Life-Combo Policies: Some Good, Some Bad, Some Ugly

DALLAS -- Since long-term care insurance first caught on with consumers in the late 1980s, the product has struggled to find a comfort zone with both client and insurer.

Both sides failed to foresee how late-life care would change and how rapidly health care costs would rise. Policies were poorly priced and didn't cover the type of care that many senior citizens needed.

The market continues to evolve and might be finally nearing a place where middle-class Americans have real options for long-term care protection, said Ron R. Hagelman and Barry J. Fisher, partners in Ice Floe Consulting.

They will be joined by Vincent Bodner of Oliver Wyman for a session on long-term care options Thursday at the NAILBA Annual Meeting.

The big question is how does the industry meet the middle class, Fisher asked. He's talking about the teachers and firefighters and electricians who make decent money, but maybe not enough to self-fund their own long-term care.

"How do we expand?" he said. "How do we get the middle market to get more people to start planning for their own care using insurance, as opposed to just waiting around for the inevitable Medicare tragedy?”

For some it might be long-term care insurance. For others, a life-combo policy or some type of rider.

"It doesn’t matter what product you use," Hagelman said, "but the fact is only about half a million Americans have done anything to protect themselves."

A Robust Market

During an August meeting of state insurance commissioners, Steve Schoonveld of the Society of Actuaries said policies sold with a long-term care rider jumped from 228,000 in 2015 to 461,000 in 2018. In the meantime, traditional long-term care insurance policies continue to decline as more insurers flee the market.

The market is more robust than ever and there are a number of ways agents and brokers can help clients meet their long-term care needs, Fisher said. Studies show that getting a client a pot of $90,000 to $100,000 will give 90% of Americans the supplemental money they need to make it work, he said.

"We need to move the whole market down a notch down to the middle class and we need to do a better job of helping them to understand that they don’t need to buy a huge catastrophic policy," Hagelman said. "What they need is another 50 to 100 bucks a day to pay for what they already have. I don’t care what you do, but you need to lead your own parade here."

The important thing for agents and brokers is to be prepared. With regulations on the rise, an agent better know what they are selling. In other words, a long-term care rider had better do what the clients buys it to do, Hagelman said.

Likewise, take into account where long-term care is heading, Fisher said, not where it is now. Most old LTCi policies did not cover assisted-living care, so clients who needed that care couldn't use their insurance.

"My suggestion here is that agents need to focus on policies that pay benefits in cash because cash is going to be king," Fisher said. "They need to make sure that they’re giving their consumers the benefit of as many options as they have today, as well as five, 10 and 15 years from now."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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