Ronald R. Hagelman

As mentioned in earlier columns: There is an elephant in the room that will not go away. Its presence should be crowding out any breathing room remaining to maintain a seemingly impenetrable wall of self-deception. In recent speeches, our Health and Human Services Secretary has concluded her long term care conversation by clearly defining the presence of the massive pachyderm: “In the years to come, nearly every American family will have a grandmother or a father or a sister or a son who needs daily help because of a disability.”

As one of those involved in sales every day, I remain puzzled, perplexed and peeved at the amazingly resilient ability to ignore the size, girth and smell of our extra large peanut-eating friend. It must somehow appear not to be a real elephant. It must miraculously be seen as only the illusion of an elephant.

The only way I can explain the persistent ability to so completely ignore the obvious is that this must be the proverbial pink elephant. An elephant that can appear and disappear based on one’s level of alcohol intake. But don’t be fooled, that pink elephant is on a 24/7 eating binge!

Again quoting the HHS ringmaster: “Approximately 10 million Americans need long term care services and support, ranging from having an aide visit for a few hours a week to living in a nursing home with around the clock care. As Americans age, that number will rise steadily; by 2020, the estimate is that 15 million Americans will need some kind of care…We know that one out of six people who reach the age of 65 will spend more than $100,000 on long term care.”

As if an “ordinary” pink elephant isn’t intimidating enough, consider the catastrophic possibility of confronting an elephant parade. This was recently illuminated in the center ring by Genworth Financial’s claim analysis released last year:

• Longest claim is 17.2 years.
• Largest single claim is $1.1 million.
• Female claimants have received 71 percent of claims dollars.
• Mental disorders, including dementia use 49 percent of all claims dollars.

The risk is real, the elephant exists, and it is rapidly gaining weight. And in the sober light of day we are confident that more insurance is the only viable solution. Although it may be difficult to recognize, even the CLASS Act is supposed to be an insurance program.

No one can deny that consumer awareness of the existence of the elephant remains the key to our success. In July 2005 and again last March, a think tank was co-sponsored by the Society of Actuaries and the Intercompany Long Term Care Insurance Conference. A small group of dedicated and enthusiastic “elephant behavior” experts gathered to consider future directions and priorities. As a participant in both sessions I was impressed and inspired by the moral force of goodwill. We came together with non-denominational intentions to work together to identify a focused path to help create our own elephant graveyard.

At the March 17 think tank session, “LTCI from Hope to Change,” we identified two primary market segments:
• The middle mass, representing 83 percent of households suited for LTC protection with an average income leading up to retirement of $75,000 and average assets of $100,000.

• The middle affluent, representing the remaining 17 percent, with an average of $132,000 in assets (net of home) of $390,000.

The middle mass must have products that are at least perceived to be less costly, simpler and more flexible. This is not just about a cheaper product; more importantly, it should be about revealing the true value proposition of the financial transaction.-+

The middle affluent market will, on the other hand, remain an individual sale for the most part, including partnership and combo sales.

Recent gains in worksite sales need to be expanded for the middle mass market. More product innovations are needed to further reduce cost and expand participation.

The CLASS Act was not yet law at the time of this meeting; however, the general consensus was that the CLASS Act would help to raise consumer awareness.

Concern was expressed by many that the CLASS Act might create a false sense of security. The primary obstacles for improvement were identified as affordability, limited product design, and a diminishing cadre of qualified elephant trainers.

Even though we have had some recent contrition in terms of carrier commitment, it was recognized that we need more company participation and a serious attempt to expand the range of alternatives available to leverage the risk.

Our elephant has been parked squarely in the middle of too many American living rooms for too long. Yet we all know pink elephants are merely hallucinations, so there must be a way to make them disappear!

What we need is creativity, focus, dedication, partnership and cooperation with government alternatives (to be continued).

Other than that I have no opinion on the subject.

 An old friend recently reminded me of an even older joke: How do you get down from an elephant?…You don’t get down from an elephant, you get down from a goose!

In many ways the pursuit of the LTC insurance sale has been paved with good intentions yet impaired by a quest for easy answers. It seems that even wrong answers—if they appear logical and simple—can take on a life of their own.

Maybe it’s because an LTC insurance sale defies easy answers. Quick quotes and spreadsheets do not have any place in this transaction. The product has many moving parts and underwriting concerns remain an impediment.

Perhaps the most obvious restriction to mainstream critical mass sales has been our lack of sufficient numbers of proselytizers who encourage clients to protect their families. Maybe the revolving doors of carrier participation, underwriting brick walls, abrupt rate increases and constant product evolution just makes it too hard for too many agents.

The overwhelming psychological need for easy answers even shows up in office supply commercials. Now that we live in a world of multiple alternatives to managing this risk, the pent-up desire for easy answers continues to surface.

