Long Term Care: Catching the Big Wave. Presented By: Bob Saylor, LTCI Partners

Transcription

1 Long Term Care

2 Long Term Care: Catching the Big Wave Presented By: Bob Saylor, LTCI Partners

3 Definition of the Market LTC Insurance Overview Increased life expectancy means that most Americans will require assistance due to a chronic medical condition at some point. The average cost of care is currently $75,000 per year and is going up at a rate of 5% annually 1. Health Insurance, Disability Insurance, and Medicare do not cover the cost of this care. The result is that most people have no insurance to pay for an expense that will total hundreds of thousands or even millions of dollars. Consider these facts 70% of Americans over 65 will need LTC 2 There are 78 million Baby Boomers in the U.S. who will start turning 65 in The average LTC claim lasts 2.5 years 4 The average age when a claim starts is 82 3 The average cost of care is currently $75,000 1 and is projected to be over $300,000 per year in 30 years 4 A 50 year old couple who each need 2.5 years of care beginning at age 80 can expect to pay over $1.5 million for that care 4 1. Genworth 2009 Cost of Care Survey 2. U.S. Department of Health and Human Services 3. U.S. Census Bureau Population Estimates as of 7/1/ Genworth claims department (2008) 5. Assumes cost of care increases at 5% per year

4 State of the Industry Companies exiting the market: MetLife In-force rate increases (affecting existing policyholders) Re-pricing current product generations (based on new actuarial assumptions) Carriers limiting product features & benefits (risk management) Prudential Hancock Conservative underwriting

5 The Changing Carrier Line-Up

6 State of the Industry More support from government: 1035 Exchanges CLASS Act LTC consciousness / news Personal experience / LTC event impacting families CE requirements increased: Partnership Plans (dollar-for-dollar offset) 8hr Renewals after 2 years 4hr

7 Long-Term Care Insurance An Emerging Employee and Executive Benefit Planning Concepts: Voluntary (employee paid) Employer paid base with buy-ups available Executive carve-outs (100% employer funded)

8 The Tax Treatment of LTC Insurance Highlights: Discriminatory benefit (excluded from new PPACA nondiscrimination rules) 7 Premium contributions for executives and their dependents are tax deductible to the employer 8 Employee pays no imputed income for the value of the benefit 8 Long-Term Care Insurance benefits are income-tax free 8 7 Genworth Financial, Bulletin: Providing LTC Insurance only to Highly Compensated Employees, 9/3/ American Association of Long-Term Care Insurance

9 Corporate Sponsored LTC Insurance Employee Need Employer Solution Healthcare Group Health Plan Dental Group Dental Premature Death Group Life Plan Income Replacement Group Disability Plan Personal Assistance Employee Assistance Program (EAP) Retirement Portfolio 401(k) Program Protection of Retirement Portfolio Against Costs of Extended Healthcare (Long-Term Care) Group LTC Insurance Plan

10 Corporate LTC Product Development -- Genworth -- Transamerica -- Prudential -- Mutual of Omaha Discounts and UW concessions start at 3 lives & 7 lives respectively True Group and Multi-Life more blended Location of the highest projected growth Concierge enrollment support

11 2010 LIMRA Results (worksite sales)

12 The CLASS Act Highlights: New voluntary Government LTC plan established by New Health Care Law According to the Department of Health & Human Services, the new plan will be implemented 2013 Employers will determine if they will participate in the program (no penalty for employers not participating 10 If an employer participates in the program, employees would be automatically enrolled unless they opt out 10 No tax dollars can be used to offset premiums. Premiums must be actuarially sound 10 10The Henry J. Kaiser Family Foundation:: Health Care Reform and the CLASS Act, April 2010

13 The CLASS Act Benefits and Eligibility Pays a minimum benefit of $50 per day if a person needs assistance with ADLs No annual or lifetime maximum Enrollees must pay premium for 5 years before they would be eligible for a benefit Inflation protection will be based on the CPI Intended for working Americans who have a disability or health condition that would prevent them from obtaining private LTC insurance

14 CLASS Act Issues/Concerns/Opportunities Adverse Selection will only uninsurable risks participate? Will supplemental insurance be available through agents/brokers? What happens if the National Independence Fund runs out of money? Premiums are set each year by the Department of Health & Human Services (HHS) Is the program actuarially sound? Program will offset healthcare reform costs by $58 Billion (collection of premium revenue before claims are paid) Follow CLASS Act progress on our blog

15 Pension Protection Act (PPA) Opportunities

16 Starting the LTC Planning Conversation How do I bring it up? CLASS Act Tax Advantages especially for C-Corps Benefits for your key people? Can be ER Paid or Voluntary Can discriminate Has anyone had an LTC experience? Is the 401-K protected?

17 Asset-based Products LTC / Life Combo Products Genworth -- Total Living Coverage (TLC) Lincoln National -- MoneyGuard John Hancock LifeCare John Hancock (Performance UL & Protection UL) The Hartford Nationwide AXA LTC/ Annuity Combo Products Mutual of Omaha - Living Care Annuity Lincoln Financial MoneyGuard Annuity Prudential Variable Annuity

18 Selling to High Net Worth Clients

19 One Plan Several ways to Pay Assumptions: 55 year old single female interested in LTC coverage. Design a plan that covers $6,000 per month, 6 year benefit, 3% compound inflation rider. Initial benefit pool $432,000. Type of Plan Premium Comments Annual Pay $2,910 Subject to possible rate increase. May be partnership eligible. Immediate benefit. Other assets can be invested more aggressively. 10-pay Premium $7,510 For C-Corporation, may be able to deduct total premiums. Single Premium Traditional $121,533 No rate increases. May be able to 1035 exchange into Life/LTC single Premium $110,805 Pay for life insurance rider may not need or want. Answer to what happens if I never use it? Annuity/LTC $144,000 Benefits take your money first before rider. No partnership or group LTC deduction. LTC money comes out tax-free.

20 New Tools VitalLTC Illustration Software Report prints before competitive analysis

21 Application Partner App Partner s goal is to make it easier on the producer while increasing the placement rate with the carrier. Our App Partner person will call your clients and take the application over the phone We then send the application to the client to sign and return to us by regular mail or overnight mail We then scan the pages that the producer signs, those to you and you sign, scan and return to us We then add those pages to the application and scan to the carrier Placement up about 12%, cycle time down about 15 days

22 Designing a Policy Changing Philosophy in the business Old rule buy a little for lifetime New rule buy more for a shorter time frame Called Short and Fat Carriers are pulling Lifetime and raising rates to buy 5% Compound Look at other alternatives for better pricing

23 Policy Decisions The decisions you make at the time of application will effect the amount of available money when you make your claim... Daily or monthly benefit? Elimination period? Benefit period? Inflation protection (type)? Optional riders? Payment options?

24 NFP Long-Term Care Services With one phone call, you have access to: Group, Individual and Linked-Benefit products Policy audits (review existing policies & coverage) Firm visits (training) Conference calls with clients Point-of-sale assistance (corporate cases) Case design Proposal support Carrier appointments Case management Pre-approach s / letters Customizable brochures / slicks NFP Team: (877) sales@ltcipartners.com Kevin Slusarz, x126 (NFP Account Manager) Bob Saylor, x236 (Austin Home Office) Steve Cain, x237 (National Sales Leader)