Short-Term Care Insurance Finding a Market

By Cyril Tuohy InsuranceNewsNet

Short-term care policies have been approved in the states showing up in blue.

Big premium increases for long-term care insurance (LTCi) have created new opportunities for short-term care insurance (STCi), a category that has kept a relatively low profile. Until now.

Proponents of STCi say the time has come to push hard and loud to promote the value of STCi. New plans call for launching a dedicated STCi website as well as a marketing campaign targeted at agents and consumers.

The flurry of activity surrounding STCi is no accident as 2015 shapes up to be record year for sales, predicted Jesse Slome, executive director of the American Association for LongTerm Care Insurance in Westlake Village, Calif.

There were 26,237 STCi policies sold in the first six months of 2015, an increase of 71 percent compared with the year-ago period, according to the National Advisory Center for Short Term Care Information, a new database dedicated to tracking STCi.

Premiums up

STCI premiums jumped 54 percent in the first half of this year compared with the year-ago period, the organization reported. Annual figures for 2015 will be released over the next few weeks.

“Agents need to seek other options to meet their client needs and a policy that provides one year of coverage is a very viable solution,” said Slome, in an interview with InsuranceNewsNet.

LTCi price increases and tighter underwriting standards have made it more difficult for consumers to qualify for LTCi, but they still want some protection, Slome said.

Costs for LTCi coverage rose 8.6 percent from 2014 to 2015, according to the 2015 Long-Term Care Insurance Price Index released in January 2015. LTCi carriers are raising prices to make up for years of underpricing LTCi policies. The current 2016 price index has not been released yet.

Unlike long-term care policies, which cover policyholders for years or decades, short-term coverage is designed to protect policyholders for less than a year and agents use the policies for senior retirement planning.

Clients who buy STCi usually become eligible for benefits when they need assistance performing two or more activities of daily living.

STCI fits because anywhere from 25 percent to 40 percent of LTCI applicants are declined, and because Medicare imposes coverage limits that people may not be aware of until it’s too late, Slome said.

Many applicants, who might get turned down by a LTCI carrier, might qualify for STCI through simplified underwriting. For agents who have gone through the trouble of applying for LTCI, only to get turned down, STCI offers some sort of saving grace, Slome said.

According to the National Advisory Center for Short Term Care Information, a 360-day benefit of $100 per day ($36,000 for home care, assisted living or skilled nursing home costs) for a male or female 65 years old would cost $61 a month in premium. The coverage would start right away.

The same benefit that would start after a 30-day waiting period for a 65 year old would cost $54 a month in premium.

Detractors say STCi, which serves as a stopgap to cover the 90-day period before an LTCi or a Medicare policy kicks in, isn’t really worth it.

Whether STCi delivers as it is designed to do, industry proponents say the time has come for STCi’s day in the sun.

Key meeting

A print marketing campaign underwritten by insurance carriers and distributors is planned for later this year as well as the launch of a dedicated website, www.shorttermcareinsurance.org. About $18,000 is coming out of the AALTCI to help build the website, Slome said.

The print campaign and the website follow the creation of the National Advisory Center for Short-Term Care Information, which was launched last year.

As many as eight STCi carriers have expressed an interest in funding the STCi campaign and Slome said he is scheduled to meet Feb. 9 with the carriers to firm up sponsorship details.

“Everything is always a step-by-step slow build,” he said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Scott A. Olson

It is true that most of the older LTCi policies have had large premium increases. To protect consumers purchasing policies today, 41 states have passed strict pricing regulations. Consumers purchasing policies today are protected from the pricing mistakes of older policies.

A recent study by the Society of Actuaries concluded that an LTCi policy purchased today has less than a 10% chance of having a rate increase–and if it did that rate increase would likely be 10% or less. In other words, today’s policies, which use very conservative pricing assumptions, have a 90% chance of no rate increases. That’s because these 41 states require any new policy approved for sale to be priced with a “cushion” (a margin of error) in order to avoid any future rate increases.

Short term care policies do NOT have any of these new protections against rate increases. Short term care policies use the same old pricing regulations that caused all the rate increases on long term care policies. Combine that with the “simplified underwriting” and short-term care policies have a much higher probability of rate increases than today’s long term care policies.

Scott A. Olson
Barbara Stahlecker

Scott Olson is a true LTCi expert and his statements are mostly correct. However, I feel I need to add to the comment “short-term care policies have a much higher probability of rate increases than today’s long term care policies”. First, I agree that LTCi policies are more stable now than they have ever been – so that’s good. But I have to disagree about the probability of rate increases in STC. There are 2 critical components missing from STC that had a lot to do with the instability of the old LTCi policies – there are no lifetime benefits being sold and most people don’t buy a Cost of Living Rider with STC policies. I am not aware of any STC policy that has experienced a price increase and in fact, the carriers are very interested in selling much more. Also, with premiums of less than $100 a month, for most people, a rate increase on a STC policy would not be nearly as devastating to the average client as some of the rate increases the LTCi industry has seen in recent years. STC is a very viable option for those who can’t qualify for or afford traditional LTCi. Also as people start to encounter and understand the true result of the 90-Day certification that is required in all TQ LTCi plans, STC will become a very attractive, inexpensive way to cover those initial costs – which are increasing by the day.
- Scott A. Olson
  
  I’ve known and respected Barbara for over 15 years. Thank you, Barbara, for your invaluable insight to this discussion. I amend my prior statement.
Steven Kirstein

I have read your blog, and I got informative information which is useful for choosing right insurance. Nowadays short term care insurance(STCi) is very helpful and it has minimal premium depend on a plan. I totally agree with the fact that In 2015, 26237 STCi policies sold in a market in Six months. LTCi price increases and tight under standards have made it more difficult for consumers to qualify for LTC. Most People Choose STCi insurance because of Minimal premium and short term. In today’s policies, which use very complicated pricing assumption. As per Scott A. Jones, it has a 90% chance of no rate increases in short-term plans. As compare to LTCi Short term care policies use the same old pricing regulations that caused all the rate increases on long-term care policies.
Jesse Slome

Good to see people commenting. Short term care insurance presents a real opportunity for insurance agents — those who market LTC and those who market health products to seniors (Medigap). I created the new organization to create awareness among consumers. That will build interest and ultimately result in even stronger sales. We encourage agents to learn more … because the future opportunities to benefit consumers and derive income are excellent.
Jesse Slome
http://www.shorttermcareinsurance.org
Kim Kelly

Jesse – what companies sell the STCi products, please?
- Barbara Stahlecker, (@LTCGoddess)
  
  Kim: Here is a partial list: Aetna/Continental Life, Medico, GTL, Equitable, UCT, United Security Assurance, Kemper, Standard Life, Banker’s Life, Banker’s Fidelity. No single product is approved in all states and states like NY, CA, CT, MA, FL might only have 1 or 2 products approved. If your FMO hasn’t told you about these products, then you need a new FMO 🙂
  - Chris Boyd (LTCP, CLTC, APP, MDRT)
    
    I concur, as insurers and re-insurers tighten their underwriting belts, STCi allows many Americans to get much needed coverage which will provide adequate coverage to some policy holders. Given the fact of Home Health Care combined with Adult Day Care, today’s aging Americans have better, non-Facility Only options for extended care. These options will lighten the load of premium payers (clients) and their family care providers—win-win!
Stephen D. Forman, CLTC

“Costs for LTCi coverage rose 8.6 percent from 2014 to 2015, according to the 2015 Long-Term Care Insurance Price Index released in January 2015…The current 2016 price index has not been released yet.”

And when it does, ignore it: this Index means nothing.