Ronald R. Hagelman

Impossible not to envision a classic movie version of the damsel in distress tied to train tracks with the sure and certain speeding train barreling down the tracks, steam belching from the smokestack and whistle blaring in a futile effort to prevent an inevitable catastrophe. The problem is, here we are 20 years since HIPPA and we still cannot get a clear vision of what that potential hero hopefully coming to our rescue looks like or if he or she even exists. The potential ugliness of the risk grows larger and continues to resist any amelioration designed by mere mortals.

Forgive the painfully obvious—insurance is about intervention. It is about intentionally restructuring the potential outcome of highly likely adverse future possibilities. It’s not terribly encouraging that:

• The percentage of those individuals with insurance is falling, looking more like less than seven percent.
• It appears we are simply churning product options from over a 100 stand-alone LTCI options fifteen years ago and now approaching a 100 combo options of one flavor or another. Clearly as one choice lost ground the other rose from the ashes. The problem remains that we have not moved the needle. Even though the battle plan may have shifted, unfortunately the number of Americans trusting insurance and buying some form of protection remains ominously flat.
• Our aging population continues to rise like a mushroom cloud with the U.S. Census reminding us that the 65+ population will grow by 70 percent over the next 20 years—and half of them will need formal care.
• Compounding the impending train wreck is the vanishing inventory of available caregivers. The cost is simply too high. Personal income of caregivers is directly impacted about one third of the time and almost two thirds had to invade savings or retirement income.
• The overall financial health of our seniors is also seriously anemic with limited savings and rising senior bankruptcies.
• Public support programs are also sputtering out with Medicare Part A scheduled to run out of money in 2026.
• Stand-alone LTCI sales fell off a cliff in 2004 and have been rolling down hill ever since. Which creates a corollary outcome, meaning available potential distribution to solve the problem began to vanish simultaneously. The most frequent agent I meet on the road is the one who “used to sell LTCI.”
• Individual LTCI health sales are 80 percent-plus concentrated at two companies—one brokerage and one career. Monopoly by default may not be in anyone’s best interest.

Let’s save speculation about where we go from here for another column, focusing on what’s at hand: The “Rise of the Combo.” Here it is impossible not to envision the most recent re-incarnation of Godzilla rising from the radioactive ocean floor, but not being sure whether the monster is coming to town to do good or evil. This representation of our fears is hell bent on something. Unfortunately, we all suspect that it may be only the immediate gratification accomplished by demolishing existing structure. Meaning, simply, we have to stop reinforcing the corporate zero sum marketing game perpetually reflected in LIMRA production numbers. There must be a way to break out of the futility of reliving past performance. Walking away from the status quo is revolutionary by design. For example:

• If men claim earlier and shorter than women, why don’t premiums more substantially reflect this obvious truth?
• If 70 percent of the risk is less than $50,000 and only 12 percent exceed $250,000, why aren’t products built to conform with the reality of the risk structure?
• If the lowest cost for any risk floats eventually to the surface, why haven’t pay as you go 101(g) riders costing only about three percent of premium flown off the shelf?

These and many more mysteries continue to plague our thinking. We not only need to think outside the box, we desperately need to recycle the box and imbue it with the structural stamina and courage of long term commitment necessary to transform a private insurance alternative.

Other than that I have no opinion on the subject.

As a product consultant since 1988, I have been involved in the revision or creation of over 50 new insurance products with 16 insurance companies. I mention this not to boast (as I will never reveal the ratio of past successes to failures ) but only to legitimize my right to ask the most important question present in this whole process: “How many times can you tell the field that your newly polished and filed policy form is meaningfully and measurably “new and improved”? And then expect them to be gullible enough to believe in the frothy hyperbole that comes with product introductions, when in truth it may often be just more of the same. We know that when you stop and think about the philosophical core of wholesale brokerage it is centered on eternal hope and perpetual policy introductions. We are most often the originating source of benefit creativity and product design innovation. We have always had greater purpose than to just take expedited orders for products hopefully sold in volume on historically thin margins. Our ability to continually adapt and reform our product approach has consistently benefited the American consumer. The net result over time has been more competitive product cost and more form fitting benefit to risk product emphasis. In my humble opinion nowhere has this been more self-evident than in our perpetual, ongoing quest to solve the chronic illness conundrum.