A recent example is the addition of chronic illness accelerated death benefit riders to universal life policies. These riders are often referred to as living benefit riders.  When an insured cannot perform two of six activities of daily living or is cognitively impaired, the death benefit can be paid immediately under IRC Section 101g. Because these riders are not technically long term care insurance, some have suggested that NAIC/Partnership certification is not necessary or required, theoretically making their sale easier than that messy old LTC insurance under IRC Section 7702B.

Apparently those involved are not familiar with the proverbial duck theory. If it walks like a duck and talks like a duck—it’s a duck! What’s more, three state boards of insurance (Florida, Kentucky and Hawaii) have already come to this conclusion. This obvious recognition of fact is also pending in a number of additional states. If you use a HIPAA tax-qualified claims trigger (two of six activities of daily living or cognitive impairment) and you then adjudicate and pay claims as any other LTC claim, that is long term care insurance.

We now have multiple choices every time we sit down to have this conversation: stand alone LTCI, chronic illness accelerated death benefit riders, extension of benefits LTC riders, combo annuities as well as single and level premium life strategies.

I can already hear the easy answer chorus begin to warm up. Some actually believe they can pick their favorite approach and allow that reduction in logic to become their new universal answer to every long term care need.

These are not separate solutions each existing within its own vacuum. Each is a tool of equal value ready to best address the specific needs of individual clients.

Easy answers are not available. Nothing about LTC insurance is easy—it is hard, but it is also very important. The elephant in the room will not go away.

In a conversation with another LTC insurance veteran, we asked each other again why we continue to beat our heads against this particular wall. As the readers of this column know all too well—it’s because we care. Now there’s your easy answer!

Other than that I have no opinion on the subject.

We live in interesting times. The cumulative effects of discouraging industry news has led to the usual spectrum of concerned calls and emails: Are we okay? Where do we go from here?

The LTC insurance industry is simply adjusting and responding to the same demographics and financial realities as every other segment of the resilient American public. This too shall pass and we will continue to move forward.

Long term care products are built to adjust and respond to changing realities. Our understanding of the risk and the best way to address that challenge will continue to evolve. The need is not diminished—it continues to grow and intensify. Irrefutable demographics cannot be ignored. The answer remains immutable and obvious—spread the risk and leverage the outcome. Insurance is the only answer.

It is now more important than ever that you stop and help all your clients understand that the government will never be able to handle the full cost of the aging American populace. You may never again be able to purchase this much needed benefit at this low price. Individual and multi-life underwriting may never again be this flexible. Benefit availability may never again be this abundant. The cost of purchasing future claim dollars may never again be this competitive. Product options to address the risk may never again be this plentiful. What you do right now matters!

During times of stress in our industry, when events transpire which seem to defy reason, two aberrant voices have a tendency to appear.

One voice blames our problems on bad math. The pricing was simply wrong, and somehow we should have seen this coming. Horse manure! Pricing at any point in time is always based on current realities, and future speculation is a function of that understanding. Is there really anyone out there who would argue that the world we live in today is the same as three years ago? The truth is that we now have more than 20 years of experience with this product. Premiums have risen substantially and current underlying pricing assumptions are believed to be much more stable. NAIC rate stabilization is working.

The other voice is the one that seeks to blame adverse conditions on bad sales. We sold too much, we sold too little, or we sold the wrong thing. What we actually did was the best we could with the ammunition available. There have never been enough agents helping us make this sale. NAIC/Partnership training requirements built on a solid foundation of suitability and ethical conduct are slowly but surely mandating the participation of all life and health agents. You can no longer hide or ignore this need. To maintain your professional status, you must find the best way to protect your clients from America’s greatest underinsured risk.

No one could have looked in a crystal ball and predicted the love and respect Americans have for their LTC insurance policies. Amazingly, persistency continues to improve. Products are now priced with a one percent or smaller lapse rate—virtually the only lapse is death. Should it surprise anyone that these lower lapse rates will continue to put pressure on existing rates?

We should also note that products with more current rate stabilization pricing have experienced much lower price adjustments. Cost fluctuations this year can be attributed directly to product and premiums that had not been completely adjusted to new pricing realities.

Mortality and morbidity trends have not only continued but accelerated. We continue to live longer, meaning that mortality lapses are not arriving as anticipated, and morbidity improvements, measured by activities of daily living, are also putting pressure on current pricing assumptions. There is evidence that claims may be lasting longer than predicted.

There is also evidence that we need to be careful for what we wish.  Unlimited benefit sales have exceeded projections. Therefore, lifetime claim benefits have seen substantial pricing increases (and surprise, surprise, the longer your selected benefit period, the longer your claim tends to last).

There are also benefits that actually may never have been insurance benefits. Similar to elective surgery, assisted living and family member caregiving may be considered personal financial choices and not necessarily the province of stand-alone LTC insurance.

Last but not least, consider the current interest environment and that each LTC insurance policy has a very long investment period before claims are paid. A one percent change in long term care investments can have as much as a 10 percent impact on cost. Considering that the majority of LTC insurance is purchased when clients are 50 and claims do not occur until they are 80, the capital and reserve requirements are exacerbated by the sure and certain knowledge that these policies have a long and almost guaranteed claims tail.

