Ronald R. Hagelman

Perhaps Las Vegas is the world’s greatest example of bad math. The results are, of course, overwhelmingly predictable—losing is highly likely. Yet this sure and certain knowledge prevents few from gambling—the prospect of catastrophic gain (or loss) is what defines all financial decisions.

Substantial rate increases and strategic carrier defections continue to plague our business. I am again reminded of wisdom from my father, who served as president of several insurance companies and who understood all too well that in insurance there are two bad math scenarios—too much premium or too little. We have seen some of both in recent months.

Health insurance models are best with slow, steady and predictable growth. Extreme increases in sales or lack of sufficient growth are equally destructive to the longevity of product exercises.

Across the board, our business is built on the necessity of making money on policyowners’ money. Level premiums demand invested reserves. Without the benefit of deferred interest income we become an industry in search of a purpose.

We know that at the heart of our difficulties is an interest environment as flat and barren as Death Valley. Each time I get “the” phone call from yet another casualty of repricing or someone simply throwing in the towel, I am again painfully reminded of the cause—bad math.

Politics do not belong in this column, yet we can only hope that this fall will precipitate a departure from the status quo. Each time we must absorb what appears to be yet another obstacle to sales, I am again reminded that this is all the more reason to complete every open LTC conversation in your known universe! The urgency to get it done is real.

In a recent announcement to my own distribution, I explained that dramatic changes to a specific carrier did not just create another “fire sale.” In fact, forest fires have been raging in the LTC insurance industry since HIPAA. In truth, we all must continue to scream from the mountain top that premiums will continue to rise and underwriting will continue to tighten. Yet, at the same time, we all must understand that bad math is dramatically restricting an adequate flow of water to put out the flames.

Establishing insurability and cost now remains the only protection from uncontrolled wild fires. Waiting to do the right thing is an extremely bad decision for all concerned—agents and consumers. Policies will never again be this competitively priced, and underwriting will never again be this permissive. Agents must act now to save their clients thousands in premium as well as establish the security of attained insurability.

The necessity to take action immediately shall remain true in every client conversation about leveraging the long term care risk.

 •  Believing that your clients’ health will not change is bad math.

 •  Ignoring the potential effects of future rate increases on new policies is bad math.

 •  Paying higher premiums for an LTC insurance policy is bad math.

 •  Leaving your clients open to the ravages of inflation (if it ever returns) is bad math.

 •  Ignoring the protection of your clients’ assets and retirement incomes is really bad math.

Bad math is a pox on all our houses. The urgency that really needs to be communicated is the meaning of not taking advantage of the current opportunity.

Other than that I have no opinion on the subject!

For those still in the long term care insurance trenches, there has to be a growing perception that we might need to be concerned about maintaining our vital supply lines. We cannot fight a sustained battle without adequate ammunition. Our enemy, America’s greatest unprotected risk, continues to gain ground. Our foe will not retire or retreat, so we have no choice but to stand and fight.

The situation is painfully simple: the problem will not go away and there is only one answer. The enemy’s strength is irrefutable, nursing home costs now average $80,000 per year, with home care rising to $30,000 and assisted living in excess of $40,000.

Depending on how you want to evaluate the potential risk, two-thirds to three-fourths of all Americans may need care, and one out of those five will need care two or more years.

We have put up a good fight approaching 10 million insureds and more than $40 billion in premium. Plus, we are adding approximately half a million new buyers each year. More than half of all sales now take place through an affiliation membership. Even with our dwindling supply of ammunition we are making meaningful progress.

We have come to understand there are two markets. Those with larger incomes/assets and better educations, who clearly understand the need to leverage risk with insurance to protect savings, preserve estates and maintain control of their own caregiving destinies. The second market is the “mass middle,” where we are beginning to establish significant growth at the worksite.

Marketing strategies, product alternatives and underwriting structures have all been designed to facilitate these two sales. The number of manufacturers of ammunition has diminished. The reasons for the attrition are easy to identify: Long term care insurance is unpopular in the front office, interest rates are dead flat with few signs of recovery, some benefits have been over-sold, some regulators suffer from blind politics, and the claims can be a little scary for the timid.

The fight will continue because we have no other choice. Surrender or defeat is not an option or, frankly, our entire industry will have dishonored its social obligation. While we may yet see more defections (those who cut and run), we will also have those who will find the courage and the long term commitment to stay the course. They will not quit primarily because they understand their obligation.

There is much work going on behind the scenes, and I am proud to serve on a number of the Society of Actuaries’ working committees. Recommendations to improve market conditions have been made to the National Association of Insurance Commissioners and the National Conference of Insurance Legislators. Among those recommendations are: greater product flexibility, including shorter and reduced benefit amounts, longer elimination periods and waiting (deferral periods); more inflation protection options; streamlined applications; flexible premium structures; expanded pre-tax funding; mandated agent training; and more combo policy alternatives.

The truth is that we, as an industry, have much more work to accomplish. We need more suppliers of new and improved ammunition. We need ammunition that is more effective and efficient. We need more agents to dust off their uniforms and return to combat. This struggle is not just a distraction—it is our primary focus.

Now let’s see who actually reads this column. The Society of Actuaries sponsors a standing committee: “The Future of Long Term Care Think Tank.” This is a multi-­disciplinary group of industry experts—those directly concerned with maintaining a future for all involved. We have met periodically over the years to evaluate and give recommendations to those directly involved in the struggle.

Roger Loomis, Actuarial Resources Corporation, and I are this year’s co-chairs. We are expanding the committee’s membership to include those interested in helping develop a consensus of opinion as we go forward to reform and expand LTC insurance sales. If you would like to help, please send me an email for an application to join the committee: ron@rmgltci.com.

Don’t stop firing at the enemy, just keep your head down and help me pass the ammunition.

Other than that I have no opinion on the subject! 

We have lost another dear friend—a corporate helpmate that professed a strong commitment to LTC risk abatement. A long term partner in our continuing struggle to mitigate a potential catastrophic lifestyle event.

As we age, we come in contact on a more frequent basis with the abrupt and permanent exit of our dwindling number of close personal friends. Of course, these are events we cannot control or prevent. An appropriate period of mourning should take place fueled by grief and a sincere sense of loss.

After the dramatic and unexpected departure of those close to us, all the usual questions arise: What does this tragic demise mean to me? What are the broader implications of this new and final departure?

During the last 18 months those of us in the LTC insurance business have had to process these basic questions on multiple occasions. Immediately after our most recent loss, I left the country for 10 days on a richly deserved vacation where my most important consideration was my drink selection at the swim-up bar. Therefore, I missed the traditional gnashing of teeth and wringing of hands which follows the exit of a prominent player in the market. When I returned the residual burning question was: Is this the beginning of the end?

Absolutely, positively, unequivocally No!

By definition those who read this column are permanent lifetime members in a very special club with an extremely strong indigenous affinity. You Care! In truth this is the common denominator for all those who feature the LTC risk prominently in their professional practice. Yet in our quiet moments when we are alone, we know the truth of our concerns—this is a business, after all, and the tail on a LTC insurance claim is elusive, ill-defined and hidden in the midst of Alzheimer’s and future service delivery.

If you cannot make money, if this chosen line of business is unpopular in the financial front office, if the regulators are perceived as intractable, if you do not believe that long term investment return will improve and if you are frankly just afraid of the claim: You need to quit!

You are welcome to depart without question or accusation. You are always welcome to leave the field of battle when you believe discretion to be a better form of valor. Unfortunately your original professions of altruism and customer service may be worn a little thin in the process.

The issues have always been pricing, reserves or claims; of course, we recognize these obvious realities or rationalizations. Unfortunately, because we care, we bought into the perception that the company also really wanted to help. If the problems were related to investments, reserves or claims, I can only kindly suggest these problems have always been present in the LTC insurance conundrum.

Historically we acknowledge that we have seen a shrinking universe of company and product options in the individual disability insurance market. That market did eventually stabilize and show steady growth because the product was priced more accurately based on substantial experience and adjusted benefit options.

Just in case there is anyone else waiting in the wings to throw in the towel, I would like to extend an open invitation to proceed to the exits without further delay.

If LTC insurance is simply just too hard or your commitment to stay the course too fragile, please forgive me for a small non-denominational humble heartfelt invocation: Please God, no more quitters!

Our supplication is an acknowledgement of an obvious undisputed truth: The problem grows and the government cannot and should not pay for those who can afford to pay. We are not immortal and our final departure may not be abrupt—we may linger. Medical and custodial inflation will not abate or change direction.

Insurance has been, is now and forever shall be the answer.

I may not know exactly what the insurance answer will look like or what it will cost in the future. I will, however, lay my head down tonight safe and secure in the knowledge that in the morning I will have an insurance product available that insulates my client from the grasp of government dependence—one that will always cost less than paying a catastrophic claim on their own.

Other than that I have no opinions on the subject.

Aradical departure from current practice in the LTC insurance market is necessary! Let’s begin with what we know and, for the most part, universally agree upon. Then we will logically proceed step-by-step to an inevitable conclusion.

The time is right for the National Asso­ciation of Insurance Commissioners to mandate LTC insurance training for all agents who sell life and health insurance. This proposed amplification of existing guidelines should become an absolute requirement to maintain a life and health license.

