long term care planning after health care reform
TRANSCRIPT
Presented ByJohn Ryan, CFP®
Ryan Insurance Strategy ConsultantsWith
Claude Thau, Target Insurance
About Ryan Insurance Strategy Consultants
.John Ryan, CFP®, and Ryan Investment Strategy Consultants works exclusively with fee-only financial advisors to help them analyze insurance solutions for their clients and has been working with fee-only advisors since 1983.
Long-term Care has been part of our advisory services since 1990.
NAPFA Resource Partner.
Licensed to do business in all states, Ryan Insurance Strategy Consultants is an independent insurance brokerage firm specializing in life, disability and long-term care insurance policy analysis and underwriting.
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About Claude Thau
Since 1994, focused exclusively on Long-Term Care.
Actuary.
“Senior Market Advisor” named him to the first list of “10 Power People in the Long-term Care Industry”.
Ran one of the major carriers’ LTC divisions.
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How to Ask A Question
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GoToWebinar Attendee Interface
1. Viewer Window 2. Control Panel
Problem: LTC needs will soar, but few people are preparing
People do not see LTC as an imminent risk, so they put off worrying about it.
When they become concerned, they may be uninsurable or LTCi may seem too costly.
Government pays 2/3 of commercial LTC, almost entirely on nursing homes.
To reduce its cost, the government wants to encourage keeping people at home and family care-giving.
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The CLASS* Program is Intended to:
Help people stay independent at home
Build supportive service infrastructure
Alleviate family caregiver burdens
Reverse Medicaid’s institutional bias
Encourage people to start insuring at younger age
* Community Living Assistance Services and Supports
Problem: LTC Impact on Employers
Government pays 2/3 of commercial LTC.
But if you add informal caregiving, the family already bears ¾ of the burden.
Employers, overall, are increasingly negatively impacted by employees’ caregiving burdens.
Have your clients been adversely impacted by employees needing to be caregivers?
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The Impact on Employers
80% of working caregivers have come in late or left early as a result
10% shifted to part-time work
15% passed up promotions or quit
25% missed out on transfers or relocations
22% were unable to acquire new job skills
The Impact on Employers
34 million employees provide care for parents age 50 or older (AARP, 2004)
12 weeks/yr unpaid leave required for companies with 50+ employees
California requires paid leave
• Parent care: one of the fastest-growing uses of the Family & Medical Leave Act
The Impact on Employers
An employee caregiver costs his/her company about $3500/year
Alzheimer’s disease costs businesses more than $33 billion annually
The CLASS* Program
New government LTCi program passed in HCR. Administered through employers
Employers can choose whether to offer it or not
Voluntary coverage, intended to be paid entirely by employees
Non-workers (including non-working spouses) are NOT eligible
Alternate enrollment methods will be created for people whose employer does not offer the program.
Uncertainty in many respects, including legal contests, but presents financial, administrative and philosophical risk for employers.
* Community Living Assistance Services and Supports
Time Frame
By 1Oct12, HHS is supposed to develop 3 alternatives and select one for exposure.
Should be available in 2013.
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LTCi Benefits under CLASS
Must need help with 2+ (or 3+) ADLs* or be cognitively impaired or similar need
Need must be expected to last 90+ days
As soon as needed, for as long as needed
Can be used to pay family member, etc.
Amt. varies based on severity (2-6 levels)
Benefits increase annually with urban CPI
Facility care covered, although law unclear
Advocacy & counseling services provided
14* ADLs are Bathing, Eating, Dressing, Toileting, Continence, Transferring
Cost Uncertainty
1) Price must reflect:
Anti-selection (weighted toward unhealthy)
Subsidy for impoverished
2) But then, fewer healthy & middle class people enroll, causing price to be re-calculated upward. Can lead to spiral.
3) If price approaches assigned risk pool levels, everybody would prefer private LTCi.
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Efforts to Control CLASS Premium Level
1. Enrollees must be actively@work, unconfined & able
Eliminates unhealthy people and early claims
Does not address employer’s issues
2. “Negative” enrollment (“in”, unless actively opt out)
3. Same benefit for all (average = $50+/day). Proponents predict complementing with private LTCi.
4. Efforts to avoid “gaming” the system
a)No benefits paid until in plan for 5 years
b)Must be actively-at-work at least 3 of 1st 5 yrs pd
c)Must have pd most recent 2 yrs to receive benefits
d)Premium penalties if you discontinue for 90+ days16
Pricing Risks Remain
1. Actively-at-work defined as $1,120 annual income HHS Secretary shall promulgate exceptions
2. No health questions up-front and maybe biennially
3. Inflation risk because benefits increase with CPI
4. Broad expenses can be used to justify benefits
5. Admin expense load limited to 3% of premiums; inadequate for marketing, claim qualification, fraud control, counseling, advocacy, etc.?
6. Healthy couples might opt for private LTCi
7. Cost of $5 subsidy might be under-estimated
8. Potential fraud: false claim & severity, lapse, etc.17
How Much Will It Cost?
Originally $30/mo., then $65/mo. in Jan09
American Academy of Actuaries:
$160/month (6% enrollment & $75/day average benefit)
CMS actuary: $240/mo. (with 2% enrollment)
CBO assumed: $123/mo. (with high enrollment)
Matthew Greenwald & Associates’ survey
43% would participate at $35/mo.; 3% at $160/month
Higher prices shift distribution toward less-healthy and subsidized buyers
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Claude Thau
Polling Question:What Do You Think?
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Will the CLASS Program be:
1) priced adequately?
2) under-priced?
Contact Us:
Ryan Insurance Strategy Consultants 800.796.0909 John Ryan ext 102 [email protected] www.Ryan-Insurance.net Webinar Audio will be posted in the “Long-
Term Care” section of website Indicate in the “Questions” area if you would
like a copy of the slides
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