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Better plans mean better opportunities in long-term care insurance

Christine Mccullugh

Take a little trip down memory lane with me, back to high school. Hair was big, jeans were baggy, and you may have even worn one sparkly glove on occasion. Times have changed, and (hopefully) your style has, too.

Many of the insurance products we know today also look very different than the ones available when we first entered the business. Retirement plans and health insurance have undergone significant changes, and new products are coming on line all the time.

As you help your clients fill their risk gaps, don’t forget about long-term care insurance. It, too, has undergone some significant, and even exciting, changes in recent years.

What’s changed?

Long-term care insurance can play a significant role in your clients’ overall financial plans. The odds are now 2 in 3 three that any one of us will need long-term care, and there are limited ways to pay for it. At a current estimated cost of about $90,000 per year for nursing home care, the accounts of even the most diligent savers will be quickly depleted. And in cases where an individual spends down assets to the point that Medicaid takes over, there are implications for the patient’s heirs. States increasingly pursuing the recovery of amounts paid by Medicaid for LTC patients whose estate still includes the family home; it is becoming more and more common for them to be required to sell the house in order to repay those expenditures. Loved ones for whom the patient intended to leave an inheritance may never see what the patient worked so hard to accumulate.

But there is great news in this new market. Plans are better than ever, and now is a great time to bring them to your clients and explain why.

Carriers: You may have read that some carriers exited the long-term care market in the last few years. Those that remain are the ones whose products are the best and whose pricing reflects actual market experience. As with any new product, there were many unknowns in the early days of long-term care insurance. But now, with 25+ years of product and market knowledge behind us, the carriers in the marketplace are committed to matching the products to the needs of today’s consumers, at prices that are fair and reflective of the risk.

Rates: When you present health insurance coverage to your clients each year, you (and they) expect to see rate increases. In the group long-term care market, there have been rate increases in the last few years – after more than 20 years without them! Experience has yielded adjustments in assumptions, leading to more accurate pricing for LTC insurance products. For example, in the early years of LTC insurance, carriers expected a lapse rate of about 8% per year. In reality, people hold onto their LTC coverage, and the actual lapse rate is less than 1% per year. New pricing models reflect the change, and new underwriting guidelines ensure that today’s prices keep pace with real experience – which should create stability for carriers serving the market.

Products: When LTC coverage first entered the marketplace, it looked similar to Medicare in that it only took effect following a 3-day hospital stay, and only applied to care received in a nursing facility. Significant improvements have been made, based upon consumer preferences and market experience. The hospital stay requirement is gone, and the coverage can apply to in-home care, nursing home care, and even assisted living facilities.

You can help clients fill the risk gaps

As an insurance professional, you’re well aware that costs have increased for all kinds of coverage. That’s because costs of the things we’re insuring – our homes, cars, health, and everything else – have also increased. It’s no different for LTC coverage. Governments, both federal and state, feel these increases too, and the result is belt-tightening like never before.

If your clients are relying on either their own savings or Medicaid to pay for their long-term care and then expecting that their heirs will inherit the family home or the 401(k) account anyway, they may find themselves in a very uncomfortable position at a time when they can no longer do much about it.

As their insurance professionals, it is incumbent upon all of us to educate our clients about the risks they face with regard to long-term care, and how we can help them preserve their savings, their homes, and their retirement money to their best advantage.

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Christine McCullugh is a nationally-known expert in long-term care, and the President of LTC Solutions (www.ltc-solutions.com). A speaker, consultant, and member of AHIP’s Long-Term Care Curriculum Review Committee, McCullugh provides insights to employers, carriers, and industry associations in an effort to guide and develop the future of LTC insurance. She is pleased to provide expertise and partnership opportunities to colleagues desiring a deeper understanding of this unique market and help presenting it to their employer clients.



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