NAIC meets every three years to rewrite and upgrade its Long Term Care Model and Long Term Care Regulation; and the 2012 version should include this enhanced training requirement—with no exceptions, excuses, grandfathering or circumvention of state regulation.

Let’s begin by outlining those concepts with which we strongly agree. For many years the American Council of Life Insurers has made the direct connection between financial planning and the necessity of providing LTC insurance to protect the plan.

How can any financial professional have a career designed to create assets and income at retirement without recommending LTC insurance to protect his efforts? In my humble opinion we are talking about America’s largest unprotected risk. Many trillions will be required to provide care to the boomer generation.

At this point no one in their right mind would argue that the government could or should pay for this risk (the exception being for those in the greatest financial need). It must be paid by the private sector.

The remaining question is to what extent will the private sector’s exposure be leveraged with insurance. If spreading the risk is better than having the full load fall directly on those needing care, then why can’t we make LTC insurance a mainstream sale?

I am constantly asked about leads. My answer is always the same: Just make the LTC insurance risk a centerpiece of your practice. Every conversation with every client must include an inquiry about plans for LTC—their experience with an LTC event and their financial risk if they wait to solve their LTC problems. Leads are all around you—just reach out.

LTC insurance provisions in the Pension Protection Act, which began in 2010, created the beginning of the end of non-participation in the LTC insurance crusade. Far too many agents have chosen to avoid the LTC insurance risk leveraging conversation. Yet the simple and unavoidable solution to more LTC insurance sales is more LTC insurance agents!

The proliferation of LTC insurance options is contributing to the inevitable conclusion of the problem. As we predicted, LTC insurance and chronic illness accelerated death benefit riders are being glued, bolted and combined to more and more life and annuity products.

The only way to avoid the obvious is to deny the inherent truth of the proverbial Duck Theory: If it walks like a duck and talks like a duck, it is a duck, my friend.

Both LTC insurance (IRC Section 7702B) and chronic illness accelerated death benefit riders (Section 101g) provide tax-free dollars for long term care. Both are claims eligible based on HIPAA tax-qualified definitions for the two of six activities of daily living and/or cognitive impairment. Both are defined by 90-day disability. The claims are adjudicated and paid in the same manner. The only difference is where the available funds are located. Don’t even try to tell me these are not identical duck twins—chronic illness ADB riders are long term care insurance, period.

Three states have already come to this conclusion—Florida, Kentucky and Hawaii—and require LTC insurance training regardless. More states will follow, which makes the duck theory hard to ignore—it is blatantly obvious.

Yes, we have an aging field force, and new recruits are not arriving in sufficient numbers; however, that cannot be a rationalization for inadequate preparation. I cannot accept arguments based on expediency. LTC insurance training cannot be muted or divided for convenience.

This brings us back to the principal of unavoidable contact. A number of companies provide chronic illness accelerated death benefit riders with the majority of their universal life products. These riders are provided at no current cost unless they are used—costs are then deducted from the final payout. In other words, the LTC insurance/chronic illness benefit “comes with” every one of these policies. How can anyone avoid a conversation about this? Even if the intention is to make a life insurance sale with blinders on, there is still an obligation to explain that if such a rider is used, the life insurance benefit will be diminished. If you do not wish to expose the life insurance to the LTC risk, do you not have an obligation to offer alternatives?

The basic requirements are already in place in the 2009 NAIC Model Act, which states, “An individual may not sell, solicit or negotiate long term care insurance unless the individual is licensed as an insurance producer for accident and health or sickness and has completed a one-time training course. The training required is eight hours and four hours more every two years thereafter.” This very strong recommendation, which actually began in 2003, became the armature on which to build the Partnership Program training.

Basic LTC training should include LTC insurance and LTC services; state-specific Partnership information, where applicable; available LTC services and providers; changes and improvements; as well as alternatives to LTC insurance. Also, training is to include consumer suitability requirements (i.e., suitability is not just affordability; it is, more importantly, whether the sale fits the need).

The 2009 Model Regulation Section 24 spells out suitability: “The applicant’s goals or needs with respect to long term care and the advantages and disadvantages of insurance to meet the goals or needs and the values, benefits and costs of the applicant’s existing insurance, if any, when compared to the values, benefits and costs of the recommended purchase or replacement.”

What this suggests is that every agent has a fiduciary responsibility to explain all “the good and the bad” of all the choices. However, the change that will finally transform the long term care insurance industry is to remove one word from the first sentence of section 24(A): “This section shall   not   apply to life insurance policies that accelerate benefits for long term care.”

This action would be a resounding affirmation of our belief in the necessity of LTC insurance as well as the acceptance of structural benefit reality and would unleash the forces of professional obligation and moral necessity.

Remove, expunge and completely obliterate the word “no” and the phoenix will rise from the ashes!

