Jesse Slome had a long career in marketing, public relations and advertising. One of his PR success stories was helping launch the Cabbage Patch Kids, those pudgy-faced dolls that sparked riots in the toy department as they became one of the most sought-after playthings of the 1980s.
But he also created strategic campaigns for banks and insurance companies. Along the way, he entered the insurance industry.
In 1998, he founded the American Association for Long-Term Care Insurance and still serves as the organization’s director. AALTCI is recognized as one of the nation’s leading advocates for long-term care planning, and Slome oversees all its research and marketing initiatives. In 2001, he established the month of November as National Long-Term Care Awareness Month, and he received the industry’s Lifetime Achievement Award in 2010.
He also serves as executive director of the American Association for Medicare Supplement Insurance.
Slome has observed the senior care market for decades and sees opportunities for those who want to serve that market. In this interview with InsuranceNewsNet Publisher Paul Feldman, Slome gives his predictions on the future of this segment.
PAUL FELDMAN: Tell us a little bit about what you do and how you got into the industry.
JESSE SLOME: I’ve created many award-winning and effective strategic campaigns for insurance companies. I really understand these products. Aetna brought me on board and made me their pension sales manager. I got even more engrossed and involved in the insurance industry for probably about a dozen years — running field operations, etc.
In 1997, I was approached by a number of people who said, “There are these small little lines of business — in this particular case, long-term care insurance — that really need to be put on the map. Would you consider putting together a trade organization to promote it?”
That’s what we did. I created the American Association for Long-Term Care Insurance several years later. Then at the behest of those who were in what was then a rather small industry called Medicare supplement, we started the American Association for Medicare Supplement Insurance.
These organizations exist today for a couple of purposes. The first goes back to my personal core strength, which is marketing and public relations. We serve as advocates to inform the consumer. In doing that, we also support insurance agents and their companies.
These two associations are really the key areas of focus for me.
FELDMAN: We have had a crazy couple of years — from financial to regulation. What are some of the key issues we’re seeing today in LTC?
SLOME: Let me start with long-term care. What you see today is a significant change which has been happening for a number of years in the traditional long-term care insurance industry. The products that we all were accustomed to selling in the late 1990s, early 2000s — now there are only a few insurers that still offer them. You have carriers such as Mutual of Omaha, New York Life, Northwestern Mutual, but the policy sales are less than 50,000 a year. The industry has undergone significant change, understandably and unpredictably.
Here are things that people should watch for in the coming year. Genworth historically and probably still is the largest traditional long-term care insurer in the marketplace. At one time, they had well over a million policyholders. They’ve obviously taken it on the chin quite significantly over the past few years.
But they recently announced plans to reenter the marketplace. I’d be rolling my eyes, except for the following: Genworth has stated very clearly that for long-term care insurance to succeed, the product needs to be designed differently and priced differently. And that’s how they are proceeding. They said they will only file this product in states that are willing to accept that.
They have the muscle and the clout to bring traditional long-term care insurance back into the marketplace. The question is, how will consumers react when that happens?
On the other side of long-term care insurance, you have the linked benefit products that have taken off. There are now several hundred thousand of those policies written a year. Those products are likely to remain the dominant sellers in the years ahead. I think you will see more of the bigger companies coming into the market. I think you’ll see more features that will make these products more attractive to both producers and consumers.
FELDMAN: How are they pricing it, and what’s the difference? How can they make this work? Because the cost of care probably destroys more wealth in our society than anything else.
SLOME: Here is the change. From what I understand, Genworth will bring out a product that will be reviewed annually and will have the ability to be repriced annually. Here’s what it does.
It allows you to go to younger people and make the product more affordable. Because you don’t have this 20-year tail in which you have to predict everything that’s going to happen for the next 20 or 30 years, you can look at this product the same way that a car insurance company looks at car insurance or that a Medicare company looks at Medicare supplement insurance. Every other line of business has the ability to annually review the pricing. Being able to do that with long-term care insurance should enable a carrier to come out with lower prices for those at younger ages.
The question will be, how will they communicate that to the buying public?
FELDMAN: What are some of the other trends that you see in the long-term care insurance market?
SLOME: There are two or three other things that I see that are important as it pertains to long-term care insurance, both currently and going forward.
Right now, we are in the midst of what I’ll call a seismic change in the long-term care marketplace. Notice I didn’t say “insurance.” The state of Washington has initiated the first statewide program where potentially there will be universal long-term care coverage for their citizens. Starting in January 2022, all workers will pay a tax — it will amount to a little less than $600 a year if you earn $100,000 a year. You as a consumer have one chance to exempt yourself from the tax if you buy private long-term care insurance by Nov. 1.
