Thursday, March 28, 2024
Home Authors Posts by Ronald R. Hagelman

Ronald R. Hagelman

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Ronald R. Hagelman, CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products. A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing “friend” of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman and his partner Barry J. Fisher are principles of Ice Floe Consulting, providing consulting services for Chronic Illness/LTC product development and brokerage distribution strategies. Hagelman can be reached at Ice Floe Consulting, 156 N. Solms Rd., New Braunfels, TX 78132 Telephone: 830-620-4066. Email: ron@icefloeconsulting.com.

Statistical Conundrums

My required statistics classes were the nightmare of my academic journey. Means, modes and medians gave me numerous sleepless nights. I was never really comfortable with the fact that “on average” would never again ring automatically true in my mind. Frankly graduate school was an endless parade of research findings analysis. I learned early to briefly scan these exercises of self fulfilling prophecies. First layout what you will try to prove by conducting a hopefully unbiased statistical analysis and magically the conclusions invariably support the initial question. This is now where the real problem begins, I was never interested in a sterile mathematical body count. I wanted to know what the meaning of that end fact is, the one held up proudly to the light of truth and introspection.

I recently came across some excellent consumer research from the Milken Institute Center for the Future of Aging and Innovative Finance. The statistics presented were big, bold and moderately helpful in understanding why long term care is bigger than a bread box and, considering the trajectory of current marketing efforts, perhaps not smaller than an elephant. Which leaves me, however, as confused as ever as to what they may mean, to whom, and under what circumstances.

Fifty-two—the percentage of adults 65 and older who will require a high degree of long term care. We have all quoted the “70 percent will need some level of care” statistic. I’m not sure we have adequately condensed understanding the risk to the flip of a coin. Betting red or black at a casino roulette wheel does concern the house that they will lose money. So serious long term care risk becomes defined as heads you win if you have an abrupt mortality event and tails you lose and your precious retirement savings are decimated.

Two times—twice your annual income will be required for one year of nursing home care. And I might add nursing home costs are inflating at over five percent per year. Not so sure wages will keep pace. What strikes me is even this is too big a number to honestly understand or provide an adequate step in a buying decision tree. Average savings in an American’s 401k is basically half that average six figure income. Americans understand they are unprepared for retirement; the fact that they have no insurance on a non-existent retirement account is a moot point after all.

Twelve—the number of LTCI carriers today after a high of more than 100 about 20 years ago. This has been flogged enough. We innocently underpriced. We tragically underestimated that, once sold, the sale stuck hard. Investments underperformed and the industry’s built in protection mechanisms required insurers to strengthen reserves. At this point the exodus was unstoppable. Claims rose, interest rates fell, the perfect storm descended; perhaps we were just another victim of global warming. Underwriting in my humble opinion remains the most onerous in insurance history. Rate increases became the hot stove where agents and consumers were required to burn fingers and in many instances jeopardize long standing relationships. Remember this was always supposed to be a happy medium sale. The market was created for the middle class—those with the most at risk. The last 20 years have left the companies with few options. Price new sales adequately, remove non insurance benefits and try to stabilize past blocks of premium with additional income. The rise of combo sales is commendable. However a very small number of options are complete with a health 7702B rider relying perhaps too heavily on chronic illness riders which may provide some marketing cover but may also impede an aggressive claims administration. Now let’s try to make sense of who pays:

  • Fifty-two percent—Individuals and Family
  • Thirty-four percent—Medicaid
  • Three percent—Private Insurance

The statement that Medicare does not pay for care is no longer completely true. Some home care service expense is picked up by Medicare and a growing number of Medicare Advantage plans have some limited managed care benefits. Alright no matter how your brain processes those numbers the truth should be shouting at you. Since the advent of modern TQ comprehensive LTCI our sales success has not been sufficient. Even pulling out the social safety net leaves you with the fact that the majority of Americans are clearly exposed to a financial and emotional conflagration. The Goldilocks principle must guide our efforts. Self insurance and government dependence delineate the opposing goalposts with a massive open and virtually empty football field of sales opportunity in between. We have constantly drifted from our original intentions of maintaining the quality of claim control for the middle class. The very cohort outlined so vividly and statistically spot on above. Regardless of how you or your client arrive at your own happy middle ground, on average the problem is real and the solution is painfully obvious.

Other than that I have no opinion on the subject.