I would be remiss not to mention that state regulators have not all been very helpful. Delays in approving increases and allowing more middle class consumer friendly product choices have slowed us down considerably. In addition, pressing on the equation is a lack of creativity in terms of middle class policy design, growing evidence of claims fraud and, frankly, an unbelievable lack of sales training.

Where do we go from here? We just keep building.

Partnership plans are helping. We sell less to more at the worksite. We unleash marketing Hades with combo products fueled by 1035 firestorms; fortunately we all finally recognize that every agent has a fiduciary responsibility to attempt to leverage this risk.

Now more than ever this must be a primary wholesale brokerage line of business. It demands what we do best: rapid response in terms of product and pricing with a growing underwriting flavor. Never hesitate, never wait, never postpone—every day is a fire sale and it always was! There has never been a better time than now to sell more long term care insurance.

Other than that I have no opinion on the subject.

It is very difficult not to compare our LTC insurance sales efforts to a military struggle. It seems to some of us that the conflicts rage on day after day and a long and protracted war continues to drag on and on. We all know the battles continue and the campaign for the hearts and minds of our citizens is far from over.

More than once we may all have lamented the lack of coordinated marketing and promotional efforts. Why couldn’t all the disparate voices identify with one common cause, one galvanizing theme, and one overriding battle cry? I have long wanted to hear martial drums in the distance, with all the battle weary LTC insurance troops assembling and saluting one unifying concept! For a long, long time, we have needed a unifying banner, a brilliantly colored universal LTC insurance flag planted firmly for all to see.

Three In Four Need More is a new marketing campaign on a mission to enlist the support of all interested LTC insurance parties: agents, general agents and companies. The new campaign is the brain child of Jonas Roeser, LTC Financial Partners, with executive committee help from Mark Goldberg, ACSIA, Long Term Care, Inc., and Margie Barrie, LTCI Consulting Group.

Helping with the campaign launch is an advisory board whose members are some of the most knowledgeable and committed professionals in the LTC insurance industry: Sharon Chace, Broker World; Peter Gelbwaks, Gelbwaks Executive Marketing Group; Ron Hagelman, Republic Marketing Group; Kevin Johnson, New York LTC Brokers; Debra Newman, Newman Long Term Care; Pamela A. Schmidt, The SIA Companies; Mike Skiens, Master Care Solutions, Inc.; Jesse Slome, American Association of Long-Term Care Insurance; Terry Truesdell, National LTC Network; and Daniel Williams, Senior Market Advisor.

On a daily basis we are friends and competitors; however, we have all come together to plant this new flag. The idea began to germinate with an often misquoted statistic from the U.S. Department of Health and Human Services which stated that “70 percent (nearly 3 in 4) Americans over age 65 will require some long term care services at some point in their lives” (www.longtermcare.gov). The statistic is, however, a little misleading. The problem is that LTC service referred to in the quote included all care­—from one day to ten years. Thepotentially catastrophic nature of LTC is real. What is needed is careful consideration of the risk and deliberate planning ahead to meet the challenge. What was therefore needed was a more comprehensive and less threatening approach.

The Prudential 2010 Long Term Care Cost Study provides a much better statistic: “74 percent of consumers age 55 to 65 said they are concerned about needing some kind of care.” The survey also clearly indicated that American consumers know they need to better understand the problem and the options available to solve the problem. Our rallying cry is about education, consumer awareness and financial planning.

The bottom line is that 3 in 4 need more information to make informed decisions. Millions of businesses and many more millions of individual Americans do understand, they are concerned, and they do see the problem looming ahead.

It is my hope that this new martial flag will call many more to service. That all concerned insurance professionals will pause and acknowledge a new banner streaming on a hill. Perhaps we can all recognize a common cause at long last.

This is an all-inclusive call to arms. Help us spread the word. Help us create even greater public awareness. Invite others in the private and public sectors to participate in a better future for all Americans. Enlist today, America’s largest unprotected risk needs you!

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

The 3 in 4 Need More
Campaign Objectives
1. Spread the word among the public that “3 in 4 Need More” and that one should look into long term care insurance as a solution.
2. Support Congressional moves to provide additional tax deductions or rebates to help people better afford long term care insurance.
3. Stimulate others in the industry, education, and government to join the “3 in 4 Need More” campaign, making use of the logo and other visuals to spread the word.
4. Educate the public that long term care insurance may not be a solution for everyone, but everyone needs a long term care plan.
Anyone in our industry—carrier, agency, agent—may join the movement. Concerned individuals as well as representatives of business or associations of all types may also join.
Belonging entitles members to download campaign visuals for use in their own marketing and public relations programs; and to keep informed of campaign progress through Facebook, Twitter and other social media.
Campaign participants are encouraged to use the logo on all items such as emails, websites, letters and brochures.
To join the campaign, visit www.3in4needmore.com.