I remain a proud card-carrying member of that stalwart cadre of hardheaded extended care specialists. A plain and simple truth pushes us forward each day. We know the risk is bigger than publicly perceived. We know the potential for catastrophe is measured in more than the decimation of financial reserves. We know that statistically inevitable predispositions in terms of available caregiving resources will sink many more boats than our customers recognize. We also know that the only glue that can possibly save all our posteriors is more insurance.

• As stated in earlier columns, my consulting partner and I have been asking “Why can’t we get this right?” for too many years. Perhaps it’s the more basic questions that need our attention first:
• What chronic illness problem are we solving for?
• How big is the problem?
• How much protection is actually enough and for whom?
• If it’s a contingent risk, why do we continue to price as if it were a catastrophic inevitability?
• Why have we never focused on the actual net cost of the risk itself?
• Why has the supplemental risk approach not gained sufficient market traction? Why do our sales efforts highlight catastrophic risk prevention almost exclusively?
• If the Partnership juggernaut was a failure, why do we continue to believe that additional tax incentives are the solution panacea?

We must free our thinking, truthfully a tall order.

This must begin with a willingness to embrace new strategies for approaching the risk for a greater number of American consumers. We desperately need new marketing ideas, new strategic sales approaches and much better defined and achievable goals. The truth is that the greatest obstacle to moving forward is the inertia present in our own minds.

My partner and I are currently helping to introduce a combo life product. The first question from our distribution friends every time is: “What product is it like?” Each time I hear that question I think my head will explode. God forbid we should venture outside our comfort zone. What if by some bizarre twist of fate it really is new and improved? Who among you would open the door and let the light shine in?

Other than that I have no opinion on the subject.

Another loose cannon in the current lexicon of confusing popular buzzwords. Living benefits began with the first cash value policy where the consumer could access their own “investment” component while still “living.” It’s history is also littered with the bodies of any benefit that took place before the death of the primary insured from accident benefits to children’s term.

Where the confusion begins to set in is the conceptual relationship with terminal illness allowances. Just for the record: The idea of present valuing an imminent death has been around from the beginning; conversations about immediate need where the inevitable was crystal clear were entertained and facilitated at home offices. Now comes the chicken and the egg conundrum as to where the fuel for viatical vs terminal illness allowances interact. Both companies and private resources understood that a short duration between a terminal health condition and the sure and certain knowledge that remaining premiums would be paid, and a death benefit would therefore also be paid, allowed for private accommodations. All that is being suggested is that the idea of funds remaining in the building may have helped fuel this dramatic expansion of accelerated death benefits aka living benefits. Although terminal illness payments may affect Medicaid and SSI benefits, they are generally viewed as a tax-free death benefit.

Terminal Illness riders are generally available on life policies most often as a “free” benefit. They also usually include a limitation as to the percentage of death benefit that is available. (Example: 75 percent.) It is important to stop here and emphasize the importance of not confusing Terminal Illness with Critical Illness. Terminal is just that requiring certification of no recovery and most often less than a 12 month life expectancy. A critical illness suggests the possibility of recovery. HIPAA dramatically expanded the conditions that could be viewed as an accelerated death benefit providing early tax-free death payments to include: Critical illness, disability income illness, nursing home illness and chronic illness. This expansion of tax-free benefits now fuels the current focus on “Living Benefits.” Initially this plethora of present value calculations followed a familiar and time tested formula: Benefit payments would be calculated by time and loss of money based on an early death not contemplated in the original mortality assumptions at the time of purchase, and, frequently, they were medically underwritten to estimate the severity of the condition and anticipated longevity.

I believe it is here that our current problems with chronic illness riders began. While this was a logical and practical approach, and the only one available at the time, that period of expediency has long passed. The long term care provisions of the Pension Protection Act that went into effect January 1, 2010, have fueled the rising combo market. In addition, recent liberalized provisions in the IIRC enhancing allowable critical illness claim trigger definitions have leveled the benefit playing field between an IRC Section 101g chronic illness life rider and a IRC Section 7702B health rider. Meaning simply about 24 months ago it became more advantageous to purchase an extended care benefit life rider on a pay as you go basis. This was of course already being done with 7702B riders after the PPA revisions on how those internal policy premium deductions for health insurance did not trigger a taxable event.

