Genworth plans major move in fraught long-term care insurance market

RICHMOND - Henrico County-based Genworth Financial thinks it's found a way to help people finance long-term care that will avoid the regular double- and triple-digit premium rate increases for policies that currently cost several thousand dollars a year.

Genworth, one of the handful of players still in the troubled market, has - like the insurance giants that have dropped out - struggled with rising costs of care, higher-than-expected claims filing and fewer people dropping coverage - all of which combined to push long-term care coverage into the red.

Genworth plans to re-launch itself into the long-term care insurance business through its new CareScout services unit. The business is assembling nationwide networks of assisted living facilities and home health care providers in much the same way managed care firms do with doctors, hospitals and other medical services for their health insurance policies. The company made the disclosure in filings with the U.S. Securities and Exchange Commission and several state insurance departments.

"We wanted to offer realistic benefits at an affordable cost that'll be sustainable," said Lynn White, CareScout Insurance's chief executive officer.

A sample price for one set of benefits quotes an annual premium of $3,528. That is well under premiums on one of Genworth's older policies that, like old but still in-force policies of other insurers, can exceed $10,000 a year.

One key was to take a fresh look at the billions of dollars Genworth has paid over the past three decades on its older long-term care policies, to see that for many policyholders, care at home was what they really wanted, rather than costlier stays in nursing homes. At the same time, while older policies tended to offer unlimited benefits, only a small number of policyholders ever needed them - but enough did to throw Genworth's projections of claims costs out of whack, as happened with the other big insurers who plunged into the business decades ago.

To win regulators' approval for long-term care premium rates, insurers have to project claims costs as much as 80 years into the future.

So, one key to Genworth's view that the new CareScout policies can be affordable over time is that maximum benefits will be capped at $250,000, White said.

Another came from a different analysis of Genworth's experience - the number of policyholders who let their policies lapse.

"There were a lot of aggressive assumptions about this," White said. Long-term care insurers' requests that the State Corporation Commission Bureau of Insurance approve premium rate increases routinely report lapse rates that are measurably lower than they had initially predicted and that they've subsequently revised. High lapse rates translate to more insurer resources to pay claims.

At the heart of CareScout's approach will be that network of providers, White said.

Policyholders won't be required to use the network's providers - but to have access to CareScout's advisers and to a network of home care and facility operators who meet the firm's quality standards will go a long way toward dealing with the challenges families often face when they have a sudden need for services, she said.

"We want to make it easy for people, from the moment they buy a policy to the times when they need services," she said.

The CareScout policy would cover services at nursing homes, assisted living facilities, adult day care and home health care.

"That's a traditional long-term care insurance product that we think is priced conservatively," Genworth chief executive officer Tom McInerney told Wall Street analysts earlier this summer.

"We will be reviewing the pricing assumptions against reality over time and seeking increases if we need to, although this product is designed where we won't need an increase," he said.

In its quarterly filing with the U.S. Securities and Exchange Commission, Genworth said it expects to launch the new coverage this year, adding that regulators in 29 states have approved the idea.

The State Corporation Commission's Bureau of Insurance is reviewing basic policy documents and forms. Still to come would be a review of the company's pricing and its projections for claims - projections that for its requests for premium rate changes for older policies can run 60 years or more into an uncertain future.

The $3,528 premium CareScout detailed in a Delaware Department of Insurance filings for a policy with a $100,000 maximum benefit suggests CareScout won't be trying to undercut similar coverage, said Jesse Slome, director of the American Association for Long-Term Care Insurance, an information clearinghouse.

He looked at two other firms' offerings to 62-year-olds and found they quoted annual premiums for men of $2,145 to $2,435 for policies with a maximum benefit of $150,000 with rates for women of $3,530 to $4,210.

The price any policyholder pays for a long-term care policy will vary depending on their age, maximum benefits they want and deductible they are willing to pay.

In recent years insurers, including Genworth, have been seeking sharp increases in premium rates for their older policies, with their more generous benefits.

This year, for instance, the Bureau of Insurance has approved rate increases ranging as high as 105.8% for some Virginia holders of Genworth's Choice 2 and Choice 2.1 policies, which it sold from 2003 to 2012.

These policy holders, who opted for the most generous inflation protection, saw increases of 39.9% in 2022, 33.9% in 2019 and 29% in 2016.

The problem was that long-term care policies were first seen as covering what was essentially a one-time expense, for nursing home care, and were priced that way.

As insurers' claims payments outpaced their projections, the red ink that began flowing was not just a problem for them. It was reaching a point where companies and regulators feared the companies might not have the financial resources to pay claims.

That's why the companies keep asking for big premium rate increases and why regulators keep granting them. Even so, Wisconsin regulators had to liquidate Time Insurance Co, completing that process last year, while Pennsylvania liquidated Penn Treaty Network America Insurance Company and its subsidiary American Network Insurance Company in 2017. When that happens, state guaranty funds - which get their money from assessments on all insurers - step in to pay claims.