Healthcare Town Hall

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.

Milliman’s Dawn Helwig discusses the new underwriting practice and the implications it’ll have on women in this Market Watch article. Here is an excerpt:

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.

Long Term Care Dawn Helwig, Long Term Care, LTC

The Washington Post looks at the tricky question of who will need long-term care insurance. Here is an excerpt:

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.

Long Term Care Amy Pahl, Long Term Care

The New York Times looks at the consumer quandary presented by long-term care insurance. Here is an excerpt:

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.

Long Term Care Dawn Helwig, Long Term Care

We have blogged before about the future of long-term care (LTC). A recent article in Employee Benefit Adviser picks up the conversation. Here is an excerpt:

[S]tandalone LTC insurance sales have been in a funk lately. According to LIMRA, “Significant declines in individual LTCI sales continued through the third quarter of 2009, with 28% fewer buyers when compared with the first nine months of 2008 and a 29% decline in new premium.” Indeed, 2005, 2006 and 2008 were also down years, while 2007 was flat.Why have sales of individual LTC insurance been slowing? Many observers cite the “use it or lose it” aspect of LTC policies; consumers might pay premiums for years – even decades – and never file a claim. Some potential buyers may be put off by the idea of “wasting” the money spent on LTC insurance premiums, says Carl Friedrich, a consulting actuary and principal in the Lake Forest, Ill., office of Milliman.

LIMRA puts the average annual premium at about $2,160. Even with some discounts, a married couple might be looking at an outlay of around $4,000 per year to buy coverage. Many individuals and couples probably tell themselves that they have other alternatives (sell a house, tap a portfolio, rely on a relative) to spending so much money to protect against a financial drain that might never occur.

Hence the appeal of combo products. If clients need coverage for long-term care, they have it. If their need for custodial care is modest or nonexistent, the money they spent on life insurance or annuity premiums will provide a payoff for them or their beneficiaries.

For more on Carl Friedrich’s perspective on combo products, read this article.

Long Term Care Carl Friedrich, Long Term Care

The Healthcare Economist has a new article out on the CLASS Act, the much-discussed long-term care (LTC) program established as part of the healthcare reform law. Here is an excerpt:

Milliman notes that currently, the CLASS act would be voluntary and would include guarantee issue (meaning that no one could be denied coverage).  Separately, each of these provisions could allow for a sustainable long term care insurance product.  The private sector currently uses the voluntary insurance model with underwriting.  On the other hand, a guaranteed issue policy could work if purchasing LTC insurance was mandatory.

Together, however, these provisions may be problematic.  “The voluntary aspect of the program allows low-risk individuals to never sign up for the program while the guaranteed issues enables some of the highest-risk individuals to join the program.  This is a formula that is virtually certain to create financial instability in any insurance program unless there are other important provisions to control risk.”

The CLASS act does have some additional risk control provisions.  To qualify for these benefits, one must pay into the plan for 5 years.  Employers can decide to offer this LTC as a benefit and employers who choose to this option will have employees automatically enrolled with the premium deducted from each paycheck.  Individuals would have to specifically ask to be removed from the program.  Also, individuals who opt-out of the program will have to pay a higher premium if they decide to opt back in.  The purpose of the vesting and opt-out penalties is to minimize adverse selection.

Long Term Care Al Schmitz, CLASS Act, Long Term Care

Long-term care (LTC) policyholders may never need to use their benefits. But when they do, how long will they likely need them? A recent Kiplinger article sought an answer to this question among others associated with state LTC programs. Here is an excerpt:

Most people who need long-term-care benefits will not need them beyond three years. A study by actuarial consulting firm Milliman found that only 8 percent of claimants who had policies with a three-year benefit period exhausted their benefits. Of those with a five-year benefit period, only 1.5 percent used all their benefits.

Electronic Health Records Long Term Care

We’ve blogged before about the attempts to legislate increased adoption of long-term care (LTC). One idea that can also help increase adoption is the “combo product”—an idea that brings together LTC and annuity products. A new article in Financial Planning looks at this dynamic. Here is an excerpt:

Why have sales of individual LTC insurance been slowing? Many observers cite the “use it or lose it” aspect of LTC policies; consumers might pay premiums for years-even decades-and never file a claim. Some potential buyers may be put off by the idea of “wasting” the money spent on LTC insurance premiums, says Carl Friedrich, a consulting actuary and principal in the Lake Forest, Ill., office of Milliman.

LIMRA puts the average annual premium at about $2,160. Even with some discounts, a married couple might be looking at an outlay of around $4,000 per year to buy coverage. Many individuals and couples probably tell themselves that they have other alternatives (sell a house, tap a portfolio, rely on a relative) to spending so much money to protect against a financial drain that might never occur.

Hence the appeal of combo products. If clients need coverage for long-term care, they have it. If their need for custodial care is modest or nonexistent, the money they spent on life insurance or annuity premiums will provide a payoff for them or their beneficiaries.

This appeal has resulted in significant business already. For 2008, first-year premium on combination plans was estimated at $650 million (primarily single premium), Friedrich says. That exceeded first-year standalone LTC insurance premiums (primarily annual premium) of roughly $600 million.

Long Term Care Carl Friedrich, Long Term Care

Milliman experts and their research are increasingly a part of Congressional discussions of healthcare reform. On Tuesday, AHIP President and CEO Karen Ignagni cited research by Will Fox and John Pickering in her testimony before the Senate Health, Education, Labor and Pensions Committee:

A December 2008 study by Milliman, Inc. projects that this cost shifting essentially imposes a surtax of $88.8 billion annually on privately insured patients, increasing their hospital and physician costs by 15 percent. This study concluded that annual health care spending for an average family of four is $1,788 higher than it would be if all payers paid equivalent rates to hospitals and physicians. The transfer of these costs to those with private coverage cannot be sustained and is critical to addressing concerns over affordability.

Read more…

Cost, Fragmented system, Government, Long Term Care, Reform Bruce Pyenson, Congress, cost shift, John Pickering, Kate Fitch, Long Term Care, Susan Pantely, Will Fox