Genworth will roll out gender-based pricing for women who apply for long-term care (LTC) insurance individually starting in April. The company’s decision means that women, who live longer and file more claims than men, will begin paying more for LTC coverage.
Historically, women have not been charged more for long-term care insurance than men, despite the fact that they live longer. (Girls at birth have a life expectancy of four years more than boys, though that gap narrows over time.) Women are generally thought to be the family decision makers when it comes to long-term care insurance purchases, and the industry didn’t want to risk alienating them by charging them more, said Dawn Helwig, consulting actuary and principal with Milliman, a global actuarial and consulting firm.
Yet, industrywide, women represent 60% of long-term care insurance policyholders, and account for 70% to 80% of claims, Helwig said. Not only do women live longer “on claim” than men, they also go on claim more. Married women often provide care for their husbands, delaying or even preventing the men’s need for care in a facility. And single women may be less likely to have family caregivers than their married counterparts, making them a potentially more expensive category of customer.
As the biggest player in the industry, Genworth has the clout to make the first move in raising prices to reflect women’s claims experience, Helwig said. The insurer’s move affects more than just single women, who in and of themselves are not a small constituency. Forty-seven % of all women 55 and over are widowed, divorced, separated or never married, according to the U.S. Census Bureau. A married woman who applies individually would also face the increase.
In July 2012, New York state is scheduled to roll out a mandate that individuals receiving community-based long-term care services funded by Medicaid must enroll in managed long-term care (MLTC) plans. This mandate will be implemented gradually, starting with the five boroughs of New York City.
Provider organizations need to be aware that under this mandate managed long-term care plans are funded using a capitation mechanism in which they receive a lump sum per member from which they must pay most long-term care and other ancillary expenses. The risk shifts from the Medicaid program to the plan. Running a successful managed long-term care plan therefore requires significantly more investment in risk management, financial management, and strategic planning than do fee-for-service arrangements.
Health plans and home healthcare agencies that were successful under fee-for-service reimbursement need to understand and plan for these changes, which will ultimately result in reduced utilization per long-term care patient.
This paper discusses these and other issues pertaining to MLTC plans in New York.
So how great is the need for such coverage? It depends on how you look at the data. “One in two Americans are likely to need long-term-care services sometime in their lives,” says Amy Pahl, a consulting actuary for Milliman Inc, a leading actuarial and consulting company. However, Pahl adds, of those who might need long-term care, about a third will not meet the most common deductible period of 90 days because they will either die or recover before then.
To determine if a long-term-care policy makes sense for you, it is important to understand how the coverage works and what’s available.
On behalf of the Academy, I offer the following recommendations for modifying the CLASS program:
An actively-at-work definition with a minimum requirement of 20 to 30 hours of scheduled work or a comparable requirement;
Restrictions on the ability to opt out and subsequently opt in with the use of either a long second waiting period for benefits or an alternative underwriting mechanism(s);
The use of a benefit elimination period or duration limits;
Benefits that are paid on a reimbursement rather than cash basis;
An initial premium structure that provides for scheduled premium increases for active enrollees at either a consumer price index or alternative rate.
These modifications, along with an effective marketing effort, will improve the sustainability of this voluntary long-term care program. Without these modifications, the program is likely to be unsustainable.
While CLASS program is required to be actuarially sound over a 75-year period without taxpayer support, that will be difficult to achieve, said Allen J. Schmitz, a consulting actuary for Milliman testifying on behalf of the American Academy of Actuaries. With guaranteed issue and a waiting period that is too short, the voluntary program is at great risk for adverse selection, he said.
For more on adverse selection, click here. To see the full hearing, click here.
Can you trim coverage? Consulting firm Milliman has found that only 8% of those with three years of coverage exhaust their benefits. And switching an unlimited policy to a three-year benefit saves as much as 39%, says AALTCI; going from five years to three can save 15%.
“While long-term care insurance may be a complex and somewhat costly product, it can act as a financial safety net should people need extensive care in their old age,” says Dawn Helwig, FSA, MAAA and consulting actuary for Milliman, Inc. “Purchasing a long-term care policy or combination product can help mitigate the potential risk of having to pay out-of-pocket for unexpected health-related costs down the road.”
Reuters examines how long-term care (LTC) policyholders can deal with rising rates, offering several suggestions, including this one:
If you’ve got the unlimited coverage and face a big rate hike that you can’t afford, consider dropping back to less coverage. Likewise, anyone shopping the market will do well to consider the less comprehensive coverage.
The LTC market has been moving in this direction in recent years. The percentage of insured policyholders with lifetime benefits has fallen from 36 percent in 2002 to just 15 percent in 2009, according to Helwig.
Three years of benefits will be enough to cover all but 13.1 percent of policyholders, according to a recent Milliman study based on the claims history of four large insurance companies; just 7.6 percent will need more than four years of benefits and only 4.5 percent require more than five years.
The CLASS Act is supposed to create a voluntary worksite LTC benefits program. Insurance groups and actuaries at the Centers for Medicare & Medicaid Services have criticized the program and argued that it will be actuarially unsound.
Budget analysts say the CLASS Act would reduce the cost of implementing the Affordable Care Act up until 2014 but then would add $76 billion to the deficit from 2015 to 2020.
The CLASS Act program addresses “an important public policy concern, but is viewed by many experts as financially unsound,” Bowles and Simpson say in the Moment of Truth draft.
The program’s earliest beneficiaries will pay modest premiums for only a few years and receive benefits many times larger, and “sustaining the system over time will require increasing premiums and reducing benefits to the point that the program is neither appealing to potential customers nor able to accomplish its stated function,” Bowles and Simpson say.
The CLASS Act program should be “reformed in a way that makes it credibly sustainable over the long term,” and “to the extent this is not possible, we advise it be repealed,” Bowles and Simpson say.
Anyone looking for ideas of how to make the CLASS Act more affordable should consider this series of articles, especially the one starting on page 15. Some of the suggested options for reducing the cost of the program include:
Increase activities of daily living requirement: The Act allows for a two- or three-ADL benefit trigger requirement. The secretary may wish to consider the three-ADL option to help control utilization and lower premiums.
Why invest in insurance if there’s a chance you’ll never need it? It’s a reasonable question, so consider your odds.
The consulting firm Milliman, which does a lot of work for the long-term care insurance industry, thinks your odds aren’t so great. For people age 65 and older who have long-term care insurance, there is a 45 percent chance of making a claim, though it ranges from 30 to 56 percent depending on gender and marital status.
Using data from long-term care insurance policies that have no spending limits, Milliman also estimates that once you’ve made a claim, the chances that you will continue needing care for more than three years is at least 13.9 percent. There is a 4.3 percent chance of it exceeding five years.