Other than that I have no opinion on the subject!

A recent disruption in the force requires re-examination of a long-­standing debate. An ancient rivalry has just stepped back into the spotlight: true group (em-ploy­er owned) versus multi-life (list bill individual policies). Of course there are multiple structural differences; thus, conversations about who has the biggest dog in the fight are patently absurd.

Bottom line: It is never about what you sell; it is always about how you sell.

Unfortunately we are dragging a large bag of tradition, inertia and sales practice forward. Benefit specialists and wholesale brokerage have struggled for worksite hegemony for as far as I can look back.

The conflict begins with control of the decision maker: Is that privileged access the domain of the supplemental worksite benefit specialist or the broker with the “juice” to influence the outcome of the buying decision?

When you overlay the enrollment requirements of voluntary benefits, historically brokerage has had to “give ground” to worksite expertise. Yet smaller groups are an entirely different conversation. As the size of a true group diminishes, options with structured enrollments begin to lose their profitability. Strategies that include list billing individual policies to increase commissions or attempts to reduce underwriting requirements have remained a viable market for brokerage (e.g., payroll deduction life).

The wonderful world of worksite LTC insurance has shattered all of the older artificial barriers. It is different because benefits are not subject to immediate claims like health, dental, vision, disability or pet insurance.

Traditional supplemental benefits are great and, whether paid for or voluntary, the decision to offer has remained solely in the hands of business owners or human resources managers.

All standard benefits enrollments have been the same from the beginning. The need for the benefit is a given, and the decision is more financial than anything else—i.e., how much benefit for how many dollars out of my paycheck.

On the other hand, LTC insurance requires a focused mandatory educational campaign. Every employee must thoroughly understand the ramifications of not buying a policy. Long term care insurance cannot be added to a list of Section 125 benefits and offered at the same annual benefit fair. It requires a separate conversation ending in a one-on-one customization of the best benefit structure for each individual.

We are now down to a very few true group product alternatives. These choices are available to only the largest, most desirable groups, with the “desirability” based on a thorough evaluation of the potential for sales success.

A prospective client cannot just call and say he has had some sort of epiphany and wants to explore LTC insurance as a benefit option. A client must have a thorough understanding of what he needs to contribute to a marketing plan and he must be willing to allow a benefits specialist to actually help his employees.

There are a number of prerequisites to evaluate large group opportunities: sufficient discretionary income, ratio of male/female employees, access to employees, geography and Standard Industrial Codes (SIC). The bottom line is that this process is a very selective one and many will not make the cut.

When compared to the precise dissection of risk and the application of therapeutic remedies required by multi-life, true group LTC insurance could be considered surgery with a blunt instrument—only successful on a grand scale.

The most obvious scenario is the executive carve-out. This often includes multiple classes, richer benefits and individual buy-up customization. Often the most desirable groups demand the greatest benefit flexibility.

Perhaps the best method to illustrate the pricing differences between true group and multi-life is to examine the cost of buy-up benefits (which include inflation protection) and then analyze the cost difference over time. True group rates represent an aggregation of all the underwriting variables; the rates can easily be skewed to younger ages and more aggressive underwriting strategies. The classic situation would be the offer of core benefits without inflation protection.

Traditional benefit spreadsheeting involves a comparison of the employer contribution toward the benefit. This is absolutely the wrong way to make a comparison in the case of a carve-out, since there will most likely be a substantial number of buy-ups. In other words the comparison should not be about what the employer pays but, more importantly: What will the employee pay for the buy-up? What will the long term savings be to the best employees? How much long term damage would be created if “cheap” core benefits are provided?

I recently evaluated a large medical clinic carve-out where substantial benefits were being bought for all. This case clearly demonstrates the cost of buying meaningful levels of benefits regardless of who is paying. When you spreadsheet core benefit costs for the entire group, true group in this case was 8 percent cheaper than the multi-life aggregate rates. However, when richer benefits were compared (including inflation protection), the multi-life totals were 20 percent less than the true group option. This would have generated hundreds of thousands in premium cost over 25 years. What happens when the employee is paying the difference between the core benefit and the richer buy-up benefit? The employer may be paying a little more for the core benefit; however, the difference in buying up to meaningful benefit levels can make a huge difference to the employee. The question is where should you make the sale?

True group options for smaller employers are disappearing before our eyes. LTC insurance is unlike other benefits; perhaps it should never have been enrolled on an easy issue vanishing (no inflation) benefits basis. LTC insurance must be explained, and its sales applications require careful counseling and individualization. Maybe it was never meant to be just another supplemental addition to a benefit portfolio. Maybe it always needed its own separate spotlight at center stage!

Other than that I have no opinion on the subject.

