2012 Long Term Care Insurance Survey
This section describes, row-by-row, the information displayed in the exhibit. Because many features cannot be fully described in limited space, please seek more information from insurers, as appropriate. This year, we’ve added information about Independent Review of Claims (row 73) and what happens to couples’ discounts when one spouse is declined for a “knock-out reason.” We removed the row describing what happens to the discount when a spouse dies; none of our participants adjusts the discount at such time.
The abbreviations in the exhibit include the following.
• Company Name (rows 1 and 56) lists the participating insurers in alphabetical order at the top of each page (Knights of Columbus and John Hancock were reversed for better column readability). Each company may display as many as three products.
• Policy Type (row 2) distinguishes between comprehensive, home care only and facility only products, indicating if the product is especially focused for worksite. In row 2 and the “Comment” rows (55 and 106), we identify five insurers which offer facility only coverage and three insurers which offer home care only. Four insurers display worksite only products and one displays a product aimed at the substandard market.
One insurer has a “disability” product (pays the full benefit based only if the insured is chronically ill). Four insurers have products which allow a portion for their home care benefit (ranging from 33 to 40 percent) to be used as a cash alternative. One product offers indemnity coverage (full benefit if someone is chronically ill and incurs a qualified cost) for a higher premium (row 38).
Where appropriate, we have inserted indicators such as “Disability,” “Facility Only” to indicate why a particular row might not apply to that product.
• Product Marketing Name (rows 3 and 57) is the product’s common brand name.
• Policy Form Number (row 4) is generic and may vary by state.
• Year First LTCI Policy Offered (row 5) is the year the insurer first offered individual LTCI coverage.
• Year Current LTCI Policy Was Priced (row 6) is the year the current product was most recently priced.
• Jurisdictions LTCI Available (row 7) generally shows the jurisdictions in which the insurer sells, or intends to sell, LTCI. A displayed product may not be available in all of these states.
• State Partnerships (row 8) identifies the number of state partnerships in which the insurer participated as of January 1, 2012, and specifically identifies any of the original four state partnerships (CA, CT, IN and NY) in which the insurer participates.
• Financial Ratings and Ranking (rows 9-14) lists each company’s ratings from the four major rating agencies (A.M. Best, Standard & Poor’s, Moody’s, and Fitch). Row 14 shows Ebix’s COMDEX ranking as of May 1, 2012.
The COMDEX ranking is from VitalSigns, a publication of EbixLife, Inc. EbixLife converts each company’s A.M. Best, Standard & Poor’s, Moody’s, and Fitch ratings into a percentile ranking. For insurers rated by at least two of these rating agencies, EbixLife produces a COMDEX ranking by averaging that insurer’s percentile rankings.
The COMDEX ranking has two key advantages: it combines the evaluations of several rating agencies and its percentile ranking makes it easier to understand how a company compares to its peers.
• Financials (rows 15-18) reflect the insurer’s statutory assets and surplus (in millions) for year-end 2011, and the percentage changes from the previous year. These figures do not include assets and surplus of related companies nor do they reflect assets under management.
• LTCI Premium (rows 19-22) lists (1) the annualized premiums (in millions) for policies sold in 2011, and separately, of (2) policies in-force on December 31, 2011, and (3) the percentage changes from the previous year. Single premium sales are excluded from the annualized premium, but the amount of single premium is disclosed parenthetically.
• LTCI Lives Insured (rows 23-26) shows the number of lives covered by new policies and by year-end in-force policies, as well as the year-to-year percentage changes.
• Policy Ranges and Elimination Period Terms (rows 27-34) shows the product’s issue age, daily benefit, benefit period (BP) and elimination period (EP) ranges. It also explains how the EP works.
Issue Age Range shows that only two participants issue LTCI to people older than age 85.