Taking The Lead

I’ve just returned from our industry’s professional annual gathering which I believe represents our faithful and permanent commitment to keep trying. The ILTCI 2023 was in my humble opinion a smashing success. In no particular order of importance an inventory of why may have merit in your forward thinking, planning and prioritizing:

  • It was the largest attendance in years with almost 1000 stakeholders who remain concerned about the insurance care conundrum.
  • It was a diverse professional assemblage, grounded again by the avatars of good math.
  • The progression of claim efficiency and quality of service truly benefiting by the evolution of technology was clearly on display. Gains were evident in virtual underwriting and there were even successful robotics teetering on the edge of Artificial Intelligence advancements.
  • There were multiple vendors helping to define the meaning and parameters of what should be the true Holy Grail–efficient humanized quality managed care and claim adjudication.
  • But the best clues to predict a better future were all the eager bright shiny faces attending every session. A third of those present were there for the first time and over half had been attending for less than three years. Only one percent had been in attendance for 20+ years.

Helping to represent that one percent, my partner Barry Fisher and myself had been asked by the meeting chair Steve Schoonveld to reminisce about our vast, perhaps simply lengthy, experience to provide what could best be described as comic relief. Steve asked us to help conclude the meeting by being humorous and optimistic. As this was a large public forum we were asked to also remain non-denominational, non-sectarian, apolitical and keep it under 20 minutes.

Interestingly, as insurance company consultants for many years, we are used to being asked the impossible and to come in under budget.

We began by proclaiming we were going to attempt to explain two of the greatest mysteries of our little corner of the insurance marketing universe. First: Why my partner continues to accuse me of writing the same column month after month for almost 20 years. Second: How two clearly diverse Class A personalities have been able to work successfully together for this long. Actually the answer to both rhetorical questions is the same. We are simply unable to give up our quest to understand, “Why in the Hell can’t we get this right?”

We began by suggesting, as I have repeatedly in this column, that we didn’t just miss the side of the barn but that we may have been aiming at the wrong barn. We have continued to make this about financial indemnification. In my humble opinion it is about who and under what circumstances the claim journey will be managed. I have suggested many times in this column that sales begin with those who have been touched by the caregiving angel. It is a predisposition to buy that gives sales success any hope of self analysis. My partner added that our market was never given enough time to establish itself in the pantheon of mandatory risk abatement vehicles. That consumers have yet to understand their personal responsibility. That with the incessant background noise of rising premium the market abandoned the middle class buyer that the product was originally designed to serve.

We reminded the audience that producers have clearly identified this as the most difficult of insurance sales yet, frankly, the product manufacturers of this world have never banded together to publicly support this crusade.

It was pointed out that many agents have retired from the field of battle and that fresh troops may not be coming from the plethora of financial advisors/planners who seem to have moved insurance transactions to the caboose.

It was impossible to not reflect on the past and to some extent we may just have been a couple of curmudgeonly aging rock stars brought out to entertain the troops.

There was laughter and applause perhaps not from our discourse but from our longevity. The hard truth is the answer to a brighter future was in that room. We knew it and they knew it.

Other than that we all had no opinion on the subject.

Vague Generalities

Begin by imagining the soulful cords of The Streets of Laredo performed by Marty Robbins or Pete Seegar. It’s not exactly a dirge, merely an acknowledgement of a tragic passing too soon. Cliches and glittering generalities describing the status of the continuing battle to give meaning to the necessity and preference of personal control of our own claims destiny is dominated by a chorus of time worn platitudes.

  • All that glitters is not gold.
  • The calm before the storm.
  • The writing on the wall.
  • What goes around comes around.
  • It’s just a matter of time.

Instead let’s begin by meticulously avoiding America’s most overused buzzword “transparency.” Even though I might humbly suggest the past ills and future promise of significantly supporting and improving acute, sub-acute and custodial care is now in the hands of those with the most experience in managing the quality of care, I am only a salesperson. I do not need to know the frequency, duration or efficaciousness of care administration whether public or private. What I do need to know is that there is absolutely nothing more important than the quality of that claim management.

What I must begin with is the sure and certain knowledge that someone will pay this claim. I know that the balance between private and public sources of paying these claims is becoming more equitable. I know that over 250 million Chinese are already over the age 65. I know that the struggle to leverage a known and measurable risk globally will eventually dominate internal and international political and cultural environments. I know that more folks are passing than being born. I know that we now have substantial and definitive claims experience yet the battle to liberate discretionary funds to blunt that risk remains as elusive as ever.

