Doing away with elimination periods while adding risk-sharing through coinsurance make New York Life’s latest entry in the stand-alone long-term care market very affordable, a company executive said.
NYL My Care comes with premiums as low as $24 a month for a 40-year-old man and the product joins its older sibling Secure Care in the company’s stand-alone long-term care stable.
Elimination periods, or periods before which the policy would start to pay benefits, can typically last from three months to a long as one year. Policyholders pay out of pocket during that time period.
But policyholders were confused about elimination periods so NYL My Care does away with them and instead imposes a deductible, much like in primary medical coverage, said Aaron Ball, vice president of New York Life Long-Term Care.
Deductibles range from $4,500 for bronze coverage, the lowest level, to $21,000 for platinum coverage, the highest level.
“Many companies in the market today have an elimination period, but what we found was that many customers didn't understand what that was,” Ball said. “We wanted to make that very transparent so there was no confusion at point of claim.”
Clients looking for long-term care find it difficult to compare policies, said Valkyrie Lang, a New York Life agent with a strong focus on long-term care.
“The first thing out of their mouth is ‘I don't think I'll be able to afford this,’” she said.
80/20 Coinsurance a First
The second lever applied to NYL My Care is an 80/20 coinsurance risk-sharing mechanism, which means the policy offers a monthly reimbursement rate of 80 percent to pay for covered services up to the monthly purchased maximums, Ball said.
It is the first time the company has offered a product with co-insurance.
Like with major medical, coinsurance is designed to address utilization behavior by introducing risk-sharing between the company and the policyholder.
In the past, New York Life found that many policyholders would use benefits in line with their coverage limits and coinsurance helps the company share in the risk with policyholders, Ball said.
If a policyholder has a monthly benefit of $1,000 and incurs covered expenses of $1,000, the policy would reimburse expenses up to $800. If expenses exceed $1,000, the policy will pay 80 percent of covered expenses up to the $1,000 monthly benefit.
Adding a degree of risk-sharing is designed to reduce overall expenses as policyholders consider which long-term care services to utilize since they are paying some of the costs out of their own pocket.
With more out-of-pocket costs and sharing of risk, My Care can offer lower premiums.
Premiums are guaranteed not to rise for the first three years the policy is in-force and like most insurers in the long-term care market, New York LIfe has the right to raise rates in the future if adverse experience develops.
NYL My Care, however, includes a dividend feature to help reduce the need for a rate increase in the future.
If interest rates drop, the company has a cushion to help absorb that adverse experience and if rates go up the company can use the dividend feature to help reduce a policyholder’s premium, Ball said.
As a mutual company, New York Life is owned by its policyholders and its policyholders are eligible for dividends.
NYL My Care contracts come with a return of premium up to age 65, a waiver of premium after satisfying the deductible, access to care planners, coverage for in-home support equipment and coverage increases up to age 70, NY Life said in a news release.
Discounts, compound inflation options and rides are also available.
Taking a cue from the Affordable Care Act’s tiered major medical health plans, NYL My Care comes in four coverage levels: bronze, silver, gold and platinum.
The rarer the metal the higher the maximum benefits, deductible and premium.
A 40-year-old man covered under a bronze plan might pay as little as $24 a month, while a 70-year-old woman covered under a platinum plan might pay as much as $542 a month, according to a company illustration table.
There are about 7 million stand-alone long-term care policies in the market, which is expected to grow by only about 60,000 new policies this year.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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