Daily, Weekly or Monthly Benefit Range shows the minimum and maximum policy size that will be issued. The range is shown on a weekly or monthly basis only if home care, assisted living facility care and facility care are always sold on a weekly or monthly basis. Most policies showing a daily benefit range offer an option to determine the benefit on a monthly basis and some issue a daily benefit for one level of care and a monthly benefit for another level of care. The cost of monthly determination of benefits can be reflected in an additional premium and also a reduction in the annual maximum benefit from 365 times the daily benefit to 360 times the daily benefit.
Benefit Period (BP). Only nine participants, down from 11 last year, offer a lifetime benefit period. Four participants offer LTCI policies with BPs as short as one year. The partnerships make one-year benefit periods more common.
Elimination Periods (EP). A cumulative EP means that the requirement could be satisfied in stages. For example, if the policy has a 180-day EP and the policyholder needed qualified care for only 100 days, the remaining EP would be 80 days. A vanishing EP means that once the EP is satisfied, it never has to be satisfied again. One carrier offers a product with a non-vanishing and recurring EP and another has a product that has a non-cumulative EP.
Eight insurers have products that include a calendar-day EP automatically. Calendar-day EP costs more than otherwise-identical service-day EP, but it has the following advantages:
• Clarity. Unfortunately, even if clients understand service-day EP today, they may forget by the time they go on claim. A calendar-day EP may reduce the potential for disputes, especially if it does not require a paid day to start counting.
• Flexibility. It is hard to predict what finances, family status and preferences will be at the time of a future claim. Calendar-day EP allows a family to satisfy the EP with family care or perhaps informal care that would not satisfy a service-day EP.
Row 34 indicates whether the insurer offers a shorter elimination period for home care and, indicates if home care service days count toward (“retire”) the elimination period for facilities.
• Policy Benefits (rows 35-47). Row 37 shows how home care benefits are determined. For policies that limit benefits to incurred expenses (reimbursement policies), monthly determination of benefit payments allows more benefit flexibility than does daily determination. With monthly determination, if less than any daily maximum is used one day, the unused amount for that day can fund additional reimbursement for a day in that month on which more than the daily maximum is spent.
Row 38 indicates whether the facility benefit is an indemnity benefit and, separately, whether the home care benefit is indemnity-based, each either automatically or optionally at additional cost.
An indemnity provision pays the full daily benefit on days when a qualified service is incurred, even if that full benefit exceeds the qualified expense. On days when there is no qualified expense, no benefit is paid. However, the term “indemnity” has been used in a variety of ways in the LTCI industry.
Row 39 shows whether a product is sold with a disability benefit automatically or as an optional feature. A disability provision (often called a cash benefit) pays the full benefit if the person satisfies the policy triggers, even if no qualified expense is incurred.
Row 40 shows whether a product automatically includes or offers an alternative that allows a client to accept a lower benefit that is disability-based rather than having the full reimbursement benefit available. For example, if a caregiver is a teacher and can provide all the care needed during the summer, the client might use the alternative cash benefit at that time, then shift back to reimbursement benefits during the school year.
Row 41 shows whether a product includes or offers to pay (at additional cost) a disability benefit in addition to the normal reimbursement benefit.
Rows 42 and 43 indicate the ratio of the maximum daily benefit for assisted living claims and home care claims as a percentage of the maximum daily benefit for a nursing home claim. Entries of 100 percent in these rows indicate that the maximum daily benefit is the same for all levels of care. Some products offer home care benefits that can exceed facility benefits.
Row 44 indicates coverage for independent professionals (such as nurses not affiliated with a home care agency) and also coverage for independent non-professionals (someone without professional credentials who earns money by providing personal care, but is not employed by a home care agency). “Same” indicates that the same maximum benefit applies for an independent professional as for someone employed by a home care agency. Some products don’t cover such services directly, but alternative cash benefits or excess indemnity benefits could be used to pay for such services.
Row 45 describes homemaker coverage. Some products cover homemaker services only if they are incidental, which generally means that homemaker services must be provided by the same person who provides personal care and during the same visit.
