Reno, Nev.
A more daunting regulatory environment could be one of the challenges facing the long term care insurance industry over the next 5 to 10 years.
Speakers delivered that message here on a panel at the Intercompany Long Term Care Insurance Conference, an event organized by the Society of Actuaries, Schaumburg, Ill.
The need to develop new and more appealing LTC insurance products and a diminishing supply of care workers are other challenges facing the industry, panel members said.
Regulators will be paying more attention both to consumer protection concerns and to financial concerns, such as pricing, reserving and capital levels, according to Paul Forte, chief executive officer of Long Term Care Partners L.L.C., Portsmouth, N.H.
Long Term Care Partners, a joint venture of MetLife Inc., New York, and John Hancock Financial Services Inc., Boston, administers the Federal Long Term Care Insurance Program.
Although the Obama administration has a liberal majority in Congress, high budget deficits and the soaring cost of existing entitlement programs, such as Medicare, could hinder plans, such as a bill proposed by Sen. Edward Kennedy, D-Mass., to make LTC benefits more available, Forte said.
But the pressure that Americans' lack of private LTC insurance puts on Medicaid could force the government to act, Forte said.
Regulation of insurers' financial management practices is likely to increase at both the federal and the state level, Forte said.
Traditional accounting models have fallen short for many LTC insurers, and LTC insurers' recent financial troubles have only increased regulators' concerns about the adequacy of their capital and reserves, Forte said. Pricing is also a concern because of worries about premium rate stability, he added.
At the same time, state officials are becoming increasingly sensitive to carriers' claims-paying practices, and pressure is building for the kind of independent third party reviews recommended by the National Association of Insurance Commissioners, Kansas City, Mo., Forte said.
State watchdogs also will look more and more at the suitability of LTC product pricing, Forte said. In the end, he warned, insurers may need to hold greater amounts of capital in reserve to sustain LTC commitments and play closer attention to returns on equity and claims data