There has been a flood of consumers who have done that, and as of this interview, almost all of the carriers have ceased selling the product in that state. They’ve all been inundated.
The things to watch will be: What’s the reaction in Washington state? How will consumers respond when these taxes start coming out of their paychecks? Will people be upset over it?
How will the program take shape?
There are anywhere from seven to 17 other states that have initiatives to address long-term care. I’ve been around long enough to know that with every politician, the easiest way to kick the can down the road is to put together an initiative or a committee, but they never really see the light of day. People in the long-term care insurance industry are all excited about this.
California is studying this initiative. I don’t believe you’ll ever see another tax imposed in California. But Washington state is the one to watch in 2022.
The other thing to watch is the federal government.
I always say long-term care is the problem. Long-term care insurance is only a very small solution and only one part of the potential solution to the problem. There are a number of initiatives from the Biden administration and the infrastructure bill and all of these bills, where they’re throwing hundreds of billions of dollars against this problem. They’re addressing Medicare and Medicaid. Ultimately, that’s the thing to watch.
Both in the short term and in the long term, I believe that while it’s nice to advocate for a private solution, for most people the public solution is going to address it.
One more thing is what I call short-term care. Those products probably have the best potential to address consumer needs. Agents have clients who are too old or too unhealthy to get traditional coverage or who can’t afford the traditional solutions. There are only one or two carriers offering these products. I keep hearing from time to time about others that are thinking about it.
I’m not sure why others have not entered this marketplace. In my opinion, you will see some of those products that will supplement government programs and address the needs of people who want something but they just can’t afford anything more.
For long-term care, I won’t say that the years ahead are going to be rosy. But I’m certainly not predicting doom and gloom.
FELDMAN: For most people, will short-term care be where it’s at?
SLOME: The long-term care insurance industry suffers from a lot of well-meaning effort. I’m a marketing person and, in hindsight, we created this situation. We — meaning the industry, the agents, the brokers, the whole environment of asking people, “Where’s your million dollars if you need care?”
They say, “Look at someone like Christopher Reeve, and you could need a lifetime’s worth of care.”
And indeed, you always could. But when you actually look at the data and how people are using these long-term care plans, most people use their coverage for a year, two years, three years.
For so long, so many of these studies positioned this product as nursing home insurance. It started as nursing home insurance and then changed to include home care. Now the vast majority of claims are for home care. But the mindset is so stuck on those products, that it’s hard for producers to change. It’s hard for consumers to change.
When year after year, companies come out with studies that tell people what nursing homes cost, it’s understandable why consumers associate long-term care insurance with nursing home coverage.
When carriers raise rates year after year, it’s understandable why consumers are upset.
FELDMAN: How does someone get started in the Medicare market?
SLOME: Your best bet is to partner with somebody who already is in the marketplace, who will guide you and say, “I will help you with X number of sales and work out some sort of financial arrangement.” It’s not that difficult, once you go through the training and the other things; you can really learn it.
The FMOs do a really good job of training. I always tell agents and brokers, don’t expect that you’re going to wake up and start selling this product and make $100,000 in your first year. But if you really focus on it, you can do quite well. It’s an ideal business for people who are committed.
It is interesting and amazing to me how few women agents there are in this market, especially because there are more women than men in the 65-and-older demographic. I think for women, the nice thing about being in the Medicare business is that you have far more flexibility. Some people just work around the open enrollment season, some work year-round. I’d say to women, I believe it’s a really good opportunity for you.
FELDMAN: In the Medicare supplement market, what kind of things are happening and what kind of changes can we expect?
SLOME: The changes in this market are seismically different from those in the long-term care insurance market.
The Medicare market is exploding. That’s not surprising, when you have 62 million people who are on Medicare and 11,000 new people joining every day. I mean, think of a product for which you have 11,000 prospects daily, who basically have to make some sort of decision, and in a program that’s enormously confusing.
It’s exploding, and the explosion is only going to get bigger. You’re seeing some seismic changes that impact both distribution and consumer.
From the distribution side, you’re seeing a couple of major companies that have capital behind them and that are aggregating the industry. They are buying every distributor — large and small — across the country. The question is, what will they do with them? In the short term, it makes a smart play and it could be business as usual.
