As we look ahead to the New Year and ponder what changes lie in store for our beloved long-term care insurance industry, this author finds it easiest to place into five categories the major influences which impact whether 2014 will be sweet or sour.
THE ECONOMY: When I look at our production from year to year, it seems as if the economy plays an outsize role in our sales metrics — exasperating since we exert no control over it. Although academics tell us the recession ended in 2009 — and many economic indicators have either returned to normal or surpassed their 2008 lows — a malaise continues to dog the American psyche. Influential author and researcher Harry Dent agrees that “the everday consumer never came out of the last recession.”
THE GOVERNMENT: There's no greater impediment to LTCI sales than government's "free inheritance insurance for prosperous heirs," as Steve Moses describes Medicaid. 2014 will see 9 years since the Deficit Reduction Act was passed — the last real attempt to curb Medicaid abuse — and time for renewed attention. Next year's elections will prove if sentiment toward the Tea Party ethos materializes into Congressional seats, and whether any resultant power is wielded to reign in entitlement spending.
While the Patient Protection and Affordable Care Act (PPACA) is here to stay — including its devil's-bargain Medicaid expansion — ACA has had a negligible impact on Long Term Services and Supports. Instead, we enter 2014 with talk of repetitous studies by well-meaning public servants, whose results will be quickly forgotten. Those who hope for better tax breaks for the purchase of LTCI will be disappointed again.
THE CARRIERS: During the last few years several insurers took overt steps to moderate sales, whose successful implementation led some pundits to misinterpret ours as an industry on its heels. Such is the outsize power of the ratings industry, which also used its indirect might to encourage carriers to de-risk certain benefits or withdraw them entirely. In 2014 we expect many carriers will ask for and accept as much business as producers can give.
THE PRODUCTS: As LTCI evolves, continue to expect more variety in the lever which sits at the axis of price, interest-rate sensitivity, and Partnership — inflation protection. One inflation innovation which may see wider adoption by the industry is so-called “step-rating,” since it lessens the rate increase risk inherent in level premiums; two respected studies last year independently recommended this strategy.
DEMOGRAPHICS: The average age of the LTCI buyer has held steady at around 58/59 for several years now — we don't foresee this dropping next year. In the past, working age buyers of large worksite cases skewed this number downard — no more. Tugging in the opposite direction, we’ve now learned the average buying cycle (between first awareness and purchase) is roughly 7 years. Coupled with the statistic that nearly half of adults are of the “sandwich generation” — pre-occupied with immediate concerns beyond far-off retirement planning — if anything, the age of purchase could increase. Linked-benefit products have given new life to older clients for whom the price of LTCI had passed them by.