being explored here are creating a ‘Health Longevity APP” and a consumer “Care Portal.”

2. Service Evolution and Expansion.  The purpose here would be to more efficiently distribute available care to match needs, improve access to quality care and delay the need for care in the first place. Examples of development in this category would be “Uberfication” of care delivery services and rebuilding LTCI policies to look more like traditional health insurance for better consumer understanding and transparency.

3.  Paying for Care (“Pay-fors”).  This development initiative directly addresses how long term care costs are funded. This includes partnerships and or potential legislation that should be considered. Examples being explored are developing additional qualified dollars through a “Flex 401(k)” which would create a new multi-purpose savings account, or establishing a new “family long term care account” designed to provide tax privileges on a cumulative and progressive benefit basis for all family members.

Regardless of the direction from which you may have observed the progression and evolution of this market, you would have intrinsically known that the risk and the commensurate opportunity to be helpful are immutable. Although it has been frequently frustrating and strategically disappointing that our past sales success has never really met our expectations. What must be acknowledged from the wandering concepts in this market is that pricing is sounder, claims are clearer, technology  will remain an accelerant, chronic illness product proliferation will continue to expand and this industry will continue to be hell bent on resolving the conundrum of aberrant feline behavior.

Other than that I  have no opinion on the subject. 

This is after all an eclectic commentary column and it is not required to connect all the dots. We are certainly in a time of transition, upheaval and reexamination of all those previously held beliefs concerning the structure of product and basis for the sale itself. It appears nothing was sacred, which makes sense because apparently very little of what we have been doing was working well anyway. Like so many others I am trying to understand the changes in sales emphasis and product direction. How does the expanding universe of chronic illness risk management influence my practice and prioritize my planning to best serve my distribution?

Consequently, meandering through my current understanding of what’s relevant and what’s superfluous might be fun. Some of these random thoughts have appeared before—they therefore probably bear repeating. So in no particular order of importance here goes:

Americans know they have a problem. Recent retirement research suggests that two thirds of the populace believe that health risks will destroy their retirement. They have seen it first-hand—as not so coincidentally two thirds know someone who was financially decimated by the problem.

There are two sales: a primary sale that replaces financial risk with insurance; and a supplemental sale that is designed to preserve dignity and independence for as long as possible by “shoring up” assets and income already in play. We have actually succeeded fairly well at the first and failed dismally at the second. If we fail to protect the middle class from rigid government bureaucracy and the fate of budgeted warehouse care, the shame will haunt us for generations. If the private insurance industry cannot rise to this occasion it must seriously question its own relevance. However, to have any hope of success it must begin by focusing clearly on which sale it is making and how best to accomplish each separate and distinct goal.

Again recent surveys at the Center for Retirement Research at Boston College  suggest that the odds of needing care are higher than we thought, although the length of care is shorter than we originally anticipated. Average nursing home stays were .88 years for men and 1.44 years for women. However, for those who do need nursing home care, 50 percent of men and 39 percent of women will need more than three years. Most striking of all is that after age 65, 44 percent of men and 58 percent of women will find themselves in need of nursing home care.

The risk is very real and those who choose to ignore the risk will pay a very high price for their personal cowardice in not planning for the inevitable!  Even though it will be a manageable problem for most Americans, regardless of how you define severity, it will be a catastrophic financial debacle for a double digit percentage of those after age 65.

There are no “Easy Buttons”.  The sale itself is hard and does not  get any easier over time. The regulatory environment is dense and unfriendly. Adverse selection is present to some degree in every sale.  Constant vigilance is required by all concerned.

The rapid rise of premium, which created a corollary decline in sales, has left a really bad taste in the mouths of many consumers. And for all those early adopters, onerous rate increases have disenchanted existing policyholders.

The landscape of future sales is transforming before our eyes. Any company that ignores the new market mantra of faster, easier and cheaper will fail.

We are seeing kitchen table sales recede in our rear view mirror. “Share screen” computer/phone sales are the most common denominator today. Every company has an electronic application, and paper apps may become a collectors item on the Antiques Roadshow.

We have inadvertently created an industry now resting firmly on a solid bedrock of false promises. Even if our past history transpired on a completely innocent basis, we still have a lot of explaining to do.

Fear drives this sale. Fear of disability, dependence, loss of control, asset depletion, legacy evaporation and government bureaucracy.

There is an unavoidable ethics component to this conversation.  In my opinion the industry has not  yet come to terms with its responsibilities in this regard. How does a company or an insurance professional avoid a conversation about this risk in a world in which there are such plentiful opportunities to deal with the financial devastation now available within every product genre—life, annuity and health.

Price matters, underwriting speed matters, access to technology matters and simplicity of design matters. Without these key ingredients present progress will not take place.

Combo sales are not a panacea and the new fulcrum in every combo life sale must be which sale are you making?  Life with LTCI, or LTCI with life? And please explain how you can avoid annuity combos when they are clearly the lowest net cost for the risk…

My two hottest predictions remain on the table: 1) when interest rates rise, combo annuities will become the star LTCI attraction; and, 2) 1035 activity, both life and annuity, has yet to hit its stride but it will eventually.

Chronic illness ADBR 101g riders will continue to proliferate and improve.

This is the risk that will not go away. The industry will continue to try to meet the need with new and innovative product.  We will continue to learn from our mistakes.  Our insurance responses will be based on our cumulative experience. Both product and sales approach will continue to evolve and improve. We are no longer just staggering around in the darkness. We are knowingly meandering forward with purpose and resolve.

Other than that I  have no opinion on the subject.