Don’t a denial or a premium hike stop you from helping your clients
There’s, clearly, no doubt that the long-term care insurance (“LTCI”) industry is under increasing duress.
Last summer, LTCI giant Genworth announced that its company would engage in an “intense, very broad, and deep review of all aspects of our long-term care insurance business,” according to the company’s president and CEO Tom McInerney. The only solution on the horizon is to raise premium rates on new and existing policies.
In talking recently with industry insiders, apparently John Hancock – another major player in the LTCI market – is following suit more quietly. John Hancock has indicated through back channels that it is informally putting the brakes on aggressively pursuing new LTCI business, capping issuance of new business through its marketing channels as it goes through a thorough review and ultimate overhaul of the structure and pricing of its LTCI product offerings. Companies like Unum and Prudential have pulled out of the group market entirely or stopped offering individual coverage completely.
The LTCI industry is struggling from a combination of higher claims payouts than the actuaries expected and lower investment return due to historically low interest rates.
Until a few years ago, LTC carriers had offered an arbitrarily set 5% inflation protection option which functioned principally to drive up the cost of policy premiums. In response, the industry began to offer alternative levels of protection which has led to smarter planning options and variations in coverage designed to reduce the cost to policyholders. Offering “shared care” instead of lifetime coverage, lesser inflation percentage amounts in the 3% range, guaranteed purchase options to create options for more affordable premium levels and, John Hancock’s latest concept of adjusting inflation to the CPI. However, the CPI index itself has come under recent scrutiny by its innovator, given the CPI’s relative stagnancy to date.
Given that the CPI has to come up at some point and, as it grows, policyholders continue to live longer, and maintain rather than lapse their policies as they age policy payouts by carriers are expected to rise amidst a market that may, likely, continue to experience sluggish new sales.
The Federal Class Act – which would have allowed universal access to long-term care insurance – was abandoned in favor of a commission to study the problem further. As if things couldn’t get worse for the consumer, most companies are also looking at limiting overall benefit payouts and tightening underwriting. This will undoubtedly increase the health-related denials for coverage which are already high for those 65 and over.
Even as a Medicaid Planner, I’m a big believer in long-term care insurance. Partnership Policies are a very useful too in protecting assets from the Medicaid Spend Down and Estate Recovery. Medicaid Planning is not an alternative to private insurance, it’s a backup. It’s THE backup. One that more and more people need because the insurance is getting harder and harder to get.
The average private pay cost of nursing home is over $88,000/yr. (and exceeds $100,000 in 10 states). This can financially devastate families in a very fast and real way.
My questions to those of you who sell LTCI: What’s your plan when the client gets denied? Are you ready with a backup plan to help those clients? Do you stop at the water’s edge of Medicaid Planning because you think it’s too difficult to understand?
If you sell LTCI, you’re going to start seeing a lot more denials than usual as these companies tighten their underwriting. If you have clients like the ones detailed in the Wall Street Journal who had a 47% increase in their LTCI premiums, you’re also going to start seeing a lot more people abandon their policies as prices skyrocket. That should not mean that you’re impotent to help those clients any further.
Do not leave your clients unprotected. Any estate or financial planner or LTCI seller worth dealing with should have an understanding of how the long-term care Medicaid system works and the planning options available to their clients. If you don’t, you’re doing a disservice to your clients and you’re losing good business opportunities with people who already trust you to look out for them.
Do you say “Tough luck” when your client gets denied coverage?
When a client gets denied for long-term care insurance coverage, they’re often emotionally devastated because they feel rejected and exposed. Be ready with a solution for your clients that mixes long-term care Medicaid solutions and hybrid products (life and annuity products with long-term care enhancements) in a way that turns their denial into a plan of hope. Provide additional planning that will put a limit on the oval exposure for long-term care expenses.
Learn it: As the LTCI industry shrinks, don’t stick your head in the sand and hope it will get better. Learn Medicaid Planning today with my Medicaid Planning Course and the Medicaid Planning Guidebook.
Do it: Don’t have a lot of experience with Medicaid Planning? Don’t worry. We’ve got your back. Through our Medicaid Mentoring and Medicaid Case Design programs we can work with you to help design a plan for asset preservation at any stage in the process.
Certify it: Do you want to stand out in the field of Medicaid Planning? Ask me how becoming a Certified Medicaid Planner™ can help you. We can show you how to join the growing roster of the nation’s most qualified Medicaid Planners and get the recognition of your peers of your outstanding commitment to excellence in the field of Medicaid Planning.