Long-term insurers may have missed an opportunity

Published: Tuesday, May 04, 2010

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By JANET COLLITON

With all of the debate over health care reform, one provision that passed regarding seniors and payment for long-term care at home failed to attract much attention. That will likely change and the Community Living Assistance Service and Supports Act, referred to in short as the CLASS Act, presents some interesting questions.

I would go so far as to suggest that the long-term care insurance industry might have missed an early opportunity to make its product more accessible and more affordable. With some modifications to coordinate with private long-term care insurers, CLASS Act might pave the way to a better future for seniors and the disabled.

First, it helps to know what the Act does. A longtime proposal of the late Sen. Ted Kennedy, CLASS Act deals with some of the major concerns regarding long-term care insurance.

Seniors tell me frequently that they have long-term care insurance but the premiums have increased significantly over the years and increased premiums coincide with their decreased income. The premium that they could afford to pay at age 60 continues to increase while, at age 80, they are afraid to discontinue coverage just at the time they might need it.

Various suggestions have been made to deal with the issue. These include reducing the dollar amount of coverage, increasing the elimination period, reducing the time period over which benefits are paid, and dropping the inflation rider. All of these possibilities result, one way or another, in reducing coverage.

At the same time, insurers have a valid concern that, as people age and need more care, the company’s costs have increased also.

If people began to pay into the long-term care system at an earlier age, say, for example, while they are still employed full time, then long-term care insurers would have a larger pool from which to draw. This is where CLASS Act comes in as a small payroll deduction that workers pay into while they are still healthy and that can result in daily benefits when the worker is disabled or elderly and needs at-home long-term care. It is a movement away from the Medicaid model that depends on reduced assets and income and toward an insurance model.

The CLASS Act benefit is projected to be small, some estimates range in the $50 to $75 per day range, but after five years of payment into the system, participants would be eligible to receive benefits without the complicated asset issues raised by the Medicaid program. Think of the program as a small first step. It could help with at-home care for the disabled at any age and the very frail elderly. It could not deal with the much larger nursing home care expense.

In an Internet article published by Kaiser Family Foundation, probably the best source for long-term care analysis on the Web, at www.kaiserhealthnews.org, Howard Gleckman, senior research associate at the Urban Institute, raised the question “Will private long-term care insurance supplement the CLASS Act?”

Gleckman raised some valid issues. First, CLASS Act would have, as previously indicated, a small daily benefit. It could be assumed that a sizable number of participants would want more coverage. This additional coverage might be provided by private long-term care insurers.

If insurers worked with the system, they could offer supplemental coverage the way that we have Medicare Supplement plans and Medicare Advantage to supplement Medicare but, in this case, dedicated to long-term care insurance. The question is, would long-term care insurers want to offer this kind of supplement to the basic CLASS Act coverage?

A downside of working with the federal legislation is that coordination of coverages could be a problem. People who might receive benefits under CLASS Act might not be covered under the private policy. CLASS Act coverage would continue indefinitely. Most private insurers today offer policies covering no more than four to five years of care.

If insurers decided to compete with CLASS Act instead of working with it, both would likely suffer.

Governments have tried for years to encourage consumers to take out long-term care insurance. Pennsylvania not long ago spearheaded an effort called “Own Your Future” which provided contacts and links into private insurers.

There have been some positive signs on the horizon. Recently, on April 20, I wrote about hybrid long-term care insurance-life insurance and long-term care insurance-annuity products. See www.collitonlaw.com, “New Hybrid Insurances May Help With Long Term Care.”

There has been movement toward paying an upfront single premium to avoid the problem of declining income. Flexibility will be needed to deal with these very common concerns.

Janet Colliton is an elder law attorney whose offices, Colliton Law Associates PC, are located at 790 E. Market St., Suite 250, West Chester, PA 19382, 610-436-6674, colliton@collitonlaw.com. She is also, with Jeffrey Jones, CSA, co-founder of Life Transition Services LLC, a service for families with long-term care needs.

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