I know that 20 years ago twice as many consumers actually bought a policy as we are reporting today. I know that combo sales are 20 percent of all life sales but the majority of those did not require a current additional premium. We are doing a better job shifting the risk and yet fewer professional advisors than ever are intentionally focusing their attention on some approach to chronic illness risk mitigation.

I know we continue to chase the wrong industry old wives tales. The romantic and strongly held belief that moving as many claims as possible back into the home will save money is the most popular reflection of erroneous conclusions yet it continues to act as a backdrop for public and private care decisions. There is little evidence that the actual hard dollar cost will be impacted. What I also know is that it doesn’t really matter to me at all.

What I must hold onto is the sole purpose of the exercise. What can I do to help assure the best quality of the care that my customers, friends and loved ones do receive? What I cannot forget is that this problem will not take care of itself. What I must remember is that for rationalizations or denials beyond my control, I may only be able to shift a portion of this risk burden. However, anything I can do to improve the quality and decision making control concerning the efficiency of delivery and the opportunity for personal choice is a job well done.

Interestingly there is a growing hope for our cowboy “All dressed in white linen.” In truth a new Sheriff has slipped into town. Ove 500 Medicare Advantage plans now include some initial long term care managed components from home modification to respite care. This consumer driven predisposition to acknowledge the potential claim provides fertile ground to expand the sale for added protection.

Other than that I have no opinion on the subject.

Paranoia

Consider this column an exercise in fevered dream generalities. Sort of a hybrid train of consciousness somewhere between James Joyce and Salvador Dali. I would simply like to attempt to express a feeling of unease. It is more the growing weight of a persistent impression of an impending calamity. Since I can’t seem to shake it, I’ll graciously share with the hard-core readers of this column in the hope that I may again unload some of the burden on my friends. Specifically, those who refuse to give up this quest.

It seems we initially embarked on our journey with a clear vision of our destination; replace a visible retirement planning deficit (even if a little far over the event horizon) directly attacking a known, measurable risk clearly subject to amelioration with insurance. We took familiar well-known legacy vehicles of both the individual and group variety, adapted them to our perceived needs, and then somewhat innocently turned them out unprotected without adequate contingency plans into a basically virgin market. No one would deny that we may have missed the mark completely or that perhaps our audience was simply unprepared for our performance. The risk was bigger than anticipated which set the stage for brutal and onerous underwriting thresholds. Consumer resistance to understand the pending inevitable financial and emotional conflagration was much stronger than ever imagined and the cosmic irony that, when they did buy, it became the most loved and treasured insurance possession of all time. It was in its truest sense a case of the blind leading the blind.

The problem was baked in at the beginning and we have traveled down the same road for so long it seems impossible to turn around or back up. Every research project over the last twenty years aimed at understanding our consumers and product response in my humble opinion has simply chosen to begin its analysis at the point of sale or a public admission of perceived buying predispositions. Our universe is composed of matter that we can see and dark matter that we cannot. Nonetheless it is the background forces that impose the greatest motivational gravity behind all movement.

This is about control. Money may only provide a tape measure to best define identifiable parameters. It has little to do with who or what brought out a need to measure anything. It’s about control of the claim. It’s about basic personal human control. Control of location, quality, preference, maintenance, duration, transition. Will I or someone I love be making those most crucial decisions or not? It is specifically those who have witnessed personally or close at hand the loss of those decisions that have from the beginning provided any of us with successful sales histories.

What I am trying to suggest is that maybe we built this sale on the wrong foundation. Humor me for a moment that we have not adequately prioritized the value of “control of claim” issues or that my 25 years trying to get this right continue to point me in the same direction. If by some strange twist of fate I am right, the question should become who is best prepared to manage the administration of benefits. On the open market freedom side of the equation we have less than a handful of large companies or stand-alone TPAs. On the government controlled side we now have MLTSS, a state run Federal authorized program of Managed Long Term Services and Supports. These are “capitated” and regulated administrators of Medicaid both disabled and special needs. In addition, as home services expand under Medicare and its derivatives there has been substantial recent growth in dual eligible. Bottom line is these folks do anything and everything associated with long term care administration. In 2008 there were four states with an in-house claim manager; now there are 24. If you were to take a closer look at the relationship between existing/proposed Washington State Cares funding strategies and the existing expertise of these already in place in state and Federal long term care management bureaucracy you might pick up on some of the concerns building in the back of what is left of my mind. Capitated means finite and permanent control. Not yours. Theirs.

