LTCi Market Dynamics Changing

By Cyril Tuohy

InsuranceNewsNet

Rewind 12 months to the summer of 2013. At a time when Washington lawmakers were preparing for their August recess, public policy experts were testifying before a federally appointed commission on the state of long-term care.

In the space of three months, from June through August 2013, some of the most powerful lawmakers trained their attention on the issue of long-term care as more than 30 experts testified about the state of the industry.

For a brief, shining moment, long-term care was having its day in the sun. It was granted the proverbial floor, even if much of the Washington audience had returned to their home districts.

By mid-September, the spotlight on long-term care had already dimmed. Returning lawmakers went back to more pressing crises, policy experts returned to their think tanks -- and long-term care insurers, worried about quarterly earnings goals, prepared to submit rate increases before state regulators.

The only concrete result was the inch-thick report summarizing the findings of the Federal Commission on Long-Term Care. It was delivered to Congress on time — in case lawmakers had any desire to peruse its contents about where the nation stood with regard to long-term care.

Veterans of the legislative process harbored few illusions about the commission’s findings. The report would sit on a shelf, and they were right.

There was no chance in hell that Washington would pass any sort of long-term care legislation, not with a final report omitting ways to finance long-term care, and certainly not with 2014 midterm elections a year away.

Beneath the legislative inertia, though, the private sector was starting to busy itself with a wholesale revamp of long-term care products to meet new needs emerging in the marketplace.

First up were the rate increases filed with state regulators by LTCi industry leaders such as Genworth.

Industry executives maintain the increases are necessary so that long-term care insurers can turn a profit after years of underpricing the products.

Regulators have generally approved the increases, even if they aren’t too happy about it. Policyholders and consumer watchdog groups grumbled, but in the end few long-term care contract holders actually cancelled their policies, LTCi industry executives also said.

Higher prices are painful, but in the long run, raising prices will only bode well for the future of the private long-term care industry. Some of the profits from higher prices will be reinvested in new LTCi policies that better meet the needs of the market.

A case in point: Privileged Choice Flex 3 introduced earlier in July, a product which Genworth says is more flexible and affordable, exactly the kind of new development in the LTCi marketplace that consumers need if they are going to elect coverage in the private LTCi market.

Flex 3, which benefits from a “FlexFit” feature, allows buyers to choose one of eight annual premium options from $1,000 to $4,500, and initial coverage amount options from $100,000 to $500,000, the company said.

“FlexFit allows more Americans to take control of their long-term care future for not much more than what it costs for a daily latte,” Genworth chief executive officer Thomas McInerney said in a news release.

LTCi sales at John Hancock are up about 25 percent in the first quarter of the year, said Mike Doughty, company president and general manager, during a panel discussion at a trade conference in May.

John Hancock, which is developing a stand-alone LTCi product, has no intention of abandoning the LTCi market. As the need for private long-term care continues to grow, all systems at John Hancock are a go for long-term care, Doughty added.

While Washington prepares to go on this year’s August recess — after which lawmakers will turn their attention to the election — long-term care insurers aren’t naïve enough to believe anything will get done in 2014.

Carriers are tweaking LTCi product designs and many have already announced bundling long-term care coverage with other health insurance products in an attempt to make LTCi coverage more flexible and as a way to add value to existing insurance products.

And who knows, with a bit of foresight, a pinch of luck and new faces in Congress, lawmakers may take up LTC financing issues in 2015.

That’s when lawmakers take up tax and entitlement reform, which represents the first real opportunity for Washington to take a hard look at public LTC financing via Medicaid or another funding mechanism, according to one legislative analyst.

Whether that comes to pass, the industry will have to wait and see. In the meantime the industry isn’t standing still.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].