In Medicare, nobody is going to survive if it’s business as usual. Because at the same time, while you have that distributor channel, you have these other channels, which is what I’ll call the direct to consumer. You know, if I watch afternoon television, I can’t miss all the commercials with Joe Namath or Jimmie Walker pitching Medicare Advantage plans. You can’t avoid seeing these ads, which are directly soliciting consumers with business. And, to a degree, I won’t say they’re unregulated, but they’re questionable. People are saying, “Gee, you know, when they’re running an ad saying you could be entitled to free dental care or free something else, it sounds so good.” So who wouldn’t check it out?
They are generating such massive numbers, and converting them into sales, that it gives them an explosive competitive advantage against those distributors. The distributors are going to have to figure out what they are going to do to stay in business. So, like I said, the explosions are only going to get bigger.
I’m not a gambler. And I’m not a predictor. But I think the logical thing that we will see is the lowering of the Medicare age. I think it depends on whether the Democrats hold Congress in 2022, but I think the chances are very likely. I just saw another proposal to open Medicare to everyone on a voluntary basis. I don’t think this one will take hold.
None of this is new. When Sen. Ted Kennedy was alive, he proposed expanding Medicare down to those age 50.
I don’t think Congress will open Medicare to everybody, but I do think they will approve dropping the eligibility age by five years. Just think how many millions of Americans are between the ages of 60 and 65. When that works, and you have much more electoral support, it makes sense that five, 10 years from now you’ll see it optional for everyone.
Medicare will continue to explode. And there’s so much money in it. Today, there are venture capital companies that are looking at this market that will bring hundreds of millions of dollars into it. So Medicare is definitely the place to be.
FELDMAN: How do agents compete with these venture capitalists and direct writers that are well capitalized?
SLOME: They compete in a couple of ways. The American Association for Medicare Supplement Insurance has the only national directory where consumers can find local agents. Agents list themselves; they pay us a nominal fee. We don’t have a membership, but they pay a fee.
Consumers definitely find Medicare extremely confusing, and a significant number of them make mistakes. Some mistakes are changeable, some mistakes are irreversible. We created the directory because we were being inundated by consumers saying, “I want to talk to somebody locally. I don’t want to call a call center.”
Medicare is very local. The plans that you’re offered basically come down to your locality, often to your ZIP code.
How do brokers and agents compete? The first thing is they have to go up against those call centers. The agents’ competitive advantage will be saying to consumers, “Talk to all the call centers you want. But let me compare and tell you what’s going on locally.”
FELDMAN: What are some keys to being successful in these markets?
SLOME: I think the key for an agent or broker to be successful is they must do something they have not done in the past. You could say, “As long as I’m getting leads, as long as I’m making sales, I’m going to be successful and profitable today.” I don’t think that’s the case anymore because change is coming so rapidly.
You must think like a businessperson in a couple of specific areas. One, you had better be focused on technology. Not just the technology that you’re getting today, but learning about where the people who are giving you that technology are taking it down the road in the next three, four years. Because change is happening so fast. It took Amazon 20 years to go from selling books to where they are today, doing more sales than Walmart. But it’s not going to take another 20 years for whatever the next change is. And it’s not going to take 20 years for the changes in insurance.
You also must understand that it is all about marketing. The companies that are advertising on television, there will be only so many of them that survive. But clearly, they have mega-millions of dollars behind them, and the average agent does not.
So, to be successful, the average agent will need to be strategic about how they market themselves, how they build their brand. They have to be really committed to doing that.
Otherwise, you’ll wake up in three years and find you need to change what you’re doing. That’s what’s going to differentiate those who are going to be here in three years from those who will not.
How Washington State Is Addressing The LTC Crisis
Starting on Jan. 1, 2022, all W-2 employees in Washington state will be assessed a 0.58% premium assessment based on their wages. The employer must collect this premium assessment through a payroll deduction and remit the proceeds into a state trust account that will be used in the future to pay for people who are in a health crisis and need long-term care. Self-employed and federal employees are exempt from the mandate.
The state WA Cares Fund is a trust account created to hold the funds. When an individual meets the thresholds and eligibility, the fund will pay out a maximum of $36,500 over two years and will be adjusted through the years to the consumer price index. The plan will require an inability to perform three out of 10 activities of daily living to qualify for the benefit payout as compared with two out of six required by normal qualified long-term care plans under Internal Revenue Code Section 7702b. But if the employee leaves the state, they will not receive any long-term care benefits from the state nor will the taxes taken from their income be returned.
The state has opened a window of time until Nov. 1, 2021, for anyone to opt out of the state-mandated system by securing a privately owned plan or a group plan through their employers. They have until December 2022 to provide proof of coverage.
From “Washington State LTC Law Provides Opportunity For Agents” by Val Mikesell, InsuranceNewsNet.com, June 28, 2021