Now let’s cut to the reason for all this historical rambling. There are 70 plus companies with some form of chronic illness rider offered on their life policies and about 80 percent of those (before I go on, a reminder that this is an opinion column) simply do it wrong. At best they have chosen to not upgrade or modernize their offerings. The so-called discount method vividly outlined above is antiquated and potentially harmful to your E&O premiums. What needs to be clearly understood is that we can understand how and why they originally got there. We do not have to understand why they don’t fix it now. The often-repeated proclamation that there is “no current charge” for the rider is because you did not buy anything you can accurately measure and count on at the time of greatest need. Therefore I can only conclude the obvious—they do not like the risk. They do not understand the risk. They do not want to take any risk. I can’t make this any plainer—it is just too easy and inexpensive to fix it and do it right. If you cannot identify the actual cost or accurately predict the ultimate benefit, I would think that this is a transaction you might wish to step away from until you can. In the interim look for the 20 percent of companies who have a pay-as-you-go structure. Meaning simply that at all points in time you know exactly what the benefit costs and how much help it will deliver when required. Somehow that seems a much more practical and less dangerous approach to extended care planning.

Other than that I have no opinion on the subject.

My partner and I have certainly earned the title of Long Term Care Insurance “Road Warrior.” We are beginning yet another educational crusade this Summer. For more than 20 years we have walked to the front of the room to rally the troops. Live training always works best and our passion for helping to solve the Care Conundrum whips us once again to the pulpit. Over the next six months we will set up our revival tent in most major metropolitan areas. Our detractors, of which there are a few, will simply suggest that the circus is coming to town. We will not be deterred.

It has been suggested that I have been giving the same speech, or for that matter writing the same column, all these years. I cannot speak for my partner, but I will freely and openly admit that is absolutely correct. I have now many hundreds of times asked only one consistent and repetitive question: “Why in the hell can’t we get this right?”

We like to read the room before we begin our pontifications by asking for a show of hands:

• How many have ever sold a LTCI stand-alone health policy?
• How many have sold a combo policy of any kind?
• How many used to sell but gave it up?
• How many own a policy of their own?
• How many upset a client with a policy decline?
• How many have had a rate increase rise up and bite them in the posterior?

If you think I am going somewhere with this—I’m not. Frankly the above information is entertaining but not that revealing. The one question that matters is, have you made long term care, chronic illness, long term services and supports, or extended care planning a fixture in your practice? How many can honestly say they were proactive and not reactive? How many can look in the mirror and tell themselves that they sold more protection of this nature than the clients took away from them? By the simple measure of who asked whom we strike at the real core of the problem!

I can’t imagine that anyone who reads this column doesn’t hold some basic understanding in their minds that we keep ordering from a private care menu without honest published prices. The bill will come due. Your clients will pay. Can you document in all your client files that you offered to help by using leveraged insurance dollars to intervene?

Long term care remains the bastard step-child of an industry that remains in denial. Long term care specialists are a vanishing breed. We have been making excuses for adequate market penetration for over 20 years:

• It’s the product. Wrong, I can’t imagine what perceived product deficiency we haven’t directly addressed. Product options are for the most part simpler and more transparent. There are options now with net cost against a core life premium running less than five percent of cost and combo benefit with annuities less than one percent.
• Family caregiving is easily addressed by using a chronic illness rider paying indemnity dollars.
• Rate stabilization has drastically slowed the rise of new LTCI premiums.
• Living benefits—the good kind (pay as you go), and the bad kind (benefit discount)—are now available at over 70 companies.
• Return of premium options or reasonable future CV surrenders are abundant.
• Short term sales are steady, and even with only 360 days of benefits we know we are covering half the known risk.
• I can’t think of anyone who does not understand the marginal nature of the problem or the potential for a catastrophic financial problem.