A rose is a rose is a rose.
    — Gertrude Stein, “Sacred Emily,” 1913

Simply using a name can invoke the imagery and emotions associated with the name. There are immutable universal concepts in the world. Therefore, chronic illness is chronic illness is chronic illness. It’s the absence of the rose or the absence of chronic illness risk leveraging that demands our conceptual attention. I don’t care what you do to try to abrogate the risk exposure. I am, however, incensed when you ignore the problem.

When the dust settles, insurance professionals are really only concerned about what actions their clients choose not to take. My primary mission in every sales conversation is to explain what it means to not take advantage of my wise counsel.

Let me make this absolutely clear: Insurance professionals have a fiduciary responsibility, political mandate and ethical obligation to provide long term care risk leveraging alternatives.

This is simply one party no agent can afford to miss. The theme of the party is chronic illness. The term “chronic illness” is usually applied to illness lasting longer than three months—which, of course, defines benefit eligibility under HIPAA tax-qualified LTC insurance policies. Benefit eligibility is further defined under HIPAA as the inability to perform two of six activities of daily living as well as cognitive impairment. This basic definition is the primary ingredient of all chronic illness (LTC) insurance options.

As predicted, product alternatives are continuing to expand and proliferate. Life insurance combo policies now include single premium whole life and single premium universal life; level pay universal life with monthly expense charges; and level pay universal life without any current cost with expenses ultimately deducted out of benefit payments. Now, these rear-end load “living benefit” policies also include term life options. Combo annuities appear in two forms: account values plus a long term care benefit, and account values with an LTC insurance “kicker”—or multiplier of benefits (i.e., three times the account value).

Choices in the individual stand-alone LTC insurance market have also expanded: smaller policies, reduced inflation protection strategies and co-insurance alternatives provide something for everyone.

Which product or combination of products attempts to solve the risk exposure is not nearly as important as the commitment to do something (anything) to protect your client.

Multi-life continues to take advantage of “actively at work” underwriting philosophies, and spreading the risk thresholds can help many more with mild impairments acquire coverage.

In the final analysis all of these products equal one universal concept. The names don’t matter, only what they really are and what actions you take to use them to solve your client’s problem.

“A rose by any other name would smell as sweet.” William Shakespeare, Romeo and Juliet.

Other than that I have no opinion on the subject.

Severe optimism remains the favorite affliction of LTC insurance professionals. (This column has provided an ample supply of encouragement.) The LTC insurance industry now has two years of substantial premium growth, yet we are of course not out of the swamp—there remains a number of large and unpredictable alligators in our chosen swamp. Perhaps outing these lurking “carnivores” will remove some of the fear and mystery surrounding their sightings by innocent bystanders.

Carrier retreat has become a serious structural problem. Both companies and ratings agencies have acquired a negative outlook on LTC insurance, particularly in terms of individual standalone sales. Once upon a time there were more than 100 companies offering coverage; today the numbers have dwindled. Hopefully the limited risk of combo policies in conjunction with recent sales success will bring more companies back into the market.

Just like life insurance, perhaps the most significant component of successfully pricing LTC insurance is long term investment. Flat interest rates fueling virtually non-existent traditional investment returns have plagued LTC insurance companies without any apparent cure; thus, they need to explore more aggressive investment strategies. Combo policies again provide new opportunities for a more balanced risk approach.

The CLASS Act is not dead, only wounded. It was finally recognized as severely flawed and terminally impaired. However, depending on future political influences, a CLASS Act zombie could easily reappear, feeding on the flesh of mandated employer participation. According to a report by the U.S. Congress’ bicameral Repeal CLASS Working Group in “CLASS’ Untold Story: Taxpayers, Employers and States on the Hook for Flawed Entitlement Program,” (September 2011), the government knew CLASS was an unsustainable program ultimately dependent on government subsidy. Politics kept it alive and staggering forward for 18 months before pending implementation plans were put on hold. Re-animation remains a real possibility.

The Genetic Information Nondiscrimina­tion Act of 2008 (GINA), as currently interpreted by the Department of Health and Human Services (HHS), has proposed that the prohibition of releasing genetic information be extended to LTC insurance. Thus, any knowledge of cognitive predisposition would be intentionally hidden from prospective insurers. Cataclysmic adverse selection could occur as a result, literally imploding LTC insurance pricing and generating another exodus stampede of LTC insurance companies. As was the case with the CLASS Act, educational efforts are being made to inform HHS of the potential hazards of this course of action.

There are regulatory obstacles put forth by the National Association of Insurance Commissioners (NAIC) and numerous state insurance commissions that create serious impediments to building smaller policies and innovative combo plans with annuities. Work is ongoing to enlighten and focus regulators on additional consumer-friendly alternatives.

