Marc Cohen met with a combination of warm interest, confusion and skepticism today when he gave a federal Alzheimer's panel a talk on the state of private long-term care insurance (LTCI).
The panel, the Advisory Council on Alzheimer's Research, Care and Services is supposed to help the U.S. Department of Health and Human Services (HHS)coordinate a war against Alzheimer's disease and other forms of dementia.
Congress created the body with a provision in the National Alzheimer's Project Act of 2010 (NAPA). NAPA drafters want the council to help HHS lead efforts to find a way to prevent or cure Alzheimer's by 2025, and to find ways to improve the lives of the people who have dementia today and their caregivers.
In the two versions of a plan for fighting Alzheimer's that the panel has produced, the panel has mentioned the need for financial planning, and the role private LTCI might play in helping people with Alzheimer's, only in passing.
Cohen, a longtime LTCI analyst with Life Plans, told the panel members about the effects of lower-than-expected lapse rates, very low interest rates, and regulator resistance to LTCI rate increases on the LTCI market.
"Sales today are below levels from the 1990s," Cohen said.
Dozens of insurers have gotten out of the market, partly because they had a hard time making a profit, but partly because they decided that they could earn much higher returns from using the large amounts of capital needed to support an LTCI operation to write other products, Cohen said.
But LTCI carriers have paid about $35 billion in claims over the years, they've paid about 95 percent of the claims they've received, and the policies they've sold are covering about 70 percent of the cost of nursing home care and about 90 percent of the cost of home care for the insureds who've filed claims, Cohen said.
The overall level of market penetration is under 10 percent, but about 16 percent of people ages 65 and older with incomes over $20,000 per year seem to have private LTCI, Cohen said.
One woman on the council reported having vague memories that her state had tried to support sales of private LTCI and asked whether states were doing anything to support private LTCI carriers today.
George Vradenburg, a lawyer who serves on the council, asked why LTCI carriers could not cope with low interest rates by changing their investment mix.
Another member of the council helped Vradenburg explain that state regulators put strict limits on insurance company investment portfolios and that insurers typically take a very conservative approach to choosing investments.
Discussion started to come to life when some panelists asked about a possible conflict between the panel's interest in finding and spreading tools for helping people find out about dementia risk early, and the possibility that the tools could interfere with people's ability to get LTCI or other forms of insurance.
Cohen said the conflict between insurability and the need for people to know about their risk early is a difficult one.
Studies show that people who believe they are at risk for developing dementia are seven times more likely than other people to buy LTCI, Cohen said.
If consumers had an accurate way to estimate their dementia risk, and the LTCI industry had no access to the same information, "in very short order, it would bankrupt the industry," Cohen said.
Consumers: No idea what LTC planning is
The panel then heard from Hunter McKay, an official at the HHS Administration on Aging.
The agency has been trying to decide how to use a small financial planning promotion budget. One step has been to test website designs.
The agency found through focus groups and other means that most consumers have no idea what "long-term care planning" is, feel angry and stupid when a website talks about that, and hate the idea of an HHS website offering an LTC "Plan Builder" too.
"Our audience is not ready" to hear about LTC planning, McKay said. "We could not sell that to save our lives."
Similarly, people hated questions such as, "Will you want to live at home?"
Most people say they have no idea what they will want to do when they are old, and they are afraid of thinking about their older "future selves," McKay said.
Consumers did like having checklists of ideas to consider for people of different ages, and they want to see a link to information about what Medicare covers on the entrance page, McKay said.
Presenting LTC planning as a component of retirement financial planning seems to help make the topic less frightening, McKay added.
Some advisory council participants noted that McKay's agency had created a public service announcement video showing someone who wanted to plan for long-term care to avoid creating a burden for her daughter.
One participant noted that Native American tribal leaders have suggested that any effort to present family caregiving as optional or a burden could lead to huge problems, by undermining the current family caregiving system.
Other participants said some other communities would find campaigns presenting caregiving as a burden would be unacceptable.
CFPB Office for Older Americans
Also during the meeting, Naomi Karp, a staffer at the new Consumer Financial Protection Bureau (CFPB), said the CFPB's Office for Older Americans will be developing a guide to LTC planning for a retirement planning Web guide.
The office also is developing how-to guides that will help people serving as financial helpers for parents and other elders understand the concept of fiduciary duty, and they also are developing how-to guides to help managers of nursing homes, assisted living facilities and other facilities recognize and report possible cases of elder financial abuse.
Karp said staffers at many financial institutions have expressed frustation that state laws and procedures often limit their ability to place checks on hold or take other action to block suspect cases of fraud against older consumers.