LTC Products: Where's the Value?

By Samuel X. Kaplan

Long-Term Care insurance product development is booming, but the real message of LTC has been lost in the explosion. 

The LTC insurance companies are rushing "me too" benefits to market, eager to capture a lion's share of the long-term profits from reserves. Previously located on the fringes of the insurance world, the line is now becoming big business. 

That's good because it gives people more choices. 

But it's also bad—because many of the choices offer poor or illusory benefits to an audience that is actually afraid to make a choice. 

Amid the cacophony cry of "Show Me the Money!" a small voice—that of the potential LTC policyholder—can be heard asking: "Where's the Value?" 

If you can listen to that voice, you will understand the true meaning of Long-Term Care. It's about people. 

It's up to the LTC industry to demonstrate value in a definitive way that engenders confidence among individuals and employer groups. 

So, what are people looking for? That's easy. They want solid benefits that put them in control of their lives while protecting their assets. They want affordable premiums, quality care, and choices. 

Most importantly, they want benefits that will be there when needed. 

They don't want $50 per day policies that will bankrupt their families in a few months. Neither do they want limited coverage that forces them into nursing homes or takes away freedom of choice. 

They don't want premiums so high that consumers will not be able to continue LTC coverage. Nor do they want the practice of companies offering LTC plans at low initial premiums—so people will enroll—and then raising the premium by 18 percent to 30 percent within a few years, thereby rendering the policy unaffordable. 

Some LTC products out there do offer the value people are looking for—and more. First, they have the basics that should be included in any LTC product: 

1. Choices of comprehensive care (nursing home, home care, assisted living and related facilities and adult day care); nursing home only; or home care only.
2. Benefits to cover the services of a care advisor, and access to quality-rated LTC nursing home and home care networks where facility and service ratings are published.
3. Control given to the insured over benefits (by providing a pool of money the policyholder can use as desired to access covered services).
4. Availability of both simple and compound inflation protection options (to protect the individual's benefits in the future).
5. Reasonable benefit triggers that enable policyholders to access benefits when needed. (To ensure they have this, people should check the carrier's history to determine if LTC claims have been paid promptly).
6. Inclusion of non-forfeiture of benefits riders for both nursing home and home care policies at reasonable premiums (so that those whose coverage has lapsed, because they can no longer pay the premium, can recoup some of their investment).
7. Inclusion of a waiver of premium provision that waives the payment of premiums after the policyholder accesses services.

My belief is that the next phase of development in LTC will center on intergenerational products that broaden the appeal of this type of insurance to a younger demographic group, as well as to their parents. 

Some products already have a foot planted firmly in the future this way, by offering more value today. Benefits already approved in some states include: 

1. Parental Assignment: The policyholder can assign up to 50 percent of the LTC benefits, for up to 30 days, to two parents or stepparents.
2. Ten Pay Option: An LTC policy can be paid in full after premiums are paid for the first 10 consecutive years after issue. Younger policyholders can secure their futures during their income-earning years.
3. Home Care Maximizer: Creates a pool of money equal to triple the maximum monthly benefit amount for covered home care services when around the clock services are needed.
4. Access Care Plus: Waives all benefit triggers necessary to enter a nursing home and enables the policyholder to receive services if he or she is unable to perform one of six "instrumental activities of daily living."
5. Private Duty Nurse: Provides care for up to 30 days per policy year in a licensed hospital.
6. Spousal Benefit Transfer: A spouse may transfer a portion of benefits to the other spouse if both spouses purchased policies at the same time.
7. Prescription Drug Benefit: Covers up to 90 percent of covered prescription drug charges while a policyholder is receiving LTC benefits, up to a maximum amount per year.

This demand may eventually drown out the clatter of insurers counting the cash. 

If that happens, it will be for one reason: Insurers did too little, too late, to convince potential policyholders that LTC benefits are of genuine value. 

Right now, today, we have an opportunity to grow the LTC market prudently while helping individuals secure their futures. Let's not waste it. 

When people ask, "Where's the Value?"—tell them. 

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