The point is these are all just symptoms for which we keep applying bandages. Maybe if we just admitted what we all know we could move this forward. Most insurance professionals do not like this risk. Far too often the client must ask us for help. Far too often the agent is even more reluctant to discuss the reality of the coming care unpleasantness than the potential insured. We thought State sponsored Partnership plans would turn the tide. We thought mandatory training would force better behavior. We probably knew good behavior does not come from the outside. The weight of trillions of dollars needed to care for the Boomers will arrive and it will be paid regardless. It must come from taxes, personal assets or insurance. The consequences of avoiding the inevitable and the responsibility of ignoring and squandering the opportunity to be helpful should begin to weigh heavily on far too many.

Other than that I have no opinion on the subject.

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

We’ve just spent 30 years helping consumers understand that being totally unprepared for long term care risk is a sure-fire strategy for financial catastrophe. We have spent the same period determining the true nature of the risk and where best to apply insurance protection. We have acquired a better understanding of how much insurance is enough. We have developed multiple product choices and are much better able to customize insurance solutions. But recently I have witnessed a prevalent speech impediment bordering on an institutional stutter in terms of what we call the insurance options we sell. Is it long term care, long term services and supports, chronic illness benefits or extended care?

I was recently admonished by the strident voices from “compliance” for at least the ten thousandth time that you cannot call a chronic illness ADBR long term care insurance.

It says so right on the front of the policy! As the standard and overly familiar lecture began, my mind was screaming, “This confusion must stop!” So I politely asked, “Do you know why?” Herein lies the problem: We know why, they do not. Make sure your client understands a rose is a rose is a rose.

If that rider is built with the correct language currently available from the IIPRC it is insurance for long term care risk abatement. The structural differences are very small and do not defeat the purpose and intent of the product. The monies may be coming from a present value of the death benefit, but the claim will be paid exactly the same. So please do not forget that you simply cannot call it by its most descriptive term even though that is exactly what it is. Why? A little LTCI history 101 is in order. HIPAA defined TQ LTCI as health insurance under IRC Section 7702B. This is also exactly why stand-alone LTCI corporate premium deductibility will continue to elevate this sales advantage to the head of the sales prospect line. A chronic illness ADBR on the other hand is simply a HIPAA expansion of terminal illness provisions under IRC Section 101g. So again, to jog your memory, HIPAA gave us two paths to tax-free benefit payments: TQ LTCI and more early present value death benefits. Combo policies did not come to life however until the long term care provisions of the PPA went into effect January 2010, where the cost of the rider could be deducted internally without creating a taxable event. And in April 2016, alternate adopter language was added to the IIPRC which allows the identical claim triggers as LTCI.

After you exclude the “discount” method of claim payment, which I have been trying to accomplish in this column for many months, you are left with a handful of honest and transparent “pay as you go” riders. It makes no difference if they are 7702B or 101g riders, you have paid for a known benefit you will receive when you need care. It should be plain to all that you cannot call life insurance health insurance! But if the claim triggers are the same, and the claim is administered and paid on the same terms (reimbursement or indemnity), then dear friends they are truly both roses and both smell sweet to me. And just in case you don’t relate to flowers or Shakespeare; “Sticks and stones can break my bones but words can never hurt me!”

Other than that I have no opinion on the subject.

Fairly certain no one will argue with the notion that limitations or restrictions that apply to specific policy benefits can be considered “flaws.” Any benefit that is not complete as presented must be inadequate by definition and therefore “flawed.” What “is” is of course crucial, but what “ain’t” is critical to our professional survival.

A vibrant combo life and annuity market has bubbled to the surface. As predicted repeatedly in this column over the last 10 years. (Sorry, I couldn’t stop myself.) You simply do not want to be the company that does not have a critical illness/long term care combo option. Not having one paints a giant target on the back of any existing coverage. Home office 1035 personnel are vibrating in anticipation. Combo policies have been around forever; truthfully the two birds with one stone story never loses its luster. The corollary truth is equally important: Two risks require two costs. Nobody rides free.