“Paranoia strikes deep…into your life it will creep.” The immortal lyrics of Buffalo Springfield inexplicably do come to mind.

Other than that I have no opinion on the subject.

Hegemony

Hegemony is a political and social concept that may best reside in our consciousness as the proverbial 500 pound canary. It is the force that holds sway with a dominant influence over a given current reality. Always follow the money—in the United States long term care costs have reached over $275 billion not including the insidious billions of families’ and friend’s unpaid care expenses. Uncompensated care is now estimated at an additional 450 billion. The majority of the hard dollar long term care costs continue to be paid through Medicare and Medicaid with an additional quarter paid with private out of pocket funding. Private insurance payments remain in the single digits. However our long standing and frankly valiant efforts to shift that claims control to individuals is clearly demonstrated by the fact that over $12 billion was paid by private health based sources and that does not include monies from annuity or life combination policies.

We are not alone. According to a recent market analysis, the global long term care markets where North America has the largest presence is expected over the next five years to have a composite annual growth rate of 5.6 percent. There are a number of new truths associated with our chosen market that significantly contribute to a positive outlook for growth. Care has shifted dramatically to a home based platform. Bear in mind only eight percent start benefits in a nursing home. COVID experience has turned up the heat on augmenting home care with managed care technologies. These efficiencies with medical data and direct access to patient care management are fueling growth. We need to bear in mind that this shift has not yet revealed a substantial reduction in cost.

A recent analysis of global trends summarized our position as, “The long term care market is expected to witness significant growth. However, the high cost associated with nursing home services and a lack of awareness of long term care services restrains the market’s growth.” When I got to this insightful revelation frankly I almost screamed out loud. The same brilliant analysis should have been archived from the last six decades.

We know the facts. Every day through 2029 another 10,000 will turn 65 and 70 percent of those will require some care with almost 20 percent lasting more than a year. The average median cost for a private room in a nursing home is over $92,000 and assisted living over $43,000. Yet consumers refuse to take action. Like many of those reading this column, I have spent the majority of my professional career beating my head bloody against the truth of the insurance profession’s most persistent conundrum.

In a world which now demands transparency, I wish to acknowledge that I am a happy retiree of State Life/One America as well as the proud owner of a long term care paid up policy from the company. I would like to commend their most recent consumer research attempting to understand the aftermath of the COVID catastrophe. The consensus of thought for many of us was that the concentrated effects of institutional confinement should have induced a greater understanding of the risk. Surprisingly only 15 percent of the consumers they surveyed confirmed that their perceptions of the problem had been enhanced. Of those surveyed a mere 16 percent had any plan in place with only 29 percent even researching their options for protection. The majority believed that cost was the most significant obstacle. What was not a departure from current wisdom is that, in regards to prioritizing financial goals, the survey clearly indicated that the number one concern was sufficient money for retirement. Of course, none of us could imagine a more lethal projectile on this primary destination than a need for extended custodial care. For those who are able, an asset-based insurance approach does significantly provide control of both care and money. Even though this consumer research indicated that an overwhelming majority of those surveyed indicated that their top motivation was to remove the financial burden from family members, I am not sure it struck at the motivation to buy at its beginning. Research over the last 20 years has consistently suggested that buyers take action to protect money. This has historically proven however to be a post sale rationalization. It is personal experience with the financial and emotional consequences of a claim that created the momentum to complete a sale. The wisdom of ownership confirmed by its legendary persistency has always been a banner of financial family pride.

Drum roll for the summary. The problem is bigger and more tangible than ever. The marketing opportunity is larger and more appealing from a potential profitability standpoint than ever before. As outlined in numerous previous columns, new and looming attempts to mandate government imposed funding strategies will only add fuel to the fire. Forgive me…my eternal optimism is bubbling to the surface again. However, I will lay claim to the notion that market algorithms are shifting a fresh wind to our sails.

Other than that I have no opinion on the subject.

Enemies

Take a deep breath and try to relax a little, we have survived another political season. Political winds of change whether progressive or conservative favoring reform, inertia or nostalgia for the past have always defined, inspired or restricted our carefully planned insurance responses. It has always been a perpetual progression of action—reaction involving a careful evaluation of potential risk mitigation opportunities. Within the nature of our discipline we have repeatedly tried to ameliorate the risk of insurable events. The balance of political alternatives reminds us once again that our choices come to a pivotal head at our perceptions of control. Personal control of an individual’s claim destiny or the acceptance of additional centralized perhaps even coercive management. Our universal hope of course is that these most essential components are able to find a balance that benefits the greater good. In LTCSS circumstances that hopefully translates into an acceptable level of mutual decision making and maximum level of quality managed care.

In my humble opinion no one has been a more consistent hard headed advocate of exposing the corrosive relationship between the public response to custodial care for the aged and the lack of success in private responses to reduce and return control of individual claims destiny than Stephen Moses. His most recent manifesto “Long-Term Care: The Problem” recently released from the Paragon Health Institute once again provides conclusive irrefutable evidence that the still mushrooming consequence of current market conditions is the fault of existing misguided public response to the problem. The truth is we have always been fighting ourselves. It is the incestuous relationship between the holy trinity of Social Security, Medicaid and Medicare that has made it virtually impossible for us to adequately blunt this risk from the private sector. Private funding solutions including insurance, reverse mortgages and life settlements have had no room to breathe free when all the oxygen has already been sucked out of the room by State and Federal mandated, frequently capped and therefore underfunded, politically loose footballs. This exceptional white paper provides more than a sufficient arsenal of hard statistic ammunition to defeat any spurious attempt to defend the expansion of public taxpayer funded strategies. More of the same will not help. It will however most certainly exacerbate the problem.

This statistically exhaustive presentation of the facts, clearly researched, reveals more than just a smoking gun. It provides irrefutable evidence of a massive self-inflicted wound:

  • The current response to the problem is not working. New taxpayer subsidized solutions will only throw gasoline on an existing hot fire. Half of Americans will need paid care and the number of those 85 and older will triple in the next 35 years.
  • Medicaid remains severely underfunded and Medicare currently has unfunded liabilities of almost 35 trillion.
  • Medicaid and Medicare currently pay for 70 percent of care in America. Medicaid has a direct negative impact on LTCI. Because it pays for three fifths of the expensive costs (nursing homes) but only reimburses two fifths of the cost. The shortfall lands on private pay patients.
  • It is often forgotten in the conversation but the largest source of Medicaid long term care expense comes from Social Security spend down. Some long term care funding does come from Medicare Part A. The projected demise of the trust funds for both these programs reflect a very short future shelf life. Can we guess where that shortfall may ultimately reside?
  • It is true that shifting the focus to HCBC has succeeded, now representing approximately 50 percent of current overall spending. What is not true is that it is saving any money. Even though claims for HCBS grow, combined costs also continue to grow.
  • Required Medicaid impoverishment remains a ghost story told around financial planning camp fires. It is pure fantasy.
  • Compounding problems remain the definition of a Dual Eligible. One-third of overall expenses now come from those qualifying for both Medicaid and Medicare.
  • LTCI has experienced reserve and persistency concerns that have caused onerous rate increases and carrier defection from the market. The striking difference is that insurance claims will be paid. Confidence in government programs may or may not be justifiable.
  • Claim location matters. Private insurance claims show that three-fourths begin at home. Medicaid would suggest just the opposite.

Stephen’s voice has been steady and spot on from the beginning. The system has always been our own worst enemy. His personal message could not be more timely, “Government subjugates, markets liberate.“

Other than that I have no opinion on the subject.

Que Sera’ Sera’

Whatever will be will be
The future’s not ours to see
Que sera’ sera’

My gift of a legendary earwig delivered sweetly by a freckle faced Doris Day. Recently, I had the privilege to reminisce and retroactively reflect on the historical trajectory arch of the LTCI struggle. I shared the dais with other grizzled veterans of the insurance conundrum of our lifetime. Although the primary conversation was about how we might return to past successes, it was our re-telling of historical context that caused the most animation in the assembled crowd. I began to take better mental note of those assembled before us. There was a smattering of older faces mostly near the front of the room. They had lived or should I say survived the war stories we were telling. Their faces were eager to share the truth of how we got to here. Their heads were nodding in agreement as we tried to make light of our mutual long-standing frustrations. And then it hit me. This was a big room, all the other seats were full of young home office stakeholders and actuaries with their careers stretching out before their front windows not their nostalgic rear view mirrors . Based on a multitude of raised hands and intense questioning, the inescapable fact was they knew the “problem” persists but they did not know how we got here—wherever here is. The immensity of that personal revelation represents the very sharp double-edged sword that continues to hang precariously over all our heads. On one side of that blade we simply must have learned something from our past mistakes, yet it is the magic of that alternate blade of fresh optimism that holds out our only hope to help more Americans preserve control of their claim destiny. It is the intrinsic courage to try again to contain and blunt a known risk that gave us all our careers. What I am certain of is we have left behind a rich legacy of teachers. Perhaps the most frequent statement I hear from producers is: “I used to sell long term care insurance.” Yes, you did, and I might add once upon a time very successfully.