Rows 46 and 47 describe whether (how) benefits might be used to pay an informal caregiver such as a neighbor or a family caregiver with no expertise requirement beyond perhaps rudimentary training. These rows do not reflect caregiver training services (see Ancillary Benefits).
• Benefit Increase Features (rows 48-54) describe level premium automatic benefit increase features and future purchase options (FPO) which result in either attained age, or less steep, premium increases.
Rows 49 (Compound Increases) and 50 (Simple Increase, i.e. equal) show level premium features which increase maximum benefits as long as the policy exists. Row 51 shows other types of level premium benefit increases. A “Yes” listing in row 52 means that compounding ignores claims, then the sum of past claims is deducted to determine the remaining lifetime maximum benefit. With such a policy, if an insured draws full benefits each day, a five-year benefit period would extend to five years, eight months and an eight-year benefit period would extend to nearly 10 years. If the pool is increased after claims are deducted, the nominal benefit period remains constant during the claim period if the policyholder uses full benefits each day.
Rows 53 and 54 describe three approaches for increasing maximum benefits: (1) FPOs; (2) options to buy level premium increase features in the future (“deferred”); and (3) step-rated features, in which future increases of coverage generate premium increases as well.
The asterisked abbreviations in Table 17 are used to convey the frequency and amount of the increases, when such offers stop and how premiums increase when benefits increase. It is not possible to fully explain such features in limited space.
• Other Comments (rows 55 and 106). See row 106.
• Ancillary Benefits (rows 59-66) provides information regarding bed reservation, respite care, alternative plan of care, home modification, caregiver training, emergency alert, equipment, drug and ambulance benefits.
The bed reservation and respite benefits (row 60) show the number of bed reservation days per policy year, and “+Other” means bed reservation is not limited to situations in which the insured person is hospitalized.
The exhibit also indicates how many days of respite benefits are available without satisfying the EP. Respite relieves a family caregiver who keeps the care recipient off claim. If such a caregiver needs a “break” or to take a trip, it would be aggravating to face an EP that would have already been satisfied if the family had hired a commercial caregiver in the past.
A calendar-day EP can be satisfied while the family caregiver provides care. By the time respite is needed, the EP should be over. Thus, a calendar-day EP makes a respite care benefit nearly meaningless.
“APC” entries indicate that the feature is part of an alternate plan of care benefit and typically requires satisfying the EP before obtaining benefits. Satisfaction of an EP is less likely to be required for ancillary benefits with non-APC provisions. To find out if an EP must be satisfied, ask the insurer.
Frequently, two or three types of ancillary benefits share a combined maximum benefit. “Included above” identifies such packaged benefits. We asterisk items that are linked in such fashion. We also asterisk items provided as part of enhanced care coordination. In such cases, we put a corresponding asterisk in the Care Coordination row (row 71).
Ancillary benefits are often limited to a percentage of the daily/monthly facility/home care benefit. The ancillary benefits are lifetime maximums unless there is a “/yr”, “/mo”, or “/plan” indication.
• Claims Issues (rows 67-73). Conditional Receipt Protection describes if/how the insurer protects an applicant for change of health that occurs subsequent to signing the application. “Full, after app” indicates that conditional coverage starts on the date of application. “Full, after UW reqt” means that coverage starts after underwriting requirements are completed. Readers are advised to review insurers’ specific wording and ask questions. For example, for joint policies, neither applicant may have conditional coverage unless both applicants qualify.
Coverage Beyond USA (row 69) reflects the maximum number of days of international coverage. For example, “International (365)” means that, outside the U.S., 365 days of coverage are available. “NH 75%/4 yrs” means that benefits are paid for nursing home confinement up to 75 percent of the MDB with a four-year benefit period. “75% (365)” means international coverage pays up to 75 percent of the daily benefit for up to 365 days. Some reimbursement policies may provide a disability (cash) benefit when the claim is foreign.
Some insurers’ claimants may currently benefit from negotiated discounts from LTC providers (row 70). Such discounts cannot be guaranteed today to exist in the future.
Care Coordination (rows 71-72) describes whether care coordination is available and if so, whether it is provided by insurer staff, independent professionals contracted by the insurer or by someone chosen by the insured. The display also shows limitations regarding care coordination, and asterisks indicate that the use of care coordination improves benefits asterisked elsewhere in the display.
Row 73 indicates whether an insurer has extended Independent Review (IR) beyond regulatory requirements. Some insurers have extended IR to states which have not required IR or to in-force policies or might instigate IR without waiting for the policyholder to request IR.
• Premiums and Discounts (rows 74-87) lists the percentage discount for the insurer’s lowest-priced rating classification compared to its second-lowest-priced rating classification (often called preferred vs. standard) (row 75) and the percentage extra cost (also compared to the second-lowest-priced rating classification) for any other rating classifications (row 76).
Row 77 shows the amount of discount if both spouses or a pair of significant others purchase coverage. If couples’ discounts require that both people have the same coverage, there is a “Yes” in row 78. A decline for a reason other than a knockout health condition that should have kept the application from being submitted is called a “surprise” decline. When one spouse is a surprise decline, most carriers remove or reduce the discount for the other spouse (row 79). Row 80 indicates what happens to the discount when the spouse answers “Yes” to a knockout question.
Discounts are shown that apply for a married person whose spouse does not apply in row 81. Row 82 indicates the maximum discount that a couple the same age, both in the most favorable risk classification and both buying, can get compared to two people who are single and in the second-most-favorable risk classification.
Later Marriage Earns Discount For (row 83) indicates what happens if a person buys LTCI while single, then marries someone who buys LTCI. The “Current” insured’s original premium may be reduced prospectively and the “New” spouse may enjoy a full “Married Couple, Both Buy” discount.
There are many other subtleties relative to couples’ discounts, such as if one policy lapses, if a single person enters a non-spouse relationship, if there is a divorce or legal separation, and whether discounts apply to other family members living together.
Row 84 indicates the most common employer and affinity discounts. Row 85 shows the minimum number of employees a business must have to be eligible for a discount and the minimum number of applications required for the employee group to earn the discount. Row 86 shows the minimum number of members an affinity group must have to be eligible for a discount and the minimum number of applications required for the group to earn the discount.
Row 87 shows for what payment frequencies (if any) credit cards are acceptable. If credit card payment is limited to the first payment, such limitation is indicated in the display.
• Non-Level Premiums (rows 88-91) show alternative premium patterns that result in the policy being paid up or premiums grading up or eventually lowering, in ways that are not related to benefit increases.
• Waiver of Premium (rows 92-95) might begin (row 93) after: (1) a specified number of service or calendar days or (2) satisfaction of the EP or a specified number of service days after satisfaction of the EP.
Home Care Waiver of Premium (row 94) may or may not be provided or may be offered at additional cost.
Joint Waiver (row 95) may be automatically included, available at additional cost by itself, available at additional cost combined with another feature such as survivorship or included only with shared care.
• Return of Premium Riders (rows 96-98). Each company was permitted to detail two ROP riders. “Net” means premiums are only returned to the degree that they exceed claims. “Full” means that all premiums are returned regardless of claim activity. If the full calculated amount is paid no matter when the insured person dies, it is indicated by “100%.” “Grades To” indicates that the death benefit grades up to—or down to—the indicated percentage of the full calculated amount by a specified duration or attained age.
• Other Riders and Features (rows 99-105). Survivorship features (survivor pays no premium after the partner’s death, rows 100-102) are described, indicating whether they are automatically included or optional, how long both partners must survive for survivorship to apply upon the first death, and whether a requirement exists that the insureds had no claim for that specified period.
