Severe optimism remains the favorite affliction of LTC insurance professionals. (This column has provided an ample supply of encouragement.) The LTC insurance industry now has two years of substantial premium growth, yet we are of course not out of the swamp—there remains a number of large and unpredictable alligators in our chosen swamp. Perhaps outing these lurking “carnivores” will remove some of the fear and mystery surrounding their sightings by innocent bystanders.
Carrier retreat has become a serious structural problem. Both companies and ratings agencies have acquired a negative outlook on LTC insurance, particularly in terms of individual standalone sales. Once upon a time there were more than 100 companies offering coverage; today the numbers have dwindled. Hopefully the limited risk of combo policies in conjunction with recent sales success will bring more companies back into the market.
Just like life insurance, perhaps the most significant component of successfully pricing LTC insurance is long term investment. Flat interest rates fueling virtually non-existent traditional investment returns have plagued LTC insurance companies without any apparent cure; thus, they need to explore more aggressive investment strategies. Combo policies again provide new opportunities for a more balanced risk approach.
The CLASS Act is not dead, only wounded. It was finally recognized as severely flawed and terminally impaired. However, depending on future political influences, a CLASS Act zombie could easily reappear, feeding on the flesh of mandated employer participation. According to a report by the U.S. Congress’ bicameral Repeal CLASS Working Group in “CLASS’ Untold Story: Taxpayers, Employers and States on the Hook for Flawed Entitlement Program,” (September 2011), the government knew CLASS was an unsustainable program ultimately dependent on government subsidy. Politics kept it alive and staggering forward for 18 months before pending implementation plans were put on hold. Re-animation remains a real possibility.
The Genetic Information Nondiscrimination Act of 2008 (GINA), as currently interpreted by the Department of Health and Human Services (HHS), has proposed that the prohibition of releasing genetic information be extended to LTC insurance. Thus, any knowledge of cognitive predisposition would be intentionally hidden from prospective insurers. Cataclysmic adverse selection could occur as a result, literally imploding LTC insurance pricing and generating another exodus stampede of LTC insurance companies. As was the case with the CLASS Act, educational efforts are being made to inform HHS of the potential hazards of this course of action.
There are regulatory obstacles put forth by the National Association of Insurance Commissioners (NAIC) and numerous state insurance commissions that create serious impediments to building smaller policies and innovative combo plans with annuities. Work is ongoing to enlighten and focus regulators on additional consumer-friendly alternatives.
The Nature Channel revealed that alligators can hold their breath under water for very long periods of time before surfacing right under unsuspecting prey with fairly horrific results. This should not prevent us from enjoying water sports or the comfort of alligator boots. Vigilance in the face of adversity has always been the source of my persistent optimism.
Other than that I have no opinion on the subject.
