COVID-19 And Long Term Care Planning

COVID 19

How can we—as long term care specialists—use the brutal impact of COVID-19 to help our clients see the importance of long term care planning?

The Bad News—COVID-19 has totally disrupted our lives, even if we have been fortunate and not been personally infected with the virus.

The Good News—Yes, there is a silver lining here. The pandemic has provided an unprecedented opportunity for opening doors and for sales.

There are two reasons why:

First is the Denial Factor. The “This will never happen to me” excuse has always been a frustrating barrier when working with clients. But COVID-19 has changed many people’s perceptions of being invincible. They now realize how vulnerable they are. And if COVID-19 can strike us or our families and cause devastation, certainly a long term care event can do that too.

Second is the increased shift to home care. Here are the key points I am now discussing with my clients:

  • Start with the fact that families are now reluctant to send their loved ones to a facility because of the risk of infection.
  • Then add the impact of the recent changes in Medicare which is forcing hospitals and nursing homes to send patients home quicker and sicker.
  • The result is more people will be receiving care at home.
  • Who will be providing that care? Does a spouse or child want to provide this care hands-on or prefer to supervise the care? Would having a stream of income to pay for this care be helpful? And all the other reasons that we agents continually discuss with clients during the sales process.

To better understand the impact of COVID-19 on the long term care continuum and on our clients, we conducted a survey of many of the top people in our industry and prepared a white paper summarizing the results.

The survey information has been a real eye-opener. The financial impact of the pandemic has had a devastating impact, particularly on both nursing homes and assisted living facilities. Here is an overview of our findings.

The Impact on Nursing Homes
The impact on the nursing home industry has been catastrophic! With occupancy rates plummeting, this industry is in deep financial trouble.

The virus has proved particularly deadly among people in long term care settings. More than 700,000 cases of COVID-19 have occurred among these residents and the staff who assist them. The death toll has been particularly alarming. Even though just one percent of the U.S. reside in a long term care facility, long term care deaths represent nearly four in ten COVID-19 deaths.

The American Health Care Association and the National Center for Assisted Living (AHCA/NCAL) conducted a survey of 953 nursing home providers across the U.S. on their financial and staffing challenges.

  • Two-thirds of nursing home operators say they won’t make it another year given current operating pace due to increased COVID-19 costs.
  • 90 percent of nursing homes are currently operating at a loss or less than three percent profit margin.
  • 65 percent are currently operating at a loss.

Why are so many providers in deep financial trouble?

  • Staffing has been the top cost in response to COVID-19, with nine out of ten nursing homes hiring additional staff and/or paying staff overtime.
  • 58 percent of nursing home respondents said additional staff pay and hiring new staff were their top costs incurred due to COVID-19.
  • 70 percent of nursing homes have hired additional staff, and nine out of ten have asked current staff to work overtime and provided hero pay.

At the same time, revenues are taking a beating. Nursing homes are suffering from the loss of lucrative post-acute rehabilitation and other care for patients recovering from surgery, strokes and the like. Potential long term care residents are reluctant to move in.

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These results are consistent with one expert in nursing home financing who privately predicts that COVID-19 will drive about half of all current operators out of business.

The Impact on Assisted Living Facilities
Many assisted living facilities are in financial trouble, with their occupancy rates significantly declining due to COVID-19.

However, because these facilities are not subject to federal reporting requirements and the stricter state licensing required for nursing homes, reporting has been inconsistent and incomplete.

Here are the key findings from a survey by the National Center For Assisted Living

Finding 1—Half of assisted living facilities are operating at a loss.

Finding 2—Sixty-six percent of assisted living providers said they won’t be able to sustain operations another year at the current pace of increased costs and revenue loss.

Finding 3—These facilities are facing increased costs in personal protection equipment (PPE) supplies, staff pay and cleaning supplies.

Finding 4—Most assisted living facilities—unlike nursing homes—have not received any direct federal funding.

The Impact on Home Health Care
Americans want to stay at home and age in place.

Even before COVID-19, claims data shows that most care is already received at home.
Genworth, which probably has the most long term claims in the industry, released this data over a year ago. (First benefit means the first claim filed. Latest benefit means the last claim filed.)

Expect the trend to age-in-place to continue to accelerate as a result of the COVID-19 impact on nursing homes and assisted living facilities.

A survey of family caregivers showed these results:

  • 65 percent said COVID-19 has completely changed their opinions about the best way to care for older adults.
  • 68 percent said they don’t agree that quality care can be provided in assisted living and other congregate care settings.
  • 78 percent are concerned their loved one will contract COVID-19 in a facility.
  • Looking to a time after the pandemic, two-thirds of family caregiver respondents said they plan to use in-home care rather than facility-based care.