Shared Care (row 103) shows what happens to the survivor’s shared care premium when one spouse dies. “Permanent Extra $” means that survivors continue to pay their shared care extra premium. “Extra cost ends if partner dies” indicates that survivors stop paying the premium for the shared care rider (but continue to pay the premium for the base policy).
Most commonly, each insured has access to the other insured’s unused benefits if they use up their own benefits. However, in some cases, both partners have their own pool and a third common pool is provided by rider, in which case “Third Pool” is shown in row 103.
Row 104 describes Other Shared Care Benefits. For example, joint waiver of premium might automatically apply. Third-pool shared care features do not permit claimants to invade the normal benefit pool of their spouse. When shared care does not involve a third pool, row 103 notes whether the insurer requires claimants to leave a portion of their spouse’s benefit period untouched, so that the spouse is assured of having one or two years of coverage if needed. (Note: some states mandate such “protection” for spouses; state mandates are not reflected in the display.) Generally, such a requirement expires on the spouse’s death. Some shared pool shared care provisions protect insureds, to some degree, from the risk that their spouse depletes their coverage entirely.
Whether Restoration of Benefits is automatically included or available at additional cost is reflected in row 105. Restoration of benefits restores the original benefit period if, generally, claimants have not been chronically ill for a period of 180 days.
• Other Comments (rows 56 and 106) provides some unique information about some insurers’ products, which may include:
Special discounts or the availability of dividends.
Special underwriting programs for worksite cases.
Premium guarantees, electronic apps or other service features.
Special features or riders, the availability of home care only or facility only coverage, absence of war exclusion, etc.
• Non-Qualified Policies (NTQ) (rows 107-109) provides information about NTQ policies, which do not qualify under HIPAA because their claims triggers are broader than permitted for tax-qualified (TQ) policies. Row 108 indicates either “100% TQ” or shows the percentage of sales which are NTQ and the additional premium required (ranges from 6 to 10 percent). Row 109 shows the type of facility and home care triggers. “Triple Trigger” means that a medical necessity trigger is available as an alternative to ADL and cognitive impairment triggers.
Row 110 shows the types of combo policies that an insurer has available. Combo products offer LTCI benefits in the same policy as life insurance, annuity or disability benefits.
Premium Rate Details
The premium exhibit reflects each carrier’s lowest-priced underwriting class. As the percentage of policies in this class ranges from 7.6 to 100 percent, the prices should not be presumed to be comparable. The exhibit shows level annual lifetime premiums for issue ages 40, 50, 60 and 70 for married couples (assuming both buy and are the same age) and for single people, based on policies with the following features:
• $100 per day (or equivalent weekly or monthly) benefit for all levels of care. The exhibit includes home care only and facility only policies, as well as comprehensive policies.
• 90-day elimination period.
• Three-year benefit period and also lifetime benefit period. Policies based on a defined lifetime maximum, rather than a three-year benefit period, are listed separately and the maximum lifetime benefit is $100,000.
• With no automatic benefit increases and, separately, with automatic 5 percent annual compound benefit increases for life.
If one spouse was younger, most insurers’ premiums for the couple would be lower, but some insurers’ premiums would remain unchanged because their price is based solely on the older person’s age.
We thank insurance company staff for submitting the data and responding to questions promptly. We also thank Nicole Gaspar of Milliman for managing the data expertly.
We reviewed data for reasonableness and insurers reviewed their product exhibit displays. Nonetheless, we cannot assure that all data is accurate.
If you have suggestions for improving this survey (including new entrants in the market), please contact one of the authors.
Claude Thau, FSA, MAAA FSA, MAAA, is president of Thau, Inc. Previously, he started and managed several businesses, both nationally and internationally. Most recently he was a senior vice president for a major insurance company.
Dawn Helwig, FSA, MAAA FSA, MAAA, is a principal and consulting actuary in the Chicago office of Milliman, Inc.
Allen Schmitz, FSA, MAAA Schmitz, FSA, MAAA, is a principal and consulting actuary with the Milwaukee office of Milliman.