Recently I was asked to speak to a 30-person benefit committee of a very large hospital. “If they liked the idea of LTC insurance, the hospital planned on implementing a voluntary offering.” I requested at least 30 minutes to tell the story but was subsequently informed I would have substantially less time.

The show must go on was my rationalization as I carefully planned the 15-minute explanation of what LTC insurance is, how important it is, and what it means personally to each and every member of that committee. If you know me, you understand that I have no trouble conveying my passion for the subject matter, but the question was how to boil it down to a direct-impact sermonette that would be immediately internalized and, hopefully, force an immediate change in thinking.

Unfortunately I would be a long distance from the final buying decision, and to compound my problem, the audience was in their late thirties to early forties and predominantly female.

It’s All About Choice—
Or the Lack Thereof
Consumer worries such as freedom of choice, maintenance of dignity and peace of mind were somehow not only second tier, in my opinion, but “softer” concerns. But upon reviewing the longitudinal LIMRA Buyer/Non-Buyer surveys that continue to demonstrate the top two issues governing an LTCI sale were the money to be protected and the burden of caregiving, I realized I was absolutely wrong. My need to clearly illuminate the purpose of LTCI created my own epiphany!

There is no stopping the passage of time. Longevity is not a choice. For those born today, life expectancy in the United States now exceeds age 78. There are falling morbidity rates for 9 of the top 15 causes of death. Therefore, anticipating a long life and planning for a very likely outcome would appear to be prudent.

Medical inflation is not a choice—it operates in reverse of supply and demand. As supply (availability of medical technology, prescription drugs and access to medical services) increases, utilization increases, driving medical inflation above and beyond any other economic measure of future inflation. Regardless of our political persuasion, there is universal acceptance of this known eventuality. There is no choice.

It could be argued there is a degenerative process established at the beginning of life, because an inevitable change in health remains an absolute certainty. In an article published by the American Journal of Clinical Nutrition, the author’s research shows that “chronic diseases have replaced acute illnesses as major health threats and are responsible for a higher fraction of deaths.” They go on to say that morbidity is unpredictable. For example, cancer is often thought to be more prominent in the elderly. In fact, cancer is no more aggressive in older patients when compared with younger populations. The potential, however, for catastrophic events such as a stroke or a hip replacement do increase with age. (“Aging and Diseases, Patterns of Morbidity with Age, Relationships between Aging and Age Associated Diseases,” B.J. Vellas, J.L. Albarede and P.J. Garry, American Journal of Clinical Nutrition, 2002.)

The point is that stuff happens at all ages. My question to each of the hospital managers was what happens after you leave the building. Where are your choices? How are you paid? Your health will change. Although the timing can be affected by lifestyle, I am at a loss to find choice anywhere else in the equation.

The average cost of care per year is more than $70,000, with typical claims in the three to five year range. After age 65 the majority of Americans will need care. Yes, it may be one day or 17.5 years (the longest claim from the recent Genworth claims analysis as of June 30, 2010).

The Genworth claims analysis also reported that 44 percent of claims last less than one year because claimants recover, die suddenly or require only non-caregiving assistance (equipment, training, etc.). The average length of claims that last more than one year is 3.9 years—and 14 percent of claims will last more than 5 years. Once again I am at a loss to find choice in this obvious risk exposure.

Although there may be no choice about receiving care in a nursing home, private funds or insurance is the governing factor in the quality of the facility you choose. Genworth’s claims analysis is crystal clear about where claims are paid when insurance is in place. Under one year, 90 percent were at home or in assisted living—again my suspicions are that insurance provided choices.

As further proof that insurance provides choices, most people do not transition from where they receive their initial care. They are able to choose where they want to be and they stay there. (Genworth Financial “LTC Claims Experience Data,” June 2010 update.)

The LTC insurance conversation is all about choice. Choice about where and under what circumstances you will receive care. It is the absence of choice that best defines the problem. My 15 minutes was a casual, moderately passionate process of elimination. I explained choices and the meaning of the lack of choices. Each and every employee at that hospital also has a choice and all I was asking for was the same 15 minutes to explain what those choices meant to each of them. Insurance provides choices. I’ll let you know how it turns out.

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

Speaking the words “free insurance” requires the proverbial bar of soap and a firm and energetic scrubbing of tongue and tonsils. There is always a cost: bigger, smaller, current or deferred. Our curse as insurance professionals has never been the reality of the cost of leveraging risk but the perception of cost that prevents access to sales. Although this principle may apply to all insurance sales it is particularly true of LTC insurance sales.

In a recent survey conducted by Matthew Greenwald and Associates, Inc., and John Hancock—“2009 Small Business Survey of Long Term Care”—the perception of the cost of adding LTC insurance was the “leading deterrent” for not offering coverage according to 66 percent of those surveyed. Adding LTC insurance as a company benefit always costs something regardless of the level of employer contribution. One of the primary impediments to all LTC insurance sales has been the popular myth that the price is too high and therefore a lack of understanding of the value proposition of owning a policy.

In spite of our best efforts to explain the real cost of owning a policy, it must be compared to the cost of not owning a policy.

Every decision to protect employees and their families involves some level of employer largesse—administration time, enrollment interruptions, employer-provided dollars as incentives to buy, or full benefit purchases. Decisions about LTC insurance at the worksite reside in what the french called “noblesse oblige” which Webster’s defines as “the obligation of honorable, generous and responsible behavior associated with high rank.”

The most attractive feature to employers who participated in the survey was the ability to deduct employer-paid premiums (70 percent). It was also considered important to be able to provide caregiving advice and expertise, not have to count employer contributions as employee income, and guarantee policy portability. The survey also confirmed my experience in the field which strongly suggests that worksite sales bubble up at work, meaning that two thirds of surveyed employers recognized that the demand for protection came from employees.

Now, let me ask a rhetorical question: Just how big of an opportunity is required to get your attention?

According to the Small Business Admin­istration there are 5.9 million employers in the small business market. The survey suggests that among the smallest companies almost two-thirds of employers with 10 to 19 employees had never been approached to buy! Even though the survey suggests that employers are more likely to turn to their benefit broker for LTC insurance, we know the truth—these sales are not easy and require more hands-on contact with employees than is necessary with other traditional worksite benefits.

There are tens of thousands of employers just waiting for you to ask. This is a classic opportunity to offer what you do best: individual counsel, advice and customized protection. One size does not fit all with LTC insurance.

Employers are aware and recognize the problem. Almost two-thirds of employers surveyed knew that their employees understood they may not be able to afford long term care for themselves and their family members. We know the truth about the risk—it is unavoidable.

Employers are also acknowledging the obvious with 26 percent reporting that LTC insurance issues were impacting their companies’ productivity in a negative manner. Employers are aware of the problem. However, they are not aware of the solution. Fewer than half of those surveyed were “knowledgeable about LTC insurance.” Fewer than half understood portability, carve out, and no tax to employees when benefits are provided. It is interesting that about half understood the premiums were deductible to the corporation.

I consider myself a scarred veteran of multi-life sales. The one concept I cannot subscribe to is ease of enrollment. Enrollments are often painful from an administrative standpoint. The survey clearly identified the need for “ease of implementation” as “one of the most important issues.” If there are any company folk reading this column, may I humbly suggest we all have a lot of work to do to accomplish that goal.

Employers know there is a financial problem that directly impacts them. They know that LTC insurance coverage is special and unique as an employee benefit because of the inherent tax advantages. They are aware of employee interest in LTC insurance protection. It appears that a great many of them are simply waiting on you for help.

Your mission is to help them understand that to engage in an effort to alleviate exposed need, they must lead by example! This is about caring, it is about financial self interest, it is about generosity, it’s about helping others help themselves. It mandates the necessity of largesse.

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

The inexorable march of boomer demographics exacerbated by trillions in unfunded social liabilities, rapidly expanding rolls of older family members needing care, and a known potential catastrophic risk severely underinsured keeps the LTC insurance sales conundrum on the boil.

Make no mistake: The fuel, the accelerant that burns with increasing intensity, is the growing financial implication of caregiving in a rapidly aging population. Perhaps the pressure point that may best illuminate our future is the impact of difficult financial times on caregiving practices.

According to the National Alliance of Caregiving (NAC), America’s 44 million family caregivers are the backbone of our long term care health care system, providing a current economic value of $375 billion annually. In a previous study by the NAC called “Family Caregivers. What They Spend, What They Sacrifice,” November 2007, half of caregivers spent 10 percent of their own income, $5,531 per year, to help with the expenses, and 34 percent had dipped into their own savings to help. A new survey by Evercare, a care coordination company, and the NAC explores the implications of the recession on the nation’s growing army of personal care providers. The survey was designed to measure the effect of the recession on caregivers and their recipients.

We continue to see the effects of caregiving on caregivers in terms of stress and health related issues. This equation has also had dramatic effects at work. In the Evercare/NAC survey, 50 percent of working caregivers said they were less comfortable taking time off from work to provide care, one third reported the necessity of working more hours or taking on additional jobs, and 43 percent have lost income as a result of cutbacks in working hours or layoffs.

Bottom line: Our difficult financial times have made matters even worse for America’s caregivers. Of those reporting difficulty, 60 percent reported having to spend more of their own money to help, and two thirds said they were saving less for retirement.

All the above creates an absolutely clear picture of increased stress and stress is directly responsible for jeopardizing the health of the caregiver. They are also concerned about their ability to continue to provide care for their loved ones with 50 percent reporting that the economic downturn has increased their worries.