This is specifically why the adherents of supposedly free, no up-front cost, rear-end load, “discount” method chronic illness benefits Fry My Toasties! The obvious bears repeating—there is no free lunch. The entire cost of carrying the additional risk will be deducted from future benefits owed and then some. I recognize it’s fun to let the words, “If you don’t use it—it cost nothing” spill from your lips. Unfortunately the corollary truth becomes if you do need it, you have no real idea what the hell “it” is. That unknown, unidentified and currently unavailable for viewing, is also often sheltered from the light of day by built-in obstacles to claiming in the first place. The most glaring example being a requirement that benefit payment requires a permanent disability. The NAIC has allowed a more HIPAA-friendly definition for several years. The cost to the policy is infinitesimal but the benefit to the buyer is critical. Some companies have gone back and revised their definitions, which should be applauded, and new product is more likely to include the newer language as well—which makes the benefit much more copasetic. But if it’s a “discount” method payment your actual benefit, although more liberally defined as the benefit amount, is still a mystery until you really need the money. I must wonder about the efficacy of carrying sufficient E&O in retirement to be prepared when the “surprise” gets sprung on the uninformed policy holder. Bear in mind that the benefit is unknown until your client comes face to face with the reality of the imbedded shortcomings you let flow under your due diligence bridge unmolested.

I can’t believe I have to say this again: Read the specimen contract and find the flaws! If you cannot guarantee benefits, and hopefully premiums, I must ask, “What were you thinking?”

Let’s approach this calmly and rationally. Your client has agreed to buy protection against the possibility of the need for expensive extended care. It seems fairly clear that you should at least explain what that does cost. If you didn’t pay for it, it seems reasonable that there might be questions as to the validity or quantity of ultimate claim payments. I further suspect nothing should bring you in close contact with nothing, or not much, at the time of claim. Paying a known cost for a known benefit does seem to be a much safer approach. Why not take a hard look at what that net cost actually represents. Please divide the premium into the rider cost. The results might surprise you and be very illuminating to your customers. Most long term care/chronic illness claims are manageable. Doesn’t it strike you that the cost to protect a risk of that magnitude should also be manageable from a cost standpoint?

Why can’t we do this right?

You are at a fork in the road. One direction is a well-lit, newly paved toll road. You know where you are going. You know how long it will take to get there and exactly what it will cost to arrive. The other road is overgrown, dark, with unseen potholes and a dubious end to your desired journey. Again, forgive me…I just can’t see a more obvious decision. A baby pig is in a gunny sack. It can be seen moving and heard squealing. The problem, of course, is that we already know it’s probably the runt of the litter, but it is unknown just how deficient is its size and growth potential. Out here in the country we would not ever buy a “pig in a poke” or frankly have anything kind to say about those who sell them.

Other than that I have no opinion on the subject.

Truthfully this basic mathematical concept has gotten us into more trouble than we have ever acknowledged. On which side of justice do you wish to fall? In the case of chronic illness risk, average or even median numbers can be very skewed and seriously misleading. We do however have to have a target to try to accommodate. The real problem all along has been the nature of the risk itself. You must be disabled to qualify, but you must be healthy to buy. We have never come to grips with all the time in between. All those years of virtually non existent claims have played havoc with our thinking. Please take a moment and carefully review this long term care claim occurrence chart. It looks like an inverted alpine ski jump, with relatively level cross country skiing before rapid acceleration as you begin a blast off into claims in your late seventies ending with the universally required jump of faith into the hereafter. Where is the middle of this? And even if you were to arbitrarily choose one, what would it mean ?

In this environment we have built a failing empire of product that is perhaps Ill fitted to the reality of the risk. We keep selling risk protection measured against “average” quantities of the need for care. What if we simply admit that we do not need a lot of insurance for a lot of years? What if we don’t actually need inflation protection until claims ultimately begin to heat up? What if we didn’t need large daily room benefits until we actually do need them? Is it really all that crazy to suggest that we stop carrying this giant boulder of unneeded risk completely through our income productive and healthy lives? Must we struggle under the weight of risk that is simply not evident? Must we endure this interminable slogging progression to a known and eventually vividly clear risk? It is not just looming over the horizon, it is frankly and almost exclusively smack dab at the end of the journey.

Now let me respond briefly to the actuaries, who are by now squirming in their seats, that I have forgotten that we need all that extra money and that is exactly why the most important ingredient of long term care/chronic illness is the necessity of establishing the required reserves to meet future claims. Let me begin by suggesting that inadequate reserves are already the bane of every dollar of premium on the books, and that reducing perceived versus actual claims pricing might provide commensurate surplus relief and savings. Adequate reserves and carrier solvency do go hand in hand. I would, however, argue that building product to form fit the aforementioned chart does release pressure on the pricing equation.