These concerns were issued by two survey respondents:

  • Home care agencies and nurse registries will need to choose their labor force more carefully and find ways to ensure that they are free from this virus.
  • Getting trained caregivers is becoming harder, and the price of home care is already increasing. That had started pre-pandemic and will certainly accelerate as the need grows.

The Impact on the Carriers
With the pandemic crisis lasting longer than most of us had anticipated, the impact on the carriers has definitely increased.

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To determine the impact, we identified three areas: Traditional carriers, hybrid carriers and underwriting. The following information should be considered a snapshot taken as of January 2021 when we wrote the White Paper because the carriers are continually modifying their procedures.

The Hybrid Carriers
This is the area where we have seen the most change. Almost every week there has been an announcement about an upcoming change. Virtually all carriers have increased their premium rates and most have limited the application age to 70. One company requires a single premium for all applicants over age 70.

One carrier explained the premium increase as follows: “Given the extremely low interest rate environment and historic volatility in the markets, increasing premiums is a necessary step to ensure policyholders are protected and to maintain the long term vitality of the product.”

The Traditional Carriers
Initially, from an agent’s perspective for this segment of the industry, the changes have been surprisingly minimal. For several months one carrier limited the age of applicants to under 65, but that restriction has now been lifted.

But now we are seeing much stricter underwriting requirements. They include:

  • Applications are postponed if the insured or a member of their household has traveled outside the country within the past 30 days.
  • If the insured or somebody in their household has come into contact with somebody who tested positive, coverage could be postponed for 30 to 90 days.
  • If an applicant currently has COVID-19, he or she is postponed for coverage ranging from 30 to 90 days depending on the carrier.
  • If hospitalized, it could be up to a year.
  • If quarantined with no diagnosis or symptoms, the delay ranges from as soon as he or she is released to 90 days.
  • And this was a shocker: One carrier announced that if you had the COVID-19 test—for whatever reason unless it was needed for employment—there is a 90 day delay to take an application. That was vigorously protested during the conference call I attended. Fortunately, that requirement has now been relaxed.

Claim Support Services
Noreen Guanci, CEO of Long Term Solutions, provided a very interesting analysis of the impact of COVID-19 on the support services needed for the carriers’ underwriting process.

  • “During the beginning of the outbreak, around March, we saw a dip in new claims. As the summer months approached and COVID cases declined, these numbers leveled off. It was assumed that insureds were hesitant about allowing caregivers into the home. And assisted living facilities and skilled nursing facilities were on lockdown, with strict rules about allowing visitors.
  • “COVID has also impacted our ability to do on-site assessments. Some carriers do not want to take the risk of contact. In the initial phase of COVID-19, we primarily performed virtual assessments, using video technology. This strategy had its own challenges in that some insureds did not have the technology and others complained it was too complicated. Because adult children worried about the safety of their loved ones but were unable or reluctant to visit, insureds were on their own regarding these matters. And facilities did not have the staff to assist their residents. We are now doing a hybrid approach, depending on the comfort level of the carriers.
  • “If I had to look into the future, I would guess that the fear will continue. Insureds on the border of needing help will hesitate unless it is absolutely necessary. Families and friends will likely pick up the slack. Those who really need significant care will proceed, especially nursing home admissions, because they likely won’t have a choice. We know there is already a shortage of caregivers, and it is expected to get worse.”

The Wall Street Journal, in a recent article, printed this: “The pandemic is reshaping the way Americans care for their elderly, prompting family decisions to avoid nursing homes and keep loved ones in their own homes for rehabilitation and other care.”

One of the lessons from COVID-19 is that we need to encourage our clients to discuss with their families their plan for when they need help. And long term care insurance should be on that list!

While in reality there is no silver lining to COVID-19, long term care insurance will ease the burden accelerated by this crisis and to fund flexible care options. That’s why we intend to use the information in this article when working with clients. That’s why—as brutal as this pandemic has been—the silver lining for agents is how long term care insurance will help our clients and their families.

Margie Barrie, ACSIA Partners, is a nationally recognized expert having worked as an agent specializing in long term care planning since 1990. She has been named as one of the industry’s top ten power people and is co-founder of the Executive Study Council, a group of the top 20 women leaders in the long term care industry.

She is the author of two books and a much sought after speaker, presenting at numerous industry conferences and providing Partnership and other training nationwide.

Leni Webber, CLTC, CLU, MSW, personally experienced the slow decline of her mother due to a memory loss situation. This life-altering experience as a caregiver and care manager strengthened her resolve to present realistic, genuine long term care solutions for others. Since then, Leni has become one of the nation’s leading long term care experts, and is a member of one of the most successful long term care brokerages in the country.