The burden of caregiving can be relentless both economically and emotionally. Recent economic realities have certainly not helped. The good news is that in spite of the additional adversity, 66 percent reported that the quality of care provided has not been diminished, even though 21 percent of those caregivers surveyed reported that they had to move in with their care recipients. The obvious begs the question, policies in place would have helped.

Here is the last statistic from this survey which demands our attention: 64 percent were employed. This leads us directly to another annually updated survey on worksite benefits from MetLife. The “Eighth Annual Study of Employee Benefit Trends: 2010.”

Employee benefits have remained “resilient” even in the face of an ongoing recession. Employee productivity seems to be a primary focus of benefit selection strategy. Programs which foster health and wellness as well as financial security support productivity goals. Surprisingly, employees feel optimistic about the future and are making an effort to improve their financial deficiencies and reduce personal debt. For instance, it is no secret that more people than ever before have been seeking out assistance from National Debt Relief and other debt consolidation companies looking for ways to improve their finances.

Employers’ number one concern is to control benefit costs, followed by the traditional desire to attract and retain the best employees, with employee productivity coming in a strong third.

When taken in combination, the concerns of the employers and employees polled in the survey would suggest that voluntary benefit programs contribute greatly to accomplishing all three goals. Employees do value their benefits and recognize their value as a financial safety net. It was also pointed out that there is a price to pay when employers reduce benefits. This consistently creates an immediate decline in employee job satisfaction.

Benefit satisfaction is actually at an all-time high. More importantly there is a very strong relationship between benefit satisfaction and job satisfaction. In addition, financial security was directly related to loyalty, which is obviously good for employee retention. The bottom line is that difficult economic times have spotlighted the vulnerability of retirement plans. It seems logical to suggest that strategic planning to create as well as maintain assets and income at retirement requires the necessity of LTC insurance protection to guarantee those objectives.

What jumps off the survey is the optimism and confidence in future success both for employees and employers. I am just one of many eternal optimists, even when faced with the most trying economic times since the Great Depression. I am just another soldier in an army of happy campers.

Maybe Americans are the world’s original happy campers. Maybe our only real job is to shield and insulate those happy campers from a known unavoidable adversity. I am again on the road in my RV this summer speaking to agents across this beautiful land, and I see many happy campers smiling and waving as I pass. But, more importantly, I see hope and determination!

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

What’s old is new again. In the mid-1980s when you were taking an individual health application, if a client would say—”Just a minute, I need to check my blood sugar”—you knew automatically that your next question would be, “Where do you work?” At that time it was possible to acquire small group comprehensive health insurance with only three lives, either guaranteed issue or modified guaranteed issue.

In April 2004—when I began writing for BROKER WORLD—one of my early columns, “The Visit,” proposed more aggressive small group marketing. In that same year I created the first packaged multi-life product with Loyal American Life. Multi-life is a list bill of individual LTC insurance products; it looks like small group insurance and it is marketed and sold accordingly. To reiterate what has been mentioned in my columns on numerous occasions: This is a massive sales opportunity.

There are several million American businesses with fewer than 500 lives. After all these years, something less than 20,000 business owners both own or offer LTC insurance. Even Washington can understand that math.

LIMRA surveys have identified LTC insurance as the most popular worksite benefit. I can also confirm that the majority of small group sales bubbled up at the worksite. Although the sales are improving, most did not originate with the agent asking the right questions. Instead, workers or owners recognized financial self-interest or experienced caregiving realities for family members, which created the momentum for sales. Pricing for individual LTC insurance is built on an expectation that known potential claims will be turned at the door. Depending on age, one out of every three or four applications is declined at the home office. This number does not reflect those turned down by good field underwriting practices.

Multi-life is different. By definition we are spreading the risk. There is still a full battery of gatekeeper exclusions. We are substantially protected by an actively at work status and, therefore, can afford some blended morbidity assumptions. Reduced underwriting also means reduced administrative expense.

Benefits are available on a reduced basis and, for the most part, standard not preferred ratings are utilized providing additional risk mitigation. You can currently count on two hands the companies providing reduced underwriting concessions for small groups. Many of these new opportunities have only recently joined the market.

Frankly the multi-life, true group and association business has been keeping LTC insurance alive. According to Jennifer Douglas, associate research director, LIMRA, “In 2009, nearly half of all new buyers (48 percent) purchased LTC insurance through or at work (whether true group or individual worksite), accounting for 27 percent of all new premium. Those percentages are 54 and 35 if you include association business (the majority of that was individual multi-life).” In other words, affinity-based sales represents the great and vast majority of new sales.

These small group products are built in a similar manner. There are usually two thresholds for underwriting concessions. One threshold is based on an employer contribution and one on a purely voluntary basis.

There is a lot of confusion about how companies refer to their modified guarantee issue option. In my opinion there are only three categories of LTC insurance group underwriting.

Guarantee issue is guarantee issue. Although over the years I remember vividly asking underwriters, “What part of guarantee issue did you not understand?”