Even those onerous lessons that may have curbed or diffused your enthusiasm have value as we move forward. As usual I would prefer to over generalize those proverbial sinkholes in our experience and potential speed bumps present in our future as we struggle to control a risk that continues to grow every time I send in a draft of this column:

  • Underwriting remains a curse. Truthfully the pain of most insurance applications would deter even the most valiant. Yet it is not merely the sometimes-indeterminate depth of the administration process itself. It is the radioactive hot potato of how best to handle pre-existing conditions that continues to plague product futures. This seems to be the first cliff that proposed government solutions seems to favor diving off of and where companies initially throw up the most impenetrable fortress walls. This must not be a world of absolutes; it can however rest comfortably in a pool of moderation.
  • Forgive my frankness but it is not bravery that attracts a production drift to easy answers. If you know to include a conversation about the extended cost of custodial care please be willing to collect a premium to guarantee adequate and timely claim payments.
  • Price matters! As the predicted reality of this risk continues to manifest itself we can hopefully choose to slice and dice the solutions to adhere to answers that contribute to providing control of each individual’s claim journey. The goal of all sales should be universal to provide primary or supplemental assistance guaranteeing personal management of your potential need for care. In this regard all premium levels work.
  • Politics matters. Although the now slow but steady progression of state mandated trust programs designed to offset Medicaid liabilities may be viewed as a blessing or tragedy. Regardless of your faith or lack thereof concerning government imposed attempts to ameliorate risk, I must fervently hope that those wonderful younger insurance warriors with bright shiny faces of hope and faith in our own actions can replant those progressive insurance production flags on higher and higher hills.

Other than that I have no opinion on the subject. Que Sera’ Sera’.

Dominoes

Whether you are envisioning the current collapse of Black Sea ports, the former crash of SE Asian colonial empires or the stampede of carriers to escape out the door of individual LTCI the mental image of falling dominoes takes no prisoners. I would again apologize in advance for my fixation on the “Cares Fund” social experiment underway in Washington State. After 18 years of writing this column my optimism for good intentions should have long ago floated to the surface, as well as my virulent disdain for bad math or attempts at didactic political program execution. Just so there is no room for any misunderstanding or ambiguity in my humble world view: the WA Cares Fund has managed to reassemble every past false structural concept, dusting off every originally innocent actuarial faux pas and will knowingly (maybe intentionally) create a perpetual inflationary taxpayer supported (some would say cursed) political bureaucracy.

Comparing this contagious political manifestation to a virus lab leak is just too easy. The plague as predicted has now successfully escaped to Pennsylvania and New York State. The quest for easy answers fueled by budgetary priorities and the siren song of new fresh taxpayer coerced social experiment trust fund accounting is apparently as urgent as any other drug addiction. Please bear in mind that all future booster shots for these programs will require rate increases with no possibility of ever leaving these questionable and experimental political institutions for alternate risk options.

Random thoughts for your kind consideration:

  • Combo life sales still leads our sales efforts. Recent production history has been very self explanatory. Prior to the pandemic three of four years showed dramatic growth. The pandemic particularly in 2020 drove the combo sales down 23 percent according to LIMRA. This was primarily fueled by declines in single premium and extension of benefit sales on universal life. CI acceleration riders still constitute two thirds of all sales. I remain skeptical that if you did not charge a current premium that you actually sold anything.
  • As reported last year on a post COVID LIMRA survey, interest in LTCI grew dramatically with an over 50 percent increase in those willing to shop for coverage. Consumer caregiving stress also grew as a result of COVID experience.
  • Beginning in the third quarter 2021 combo sales caught fire with the greatest spiked increase since 2007. Accross all distribution channels and product lines 2021 was a banner year. Apparently this was specifically true as it regards single premium LTCI.
  • Before you get too excited however, this fantastic increase in buying (mostly from the more affluent) is a direct result of the fire sale in Washington State as over 225,000 scrambled to find individual insurance alternatives to the new pending state tax. Another 250,000 looked under the bed to dust off and prove any LTCI coverage citizenship already in place.
  • In the meantime, back at the Virus Farm, Washington Cares Fund is already anticipating rate increases before the program begins as the newly categorically excluded state residents decrease participation expectations in a program already projected to lose money.
  • The WA Cares Fund Workgroup has become fixated on any supplemental private long term care insurance that will inevitably emerge as a result of the mandatory coverage. This, dear readers, is the whole enchilada—if you do not participate in the inclusion of these future ingredients there will never again be an abundance of choice at your favorite Mexican restaurant. Extra refried beans will never again be substituted for the unpopular Chicken Chalupa.

