Combo Long-Term Care Products

Question 1

Recent financial difficulties faced by LTC insurers (3)

Answer 1

These have led many companies to take substantial premium increases and to exit the market:

1. Reduced investments earnings caused by historically low interest rates.
2. Higher cost of providing LTC
3. Strong persistency, resulting in more policies than expected sticking around long enough to be eligible for benefits.

Question 2

Programs that provide LTC Coverage (3)

Answer 2

1. Medicaid
   
   • must satisfy income requirements
   • LTC represent large % of MEdicaid expenditures
2. State Partnership LTC plans - program allows individuals who buy LTCI policy to exclude $1 of assets for every $1 of private insurance obtained from assets used in determining Medicaid elig. Designed to promote purchase of private LTCI but not effective.
3. Insurers - market penetration is low. Profitability issues

Question 3

Pension Protection Act (PPA) (1)

Answer 3

Funds in a life insurance or annuity policy can be used to pay for qualified LTC premiums w/o tax consequences.

Question 4

LTC Combo Products (1)

Answer 4

Combine LTC benefits with an underlying life insurance or annuity product

Question 5

Reason why LTC Combo may be solution (1)

Answer 5

1. Risk profile of LTC combo products is much lower than standalone LTC products. This risk profile is acceptable to the insurer and policy benefits attractive to the consumer.

Question 6

Provision for qualified LTC policy (2)

Answer 6

1. Plan of care prescribed by a licensed health care practitioner.
2. Individual certified by a licensed health care practitioner as satisfying LTC benefit triger

Question 7

LTC Benefit triggers (2)

Answer 7

1. Unable to perform at least 2 activities of daily living

2. Requiring supervision due to severe cognitive impairment