Now let’s return to the silliness of using averages anywhere near our conversation to reform product offerings and enhance sales. As an example let’s look at the most common statistic used in our seemingly futile attempt to quantify the risk: According to the U.S. Department of Health and Services, the popular prediction for needing long term care services on average is for women 3.7 years and 2.2 years for men—which frankly tells us nothing—as we know from multiple sources that almost all claims range from one day to over 12 years and that half of all claims are over in 12 months. Now you attach any cost of care information you wish and Abra Cadabra! You have a quantification of the problem. (Maybe.) So when you plug in median costs from your favorite cost of care source you should come up with an average problem of $150,000 to $250,000. But the disparity in individual claim size plays hell with the math.

My current favorite statistical quote regarding the moving target is from PricewaterhouseCoopers 2017: The cost of services “a quarter of the time is less than $25,000 and another quarter of the time the cost is over $240,000.” Which says to me most claims are small, with a meaningful possibility of a catastrophic claim, but that the majority are somewhere in between and remain manageable with even a minimum addition of insurance dollars. I’m sure enough has now been said to disturb almost everyone. So once again…

Other than that I have no opinion on the subject.

Suggesting that Americans are unprepared for inevitable future emotional and financial turmoil falls into the cosmic understatement category. Only one in five have a will or any last directives. Just a little over half own any form of life insurance. We are lousy at saving, having an average of only $15,000 put aside. Yet we somehow continue to have faith that a leprechaun will appear at the end of life’s journey and provide financial sustenance for our marital partners, largesse and remembrance for our grandchildren, private rooms at five-star hospitals and beautiful Swedish nurses for our superior one-on-one care at home.

Fantasy is wonderful at a superhero movie. It has, however, always been a measure of your powers of persuasion that allows a small dose of reality to intrude and provide some attempt at planning ahead. Believing that your sales presentation succeeds based on your skills to illuminate financial risk suffers from the same hubris that allows consumers to boast that they bought insurance because they are simply wise and wholly committed to protect themselves and their loved ones. Forgive my skepticism!

In my humble opinion, and frequently mentioned in this column, the only source of buying behavior is the 51 million living parents of aging hippies. The discomfort and uncertainty generated by those living the problem becomes painfully obvious to all but the most severely myopic.

Life insurance sales in general remain flat or, perhaps more accurately, sinking slowly in a national malaise of indifference. There is one exception: Combo life. I can’t imagine a more natural merger of concepts, as the number one cause of death is, after all, chronic illness.

There are, give or take, about 50 companies that have succumbed to the most frequent rhetorical question of today’s sale efforts: “Does your life insurance provide long term care/chronic illness benefits if needed?” Again, as endlessly suggested in this column, it is simply too easy to sell against those who do not.

Remembering again that this is an opinion column, the 80/20 rule now applies. Regardless of which IRC code is your cup of tea, about 20 percent offer something of real value and 80 percent do not! Much of what masquerades as a combination of risk amelioration is seriously flawed behind the mask. The added rider too often appears as a half-hearted accommodation to pressure from the field and a self-serving desire to be able to claim “me too!”

Why is it so hard to do this right?

Clearly there are companies that took the time , effort and investment to provide a quality alternative to stand-alone LTCI. And once again there is nothing wrong with long term care protection resting squarely on a health insurance chassis. It is the inherent structural limitations of health insurance that fuels the conversation of offering a combination option in the first place. Health insurance has multiple moving parts as it indemnifies various specific risks, it remains vulnerable to ongoing experience and, by definition, it must be extensively underwritten.

Which part of the above did you not already know? Combo policies therefore begin by answering the historical complaints of LTCI: Too many moving parts, embarrassing rate increases and lethargic underwriting practices. It doesn’t get any simpler than a percentage of the face amount paid monthly, available guaranteed premium rates and streamlined underwriting progressively accessing virtual underwriting technology.

Recently, and old friend from a long established brokerage general agency sent over their current spreadsheet for combo sales and asked, “What am I missing?” Most of the time I would have glanced at the list of companies and made a few offhand recommendations. But I knew that this agency principal cared about what was sold and represented in their name. I therefore stopped and carefully provided a much different list of what makes a good, versus an inadequate, combo product offering:

• Are the premiums guaranteed?
• Can you define now the benefit the client will receive at the time of claim?
• Does it include a residual death benefit?
• Is the predicted time in underwriting for the majority of cases less than a week?
• Are there any structural limitations on benefits paid?
• Are benefits paid in unrestricted cash?
• Is the cost of the rider less than five percent of the premium?

If the answer is no to any of the above, there better be a very good reason beyond quality and your desire to offer only the best to include the offering in your inventory!

Other than that I have no opinion on the subject .

Like Willy Wonka’s chocolate factory, we now live in a world of “combo” confections coming in all combinations of flavors, sizes and colors. Confusion, misunderstandings and frankly a potential abundance of experience disappointments, stand before us like a solid and forbidding rock candy mountain. Some light has been recently shed on the mysteries and old wive’s tales frequently attributed to the two birds with one stone, have your cake and eat it too aficionados. LIMRA, with the hard work of an SOA LTC Section Council member, has recently released a new combo life study helping clear the fog. The study is titled “Combination Products: A One-Stop Solution?” (full annotation at the end). I would not want to offend LIMRA by publishing any direct information in this column. Instead I will take my usual liberties to paraphrase, embellish and interpret my own personal observations from this excellent work.

Combo life policies do seem to offer solutions to the most common historical complaints concerning stand-alone LTCI health products. They certainly are simpler to explain with fewer moving parts, fewer consumer buying decisions, and the offer of additional stability providing at least the availability of guaranteed premiums and benefits. But the biggest boogie man put down triumphantly is the demise of the dreaded “Use it or Lose it” monster selling objection. Someone is going to get some money period. The study identified three categories of product offerings: 1) Life with chronic illness—IRC Section 101g; 2) Life with long term care—IRC Section 7702B; and 3) Life with an EOB rider paying both an acceleration of life benefits and an extension of benefits paid beyond the face amount—all as a long term care benefit. Not all companies in this market participated in the study. For the purposes of this article I would guess somewhere around 50 companies or so have some form of rider available.

What we learned:

• Confirming again that the number one impediment to sales is cost and that we have clearly limited our market penetration to those wealthier members of our country. It was again acknowledged that perhaps the only way to move this to the middle class is with the use of less expensive chronic illness riders.
• Consumers like combo products specifically because their premium is never in jeopardy. There can never be any losers.
• As you may know, the CMA in 2018 will now allow Medicare Advantage plans to add some long term care benefits. However the most expensive component remains care community monthly cost which, in my humble opinion, will remain the responsibility of private citizens. The quest for economic assistance in time of need persists. New reliable and affordable alternatives must step forward.
• The vast majority of product offerings are life CI, although some form of rider is available with all policy form options from term to variable.
• The industry deserves a compliment, as overwhelmingly companies offer product to meet market need. Offense in this case creates a better quality of rider than defensive moves to accommodate distribution.
• Companies are trying to reach more middle class buyers, lowering face amounts and target ages.
• Companies are for the most part relying on existing distribution strategies with only a few building out new ones.
• Underwriting practices and philosophy are frankly all over the board. This is of course good, or bad, or both…too early to tell.

The study ends with five key issues that stand before us: Consumer perceptions of the new offerings; product visibility; regulatory and compliance concerns; operational friction as dual administration issues require the ability to walk and chew gum; and, finally, risk management strategies in a new line of business without sufficient experience.

However, the most important finding from the majority of surveyed consumers was…they want to buy! There is something very basic, charming and endearing about simplicity—hopefully guaranteed premiums with guaranteed benefits that we should all find extremely attractive.

Other than that I have no opinion on the subject.

Reference:
“Combination Products: A One-Stop Solution?” LIMRA. Authors: Scott R. Kallenbach, FLMI, Director, Strategic Research, LIMRA, and Linda Chow, FSA, MAAA, Senior Actuarial Consultant, Ernst & Young LLP.