Truthfully, I am never pleased when my paranoia proves to be accurate. However, both New York and Pennsylvania have now joined the WA Cares Fund mandatory program parade. HB 2779 is now the law of the land in the great state of Pennsylvania with NY on the launch pad. Before you get too excited it appears there will not be any allowed anticipatory fire sale. It appears no one will be allowed to escape the new tax. Please begin to organize an image in your mind of a growing list of state Insurance Commissioners gleefully joining a regularly scheduled Zoom meeting to facilitate cloning this—at best flawed—attempt to offset Medicaid budget deficits. And then knowing that any taxpayer imposed structure would, could and should be helped with additional supplemental coverage (in this case an inadequate pool of benefits with a 10 year vesting schedule) moving to police any and all attempts to enhance individual protection around the edges.

I would be the first to recognize I may be wasting my breath, but it must be said loudly and frequently: “Freedom of choice for consumers and insurance professionals is in real jeopardy.” Now fueled by a burning sensation in my subterranean regions that the infamous predator of “taxation without representation” haunts our streets at night. I would ask that you take no pleasure in the fact that this foolishness will only see the light of day in Blue States—an untreated virus remains a self-fulfilling prophecy.

Other than that I have no opinion on the subject.

CCTV

Understanding wireless door-bell video technology may by its purpose and effect provide recognizable structural components for utilizing management technology to reduce cost, monitor current status, coordinate other overall management components, minimize bad outcomes and prevent catastrophic results. This is also the definition of chronic care management actually with a profound cross over of technology applications. Even trying to use managed care and long term care in a meaningful context can be very confusing. It remains difficult to isolate the meaning of “managed care.” All levels of care are available and frankly in desperate need of efficiency management—acute, sub-acute and custodial. Therefore you must start with the degree of care you are attempting to make more time efficient and humanly personal all at the same time. Let’s begin by throwing all aspects of medical/social technology into the massive boiling cauldron of managed care. Nothing better defines our humanity than unpredictable mortality and the persistent need for morbidity care management from infants to the infirm. This column would not be on point without the conversation being framed by who or whom shall control that precious care management. When, where, how and under what circumstances that care will be provided, funded and managed is long term care.

  • Perhaps it is best to begin at the source of the need for amelioration efficiencies—chronic disease! Chronic health is defined as a serious physical or mental condition that lasts one year or more. This includes conditions of heart disease, cancer, diabetes, substance abuse, lung disease, and a plethora of additional debilitating conditions. Six in 10 American adults have a chronic disease and four in 10 have two or more. It should therefore not come as any surprise that the pipeline for extended custodial care is always full.
  • Efforts to improve the performance of integrated health care services have been slowly but surely developing since the introduction of H.R. 337 Managed Care Consumer Protection Act of 1997. Although this legislation did not pass, it began a process of gradual state implementation that now includes a majority of states. Before we get too far off in the weeds let me take a shot at explaining what is a very complicated and regulated state/federal government attempt to better coordinate the care needs of, for the most part, dual eligible individuals—those qualifying for Medicare and Medicaid. I would only ask that you understand this program does include custodial care issues but is not its primary focus. These are not our customers for insurance. There are however some important care focus similarities that have application in our long term care insurance wheelhouse:
    • The participants must be engaged and personally involved in their care plans.
    • These managed care options must be strongly encouraged to take place at home.
    • The clinician must facilitate a holistic approach to the patients care to include mind, body and spirit.
    • The participant is allowed to choose the level of intrusion and control they are willing to accept.

Principles of managed care in some states such as New York may be specific to long term care. These again are not our customers, however the use of technology to increase the frequency of interactions and the integrated coordination of various support mechanisms may clearly provide us with insights into better serving the quality of care being delivered at the time of claim management. The important lesson here is that research into the efficacy of these support programs does indicate that they improve the quality of care options and save money.