The Nature Channel revealed that alligators can hold their breath under water for very long periods of time before surfacing right under unsuspecting prey with fairly horrific results. This should not prevent us from enjoying water sports or the comfort of alligator boots. Vigilance in the face of adversity has always been the source of my persistent optimism.

Other than that I have no opinion on the subject.

After previewing the preliminary third quarter LIMRA annualized LTC insurance figures, I must say that by any measure the industry is experiencing the best new premium production in almost a decade. This is grand, spectacular news!

The new numbers are amazing and historic. They will cause an incredible volume of speculation. The growth was dramatic across all lines of business. Combo sales in particular will now continue to transform the product landscape. Agencies and carriers that have ignored or decided to wait and see what the implications of the Pension Protection Act are, need to fall back and regroup immediately.

Amazingly, there will be a plethora of possible answers from inside and outside our industry. Yet the only ones who really know the truth are the veterans, specialists, marketing organizations and hard-core companies dedicated to LTC insurance.

There really is no one answer. During the last eight years all of the answers have appeared in this column. Therefore, one more time for posterity, let’s go over them.

1. Turmoil in the market with carrier retreats and departures last year meant that a significant portion of existing premium production had to find a new home. Activity in the brokerage market, regardless of its source, generates new premium.

2. The rising bombardment of care-­giving events is becoming a cosmic asteroid shower from which there is no place left to hide.

3. Economic adversity and the almost lethal blows of 401(k) evaporation over the last four years have focused everyone’s attention on preserving retirement equity.

4. Demographics is destiny: Boomers are indeed beginning to retire or finally contemplate the inevitability of reduced cash flow, increased longevity and looming inflation.

5. There cannot be anyone left who seriously believes the government is now in a position to increase and expand the social safety net. Even those middle class opportunists that may have used subterfuge to “borrow” from Medicaid will soon find the cupboard bare. I remain absolutely, positively sure that those with money will take action to protect their money.

6. Needed structural innovations have also contributed to a more competitive and easily explained product. Product simplification, reduced benefit pools and competitive interest rate strategies have made it easier to explain what we sell. Alternative premium strategies with reduced benefits have helped to buffer sticker shock.

7. Multi-life sales are still booming; some insurance is better than no insurance. Spreading the risk has also allowed us to offer reduced underwriting for mild impairments, allowing many more to acquire some coverage otherwise not available.

8. Expanding combo product options forces the risk leveraging conversation across all product lines. Combo products do dramatically reduce net cost.

9. Every industry survey demonstrates the steady march forward of consumer awareness both individually and at the worksite. Partnership training has also enhanced the number of agents prepared to be helpful.

We, the stalwart supporters of the cause, knew and never lost faith in the absolute certainty that a time would come when our momentum would again stagger forward. A time when LTC needs would become the beginning of a conversation, not the end…an era of established need and known anticipated risk abatement…a consensus when our solutions were mainstream and not peripheral. It begins now!

Other than that I have no opinion on the subject.

What was old may be new again. Unlike men’s ties or the length of women’s skirts, where style seems to recycle itself with historical déjà vu, LTC insurance seems to reinvent itself in a more straight-forward, progressively improved pattern of advancement.

As far as individual LTC insurance sales are concerned, we do appear to learn from our mistakes and consistently build a better product.

Multi-Life LTC insurance is different. HIPAA tells us LTC insurance is health insurance. Therefore, it seems that multi-life LTC insurance should be bought, sold and administered similarly to how health plans have been during the last 30 to 40 years. Of course, this is not exactly what happens.

Almost all primary brokerage carriers have begun to offer small group solutions during the last three years. Each has jumped into the market “pool” without knowledge of water depth or the commitment to get wet. At the same time, there are actuaries who believe it is impossible to escape the gravitational pull of adverse selection and that no level of additional premium or risk spread will allow a reduction of underwriting criteria.

I absolutely disagree with this myopic and short-sighted refusal to engage the marketplace. As a national marketing organization, my company introduced one of the first multi-life programs more than six years ago (The Employees LTC Foundation Plan issued by Loyal American Life). The 2010 LIMRA statistics continue to reflect that worksite marketing efforts are successful. True group, multi-life and association business represented 56 percent of sales, with multi-life showing the greatest strength. The majority of new LTC insurance premium was sold with an affinity discount.

Multi-life marketing is built on several immutable principals:

1. Sufficient participation, which relies on controlled health exemptions and the bedrock—“actively at work” definitions—has always been the successful strategy for employee enrollment.

2. Spreading risk by utilizing a comprehensive marketing approach—including carve-out, core buy-up and corollary sales—contributes to expanded sales. Affinity discounts are provided for spouses and family members; and some companies also offer reduced underwriting for spouses, based on an established participation threshold.