Modified guarantee issue means that the underwriting will take place exclusively off the short form application. If you answer the questions correctly, you will get a policy. This means absolute predictability of the underwriting outcome.

Simplified issue, on the other hand, means that although the process and application may be abbreviated, the company reserves the right to perform additional underwriting, including: prescription drug screens, APSs and phone interviews.

Regardless of what a company names an underwriting option, I just want to know how it actually works. I am often working with clients who have already experienced rejection or disappointment with LTC insurance underwriting and I do not want to be responsible for revisiting that experience.

Multi-life operates successfully in a classic wholesale brokerage environment. No one company has a monopoly on the truth. There are substantial differences in affinity discounts, marital discounts, specific underwriting questions, employer contribution requirements, benefit availability, commission haircuts, policy form availability, technology (online applications) and premium.

My own placement ratio has improved substantially over the last six years. Currently the majority of cases we initiate conclude in placing some level of protection.

Here is what I have learned:
1. Take your time and identify the buying motivation before you begin to sell. What brought your client to the party?
2. Each sale is about explaining and illuminating a known risk and then looking for the commitment to solve the problem. You are always drawing a line in the census.
3. LTC insurance buyers are only those who plan ahead or care ahead. The sale is always about protecting money or preventing caregiving burdens.
4. Educate your prospect first and show premium last.
5. Each sale is a normal progression from executive carve-out to core buy up to voluntary. Employer commitment and participation in the solution is pivotal.
6. Step back from your ego. If you must do voluntary, ask for professional help to provide an aggressive educational campaign and professional enrollment assistance. Successful voluntary sales can be brutal and elusive.
7. Understand the important pressure points in the sales process and seek assistance from a knowledgeable LTC insurance brokerage operation that will provide sales support and not just proposals.
8. A Section 105 medical reimbursement plan allows you to create classes of benefit availability based on length of service, occupation and income. Any employee census can be “sliced and diced” to meet your needs.
9. Never forget your basic mantra: deductible premiums (all or part), tax-free benefits, no FICA, no FUTA and no W-2s.
10. LTC insurance is the best bang for the buck in the benefit market. It can be very inexpensive and usually represents less than 1 percent of payroll and is a fixed budget item which diminishes over time.

Modified guarantee issue is available at three lives. Participants are not required to have homogenous benefits. Almost everyone actively at work may be able to get coverage even if previously declined.

Get a census on Excel (not on a napkin), with date of birth, marital status and job description with income. Contact an LTC insurance BGA with multi-life expertise and help many more protect themselves and their families.

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

This column has remained consistent in its optimism. Even when faced with the reality of declining sales since 2002, my faith in the necessity of this protection remains solidly intact. What I want to report is my belief that the stars increasingly compliment our commitment and that cosmic forces seem to be finally gathering to mandate an industry focus on the success of LTC insurance risk leveraging.

First we obviously have nowhere to go but up! Demographics is destiny. The boomer age wave hit the beaches in 2005 and peaks in the year 2015. The fate of our financial planning careers is all about the boomers and their “Benjamins.”

Why would anyone knowingly and intentionally leave his retirement security at risk?

An illuminated question for our industry is: What are the long range implications of an aging population with unprotected assets and retirement income? Quite frankly, insureds are not who I’m concerned about—it’s their children asking fundamental questions about fiduciary responsibilities.

How do we maintain our professionalism and continue to ignore the potential financial devastation of an extended LTC event?

Is there anyone out there who believes that our government does not clearly understand that it cannot pay this bill when it comes due? Every national insurance legislation since HIPAA has been a government-sponsored incentive to buy. It is known and understood that these risk dollars must come from private sources.

HIPAA began the birth of the tax-qualified universe, creating tax-free benefits and corporate premium deductibility spontaneously from the vacuum of space.

The Deficit Reduction Act of 2005 nationalized state partnership plans, driving more sales to the middle class, as well as vaporizing most Medicaid planning strategies.

The Pension Protection Act of 2006 created a brand new star in the heavens—tax neutral LTCI rider risk charges—and began the growing vibration of 1035 antimatter implosions.

And now we have the background space noise of the CLASS Act that will, at best, increase radioactive risk exposure at the worksite.

All of these events, when taken in sequence, represent a galactic conspiracy to encourage consumers to take action.
 • Multi-life and group LTCI has expanded as predicted. Beginning in 2008 the majority of LTCI premium now takes place in the new and rapidly expanding universe of affinity-based premium with reduced premium and underwriting. We are seeing a massive concentration of a previously unknown element in the cosmos which dramatically grows sales: modified guarantee issue underwriting concessions. Our new first line of defense when we encounter underwriting dissonance is to ask: “Where do you work?” Abbreviated underwriting concessions light up the night sky.
 • Agent training requirements are bringing order out of chaos. In my opinion the NAIC Model Act and Model Regulation requires LTCI training of all life and health agents. This includes a substantial injection of suitability and ethical conduct requirements, including the necessity of explaining all the good and all the bad for all the choices. Light from these new stars cannot be avoided, ignored or explained away.
 • The advent of new combo products restores choices and alternative energy sources to our exploration of the known financial universe. Travel from one sale to the next is also accelerated by adverse economic times. There is a buzz in the space-time continuum concerning the necessity of policy review. Combo products and new 1035 guidelines can mean many more sales, yet a receding need for new premium. Combo product development and 1035 activity will provide fireworks in the heavens for some time to come.