Understanding the background and undercurrents of today’s efforts to manage care both to improve the quality and efficiency of that care and in the process reduce cost is the most important door bell guarding the entrance to all our insurance futures.

Other than that I have no opinion on the subject.

Tweaked

Many of us will remember our mothers telling us as wayward children: “If you keep picking at it, it will never heal.” Unfortunately, or maybe providentially, this particular open wound continues to fester, itch and burn. I sincerely apologize that I am unable to leave it alone. The spectacle that continues to unfold in Washington State contains every past attempted ingredient of resolution that has infected both public and private attempts to at least hold down the fever of massive unfunded care. You should begin by understanding that this is an old unhealed attempt at subacute care policy. The CLASS Act was removed from the ACA not because it was an unworthy concept, but specifically because it was bad math. Under actuarial scrutiny it simply would not perform as advertised.

I believe there are insurance constructs that we would all acknowledge as basic truths. Layering risk is a good thing. Adequate participation in any risk pool is a prerequisite of future success. Adverse selection is the bad apple we all energetically strive to remove from the barrel. A strategic balance playing to each other’s strength between public and private efforts to meditate risk sharing is in everyone’s best interest. The relative acceptance or accommodation of preexisting conditions, mortality or morbidity, still represents the greatest toxicity to any plan of insurance.

Now let’s return again to the unfolding drama on the Pacific coast. First, my enthusiastic endorsement of the good intentions of WA Cares Fund. The director of the fund, Ben Vegte, couldn’t be more spot on: “By contributing to the WA Cares Fund, we are all better prepared to age with dignity and independence. It gives families peace of mind and allows them to focus on care, not costs, when a loved one needs support.” The readers of this column should read these words and with the patience of Job try not to scream out loud that we have been giving this speech for over 30 years. We also know that as events unfold out west the realities of implementation may temper their perceptions of success:

  • The program has already been amended early this year to correct certain inequities such as inadequate time to vest benefits for older employees. Some limited exemptions were additionally allowed for existing military coverage and those predetermined to be out of state where no benefits could be received as the program has no portability.
  • These changes pushed back beginning the program until July 1, 2023, and no benefits paid until July 1, 2026.
  • The ability to opt out remains open this year but private insurance must have already been in place by last November. This process is a little confusing and the real numbers for what happened last year need to be understood. Almost 500,000 have shown proof of private insurance, somewhere around half of those joined the ranks during last fall’s famous fire sale.
  • There is growing push back to the program. A recent article in the Health Affairs Forefront by Mark Warshawsky suggesting that the program is “deeply unpopular, poorly designed, unstable, insolvent ab initio, perhaps illegal, and, without major change, failed.” This has drawn strong rebuttals from those who support the program, but it has also ignited a healthy debate as to the merits.
  • The half a million who bought a policy went through underwriting. The new employee payroll tax will not have any. Adverse selection is an issue.
  • The commission is currently considering additional revisions specifically monitoring the persistency of coverage from those claiming private policy exemption and subsequently how someone could rejoin the public risk pool by paying back taxes.
  • The status of the self-employed is currently, at best, in serious turmoil. Definitive clarification of employment status rules will need to be enacted.
  • Initial actuarial projections predicted a 12.3 billion dollar reserve over the first 30 years because no benefits are paid for several years, vesting is required, and, as we know, claims will be small in the beginning. There will be some savings of Medicaid expense. This savings extended the program’s projected life span to 75 years. As always, these pristine optimal projections are subject to the usual suspect list of program debilitating scenarios from inflation to unexpected risk spikes. Maintaining a balance between potential long term deficits and the on-going necessary political support maintenance required will remain an open question.
  • In a migratory society, requiring that benefits remain exclusive to the state will ultimately require further amendments to the program.

I would ask you again to keep your eye on this continuing microcosm of the struggle for care equity and justice. We will always admire altruistic intentions but we will never blindly accept politically motivated projection speculations. Continue to bear in mind what we know, yet every politician and bureaucrat has never clearly understood: Every “tweak” to the program, those already made and those contemplated, will as certainly as the rising sun add to the cost. Future cost adjustments will absolutely be required. Bad math is still bad math. Frankly, what continues to hang in the balance is where this fiscal burden will eventually land. Will it again be on an unsuspecting and inadequately informed public tax payer or the individual conscience of all caring Americans? Our prayers for that outcome will never waiver.

Other than that I have no opinion on the subject.