Common Cause

This is a time for clarity. If ever there was an opportunity to reflect on the obvious it is now. Critical baseline values, intrinsic social obligations and the meaning of cultural responsibilities to each other, in my humble opinion, have never been more important. The cry for common cause and common purpose currently haunts every American psyche. In these troubled times the disparity of understanding of what should unite our thinking and consolidate common ground is truly alarming.

Clearly identifying those common denominators of collective knowledge that bind us together is the only way we can ever move forward. It struck me that this is particularly true in our own little back eddy of long term care risk mitigation. Therefore, in no particular order of importance, I would like to try to establish a baseline of what we should all know to be Common Knowledge:

  • Nobody wants to suffer the ill effects of ending life’s journey in an institutional setting. (Nursing home or prison.) No one can escape the current implications of overcrowded, underfunded, locked down institutionalized and intentionally discounted care.
  • Again, the readers of this column are the original founding members of the “International Stay at Home Fraternal Order of the Sainted Caregivers of the World.”
  • No one really wants to talk about the problem, but virtually everyone is aware that it exists.
  • Limited market penetration has been a mirror image of limited acceptance of the insurance selling fraternity both affiliated and non-affiliated.
  • “Planners” are of course the most likely to respond, but even this primary cohort of all insurance sales have to be cajoled and frankly marginally coerced to take action.
  • At the heart of virtually every sale is a personal or tangential experience with the emotional and financial consequences of being unprepared. The cost of caregiving binds us all together.
  • Everyone would prefer quality private care yet consumers consistently underestimate the actual cost of care and remain perpetually confused about who will pay. We all of course suspect this is simply intentional blind ignorance.
  • No one disputes our known history. This is certainly not the first or probably the last time we underpriced health insurance. The burning frustration is that the largest pricing concern was how much consumers who did buy loved what they bought. The negative feelings caused by onerous rate increases has done more damage than we choose to admit.
  • We have slowly but surely priced ourselves out of our market. Twenty five years ago the average assets of LTCI buyers was $40,000…it is now approaching $100,000. As average cost rose underwriting constricted and sales fell causing producers and consumers to abandon ship.
  • It was always about cost to benefit. We continue to find ourselves just out of reach of the very market we need to insure, those whose fragile assets and marginal retirement strategies are most vulnerable. Individual traditional LTCI premiums are teetering on the edge of $3,000 and multi-pay combo premiums are rapidly approaching $5,000—tantalizingly just out of reach of what every consumer survey suggests is successful marketing territory.
  • We know that the best way to achieve successful market penetration is to offer protection at the worksite, a market that has unfortunately and embarrassingly now dried up and blown away.
  • The gravitational pull of double-dipped benefits with state supported Partnership plans might be kindly compared to a not overly embarrassing belly flop.
  • Why are we surprised at growing claims? Those who do buy know there is a problem. Why can’t we accept this as adverse selection at the get go and face up to the consequences?
  • We know that corporate premium deductibility will drive sales, yet currently the argument finds itself in the fine print at the back of new and improved marketing materials.
  • It was always supposed to be our intention to leverage the risk of those at greatest risk, yet we find ourselves quietly justifying the importance of leveraging dollars for the wealthy.
  • I’m very sorry but there is only anecdotal evidence from consumer wish lists that additional tax incentives which might allow access to tax deferred accounts will change the dynamics of the sale. We all know that there will have to be a balance of commitment to the risk from public and private sources. Eventually, one will have to lay claim to the front end of the risk and the other the surplus and excess. Frankly, whichever one prices out better politically will get to choose heads or tails.
  • There is massive confusion in the combo market. Beginning with the definition of what constitutes a Hybrid product (which is currently all over the spread sheets). And…anyone who does not read carefully the specimen language of the riders at play better have a low deductible E&O policy.
  • Two thirds of the affluent do not have a financial plan. How can long term care protection be a firewall around a non-existent structure?
  • If you study current LIMRA combo production there are really only two visible signs of sales growth: Variable UL and SPUL. In other words, the only way to hang on a long term care/chronic illness ADBR is to dangle it as a bonus feature of a very aggressive account value projection.
  • And before we all become too proud of the fact that 90-plus percent of the long term care market is combo, please note that 85 percent of those sales did not charge for the rider! So, apparently, if our mission was to reduce the net cost of the risk, the only way we can sell it is to give it away!
  • Furthermore, those predominant discount or loan method riders are in truth nothing more than a convoluted life settlement—which might be the shortest distance to a fair present value anyway.
  • Insurtech holds great promise of enhanced private care at home and major reductions in personal cost. Unfortunately this growing group of innovators suffer from the same shortage of funding that has plagued our cause from the beginning.

Dear friends, until we stop and take inventory of the absolute truths we have learned the hard way over the last 25-plus years, we cannot hope to build any kind of new future. We already share a common cause. If we could just convert our common knowledge into common purpose we may finally get this done!

Other than that I have no opinion on the subject.

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: