The Three Percent Solution

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.

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: