My ten-pay policy was recently paid up. It’s a joint, comprehensive benefit policy with indemnity, 5 percent compound inflation and unlimited benefits. At the time of purchase I was very concerned about catastrophic risk. At the center of my benefit selection process was the possibility of that big, lengthy home and institutional event. I wanted to make sure that I had provided a total insurance solution, that I had guaranteed the prevention of a possible scenario that could totally devastate my financial plan.
Our industry has always been attracted to blanket risk protection. A Gestalt insurance solution is, after all, a predictable, finite and specific response to a known quantity of risk. We have done an exceptional job of quantifying the potential size of the problem and providing fairly robust insurance alternatives. We do have a policy that can directly confront a potentially drastic and dire outcome. The problem of course is that not enough Americans can afford it.
Recently, I had a total knee replacement. As is sometimes the case, rehabilitation has been slow and frustrating. Both the acute medical procedure and the sub-acute rehabilitation are predictable—ultimately providing anticipated improvement in my mobility and quality of life. Unlike a LTC insurance event, I am 100 percent sure my situation will improve.
This unanticipated down time has provided me with a true opportunity to reflect. In many ways I have had a close call with the meaning of custodial dependency. For a number of weeks I could not perform a number of instrumental activities of daily living (IADLs) and activities of daily living (ADLs). My beautiful and saintly wife has experienced an early dress rehearsal of the burden of 24-hour caregiving.
After release from the hospital I was also given the choice of going to a skilled nursing/physical therapy facility for a one-week stay, or going home and having several home visits per week. I had previously toured the nursing homes in my small town, so I chose to go home, placing an additional burden on my family. The entire experience has caused me to again ask some basic structural questions.
How much insurance is enough?
Have we adequately provided for the initial front end trauma experienced at the beginning of the claim process?
How many dollars are really needed to help maintain personal control of the claim process?
How much is needed to remove concerns about imposing on family members?
How much indemnification is really needed to allow sufficient time to prepare and plan for a known claim onslaught?
Incidence of claim has always been a little confusing. An often quoted source comes from an analysis done in 2005-2006, “Long Term Care Over an Uncertain Future; What Can Current Retirees Expect?” (Peter Kemper, Harriet L. Komisar, Lisa Alecxih, Inquiry, 42: 335-350). This popular research is based on the loss of one or more ADLs, four IADLs and any LTC service received after sub-acute care under Medicare.
After 65, 31 percent will never require care, 17 percent will need care for less than one year, 12 percent for 1 to 2 years, 20 percent for 2 to 5 years, and 20 percent for more than 5 years. These numbers were basically confirmed by the 2011 Genworth Claims Analysis, which indicated that 44 percent of their claims lasted less than one year. Those claims that lasted more than one year had an average duration of 3.9 years, and 14 percent would last more than 5 years.
The bottom line is in today’s dollars a $100,000 pool of money would cover 60 to 70 percent of anticipated claims.
I’m just not sure we are asking the right questions. There remain several underdeveloped markets. There needs to be a more confident approach to selling smaller benefit policies that intentionally address those issues most dear to consumers:
Freedom of choice about where and from whom we receive care.
Personal control of caregiving alternatives.
Peace of mind that planning will address real and immediate caregiving issues.
There needs to be a more precise focus on what happens at the beginning of the claim process. What can be done to alleviate the shock of a new and often sudden disability? There are new responses to this concern coming to market offering LTC insurance light—short term LTC insurance or what might be best described as LTC supplement policies.
A number of companies are now offering one year benefits, managed care support services, reduced percentages for assisted living, and early cash “transition” benefits. Although there are still some regulatory prejudices against policies with less than a two-year benefit, this is a significant development.
Selling less benefit to many more members of the working middle class is critical to the survival of our industry and perhaps the very stability of our national financial well being. It seems logical that these newer, more affordable benefits will continue to have increasing traction at the worksite.
Targeting smaller, more affordable solutions to the specifics of the problem (particularly if policy issue is faster) seems to be an obvious formula for greater sales success. If we could just focus on the human pressure points that can best be alleviated by simply applying money—money that buys time to think, plan and adjust to new realities. Many of us are just not comfortable with or confident in government programs; however, a well-built and flexible Medicaid supplement policy (for those who need it)—perhaps as an intentional enhancement for the partnership program—may have much more merit than I originally thought.
Other than that I have no opinion on the subject.