3. Discounted premiums for employees, spouses and family members and limited underwriting are two iron-clad promises all group/multi-life sales always offer.

4. Standard (not preferred) rates and underwriting costs reduced by definition are two additional characteristics that contribute to the success of multi-life LTC insurance products. In addition, the average age of a policyholder is mid-forties, and persistency is influenced by normal employee turnover.

Participation thresholds have increased and gatekeeper questions have been enhanced as companies search for the best blend of marketing finesse and underwriting incentive. More importantly, very few “players” have left the arena and, hopefully, those that left may eventually return.

The marketing environment is what deserves additional emphasis. Opportunity for sales remains enormous—there are several million businesses with fewer than 500 employees. Abbreviated short-form underwriting continues to provide opportunities to offer coverage where none is available in the individual market.

Let’s revisit what makes this sale so exciting and reexamine where we may have gone slightly off course.

What is it that makes the multi-life sale resonate with employers and employees? First there are the tax benefits to employers—dollars spent for employees are 100 percent deductible and devoid of payroll tax. Employees receiving the LTC insurance benefits not only get them free but they also own a policy that pays tax-free benefits. The absolute cheapest pay raise ever!

Utilizing a section 105 medical reimbursement plan allows an employer to choose who gets the benefits, based on any combination of income, length of service or job description. Benefits do not have to be homogeneous, and there are very few limitations or restrictions on the number of employee classes allowed.

Once the decision maker in a corporate setting is made aware of the issues of asset protection and the burden of caregiving, buying opportunities are endless. For the most part human resources personnel should not be the initial contact; they are, in my humble opinion, an anathema to successful sales. They have no direct relationship to any of the decision making variables, and they can contaminate a benefit conversation—comparing LTC insurance to pet insurance and vision care.

The basics of the sale have not changed. Conversations about offering LTC insurance as a benefit almost always originate with the insured, not the agent. Frequently, the perception of the need has arisen internally.

Find the source and you will find the sale. Each case involves a census and determining where to draw the line where the employer cares. Maybe just the owner will have coverage; perhaps the vice presidents, managers, or those who have been with the company ten or more years will be included. (Maybe just the bookkeeper who knows where all the financial skeletons are hidden.) Thus begins the first step—the carve-out.

Unfortunately, the carve-out is far too often the full extent of the sales effort. Carve-out discussions based on the fear of economic loss or a personal experience with the catastrophic impact of caregiving have dominated our sales expectations.

I believe that by taking this approach, only the low hanging fruit has been picked. We need to work harder to liberate the need for protection inherent in every group regardless of size. The next step in the conversation that deserves the greatest attention is the holy grail of successful LTC insurance sales—core benefits. This is the secret that transforms the opportunity to help and unlocks an almost unlimited benefit treasure.

Important Truths
1. Some LTC insurance is indeed better than none. A small amount of insurance dollars can make the difference as to how and under what circumstances clients will receive care. Reality at the time of claim does not have to be based on a choice of 100 percent of your client’s money, 100 percent insurance money, or 100 percent government money. It is more likely to be a little of each. Leverage is leverage.

2. Voluntary enrollments are never successful unless management believes and publicly supports the cause.

3. Knowledge is sales power. Employees must be able to make informed decisions; they need to know exactly what LTC means, how it can directly impact their lives and the basic math of insurance options. In other words, they must understand exactly what it means to not participate in the offered protection.

4. LTC insurance at work is not expensive. Core benefits are now available that provide as little as a one-year benefit, facility only, with average premiums of less than $5.00 per employee per month.

Providing core benefits changes the entire sales conversation. You are no longer asking, “Who wants to buy?” You are instead enhancing an important corporate-provided benefit. The opportunity for employee buy-ups, spousal additions and family sales is limitless.

This is the sales concept that changes everything. Recently a friend who manages a light manufacturing company described his hands-on management skills: “If I can do it, you can do it!”

Employers must understand the bottom line—they must help and lead by example. How can they expect their employees to believe if they do not? That $5 to $20 per month is critical to your ability to succeed.

You are not in the business to see just a few employees to whom you might be able to sell some insurance. You are there to protect as many employees and their families as possible from America’s largest unprotected risk and protect employers from lost productivity caused by caregiving needs. You simply cannot do it alone.

The hard dollar cost is incredibly small and it generates a gigantic difference in your chances to make a real difference in the lives of employees and, at the same time, protect the assets of a company. The employer is going to write off the dollars anyway, and those dollars represent a cost that is substantially less than 1 percent of payroll. No real impact on the bottom line but enormous impact on the lives of employees.

Employers get to be the heroes by helping you help their employees do the right thing—inexpensively. Plus this extremely visible benefit represents a deductible pay raise for all employees with no FICA, no FUTA and no W-2s—plus it even pays tax-free benefit dollars.

Just say NO to purely voluntary conversations and do not let the sales stop at the obvious carve-out. This is the sale that does not just happen, it must be made. This requires the best in us and connects directly with the best in our customers. Go forth and multiply—but do it right!

Other than that I have no opinion on the subject.

My ten-pay policy was recently paid up. It’s a joint, comprehensive benefit policy with indemnity, 5 percent compound inflation and unlimited benefits. At the time of purchase I was very concerned about catastrophic risk. At the center of my benefit selection process was the possibility of that big, lengthy home and institutional event. I wanted to make sure that I had provided a total insurance solution, that I had guaranteed the prevention of a possible scenario that could totally devastate my financial plan.

Our industry has always been attracted to blanket risk protection. A Gestalt insurance solution is, after all, a predictable, finite and specific response to a known quantity of risk. We have done an exceptional job of quantifying the potential size of the problem and providing fairly robust insurance alternatives. We do have a policy that can directly confront a potentially drastic and dire outcome. The problem of course is that not enough Americans can afford it.

Recently, I had a total knee replacement. As is sometimes the case, rehabilitation has been slow and frustrating. Both the acute medical procedure and the sub-acute rehabilitation are predictable—ultimately providing anticipated improvement in my mobility and quality of life. Unlike a LTC insurance event, I am 100 percent sure my situation will improve.

This unanticipated down time has provided me with a true opportunity to reflect. In many ways I have had a close call with the meaning of custodial dependency. For a number of weeks I could not perform a number of instrumental activities of daily living (IADLs) and activities of daily living (ADLs). My beautiful and saintly wife has experienced an early dress rehearsal of the burden of 24-hour caregiving.

After release from the hospital I was also given the choice of going to a skilled nursing/physical therapy facility for a one-week stay, or going home and having several home visits per week. I had previously toured the nursing homes in my small town, so I chose to go home, placing an additional burden on my family. The entire experience has caused me to again ask some basic structural questions.

How much insurance is enough?

Have we adequately provided for the initial front end trauma experienced at the beginning of the claim process?

How many dollars are really needed to help maintain personal control of the claim process?

How much is needed to remove concerns about imposing on family members?

How much indemnification is really needed to allow sufficient time to prepare and plan for a known claim onslaught?

Incidence of claim has always been a little confusing. An often quoted source comes from an analysis done in 2005-2006, “Long Term Care Over an Uncertain Future; What Can Current Retirees Expect?” (Peter Kemper, Harriet L. Komisar, Lisa Alecxih, Inquiry, 42: 335-350). This popular research is based on the loss of one or more ADLs, four IADLs and any LTC service received after sub-acute care under Medicare.

After 65, 31 percent will never require care, 17 percent will need care for less than one year, 12 percent for 1 to 2 years, 20 percent for 2 to 5 years, and 20 percent for more than 5 years. These numbers were basically confirmed by the 2011 Genworth Claims Analysis, which indicated that 44 percent of their claims lasted less than one year. Those claims that lasted more than one year had an average duration of 3.9 years, and 14 percent would last more than 5 years.

The bottom line is in today’s dollars a $100,000 pool of money would cover 60 to 70 percent of anticipated claims.

I’m just not sure we are asking the right questions. There remain several underdeveloped markets. There needs to be a more confident approach to selling smaller benefit policies that intentionally address those issues most dear to consumers:

Freedom of choice about where and from whom we receive care.

Personal control of caregiving alternatives.

Peace of mind that planning will address real and immediate caregiving issues.

There needs to be a more precise focus on what happens at the beginning of the claim process. What can be done to alleviate the shock of a new and often sudden disability? There are new responses to this concern coming to market offering LTC insurance light—short term LTC insurance or what might be best described as LTC supplement policies.

A number of companies are now offering one year benefits, managed care support services, reduced percentages for assisted living, and early cash “transition” benefits. Although there are still some regulatory prejudices against policies with less than a two-year benefit, this is a significant development.

Selling less benefit to many more members of the working middle class is critical to the survival of our industry and perhaps the very stability of our national financial well being. It seems logical that these newer, more affordable benefits will continue to have increasing traction at the worksite.

Targeting smaller, more affordable solutions to the specifics of the problem (particularly if policy issue is faster) seems to be an obvious formula for greater sales success. If we could just focus on the human pressure points that can best be alleviated by simply applying money—money that buys time to think, plan and adjust to new realities. Many of us are just not comfortable with or confident in government programs; however, a well-built and flexible Medicaid supplement policy (for those who need it)—perhaps as an intentional enhancement for the partnership program—may have much more merit than I originally thought.

Other than that I have no opinion on the subject.