There is ultimately no other answer; Medicare and Medicaid are collapsing into their own black hole of unfunded liabilities. The cosmic truth becomes unavoidable: “If you can afford to pay you must pay!” As boomers age, soft issues also grow in resonance and gravity, providing increased luminescence to the core concerns of money and caregiving such as: freedom of choice, dignity, control of financial destiny, avoiding dependence and leaving a legacy.

Evidence of transcendence is all around us. The planets are in alignment and our future is clearly revealed by the brightest stars in the heavens.

Other than that, I have no opinion!

All any good salesperson needs is a lead-in conversation—one that is bright, perceptive, insightful, thought-provoking and basically nonthreatening. There is a legend in our business of the agent who made MDRT just riding an elevator in a large office building. He had only a few minutes to make his points and then asked for an opportunity to elaborate.

Optimism remains our life blood. In LIMRA’s “LTCI: An Industry Reflects 2009,”¹ the top three reasons for optimism were (1) demographics, (2) increasing consumer awareness, and (3) opportunities at the worksite. The boomer age wave is upon us. Consumer awareness—formed from financial uncertainty and caregiving distress—is eating away at denial. Worksite sales—fueled by the need for alternative cost-effective benefits and liberalized underwriting concessions—continues to outpace the relative growth of individual sales.

Now, what should you say to connect to these growing sales? First, you must ask (if necessary ask over and over again):

Do you have your LTC insurance protection yet?

Every planning conversation must include the identification of retirement dollars. You must end the misperception that somehow LTC insurance is an optional expense. There is no choice. Your client must either take action to protect himself and his family or accept the responsibility if he does not.

You must speak firmly of the inevitable nature of the risk: You will get older, your health will change, and you will need care. Care is very expensive and it will be even more expensive when you need it.

I begin every employee enrollment meeting by telling the audience that my daughter’s favorite movie was The Lion King. At the core of this presentation is the circle of life concept. We enter this world dependent on others and the great and vast majority of us will leave it exactly the same way.

For potential clients who are by nature more analytical, operating on the assumption that you would not even presume to sell LTC insurance to others if you did not already own your own policy, tell them: You know, I had a $1 million problem. Do you? Now stop and do some fast math explaining current annual cost, current typical claim durations and what inflation does to that cost in 30 years.

Next, ask the obvious: Where will the money come from? Someone must pay! You, the government (with you as a welfare recipient), or insurance.

The all-time favorite is of course to go fishing for the caregiver connection. Ask these probing outcome questions:
 • Who will care for you?
 • Whose life have you chosen to disrupt?
 • Which family member will lift you, dress you, bathe you and change you?

A conversation about the changes in the law is always a good place to start. Begin this conversation with a neutral informational question: Did you know that the law has changed and your assets are now at risk? Next, discuss the Deficit Reduction Act of 2005 in a dispassionate academic manner, explaining the change in the transfer of assets regulations. This conversation may also then lead logically to an explanation of state partnership plans. Most are still not aware of the benefits of partnership plan ownership. This is also an excellent time to tap into resentment of government sponsored asset recovery. (I’m sure you don’t want the state to sell your home to pay your Medicaid bill.) The partnership sale is very straightforward:
 •  What is it in your life that you care enough about to protect from the state?
 • Is there any part of your legacy that you wish to leave to your children and grandchildren?

I have some new favorites as well. The Pension Protection Act and the availability of favorably priced and underwritten combo life and annuity products leads directly to these questions:
 • Does your life or annuity policy pay for long term care if needed?
 • If I could show you how to protect your assets and triple your benefit values—if needed for long term care—without having to ask for new premium, could we at least visit?

And the new question that I now work with every day is based on modified guarantee issue thresholds as low as three lives: Where do you work?

With a sufficient number of lives, almost everyone actively at work, regardless of underwriting status, is eligible for LTC insurance coverage!

To all those veterans still actively involved in the struggle, as well as all those recently re-enlisted or newly recruited, please help yourself to this verbal arsenal. My hope is that it will immediately grab your client’s attention and begin the journey that we know will alleviate an enormous burden for them and all their loved ones.

Sources
 1. “LTCI: An Industry Reflects,” Jennifer L. Douglas, 2009. Over 80 executives representing insurers, reinsurers, producers and consultants provided LIMRA with their thoughts, insights and opinions as to the state of the long term care insurance industry, as well as with their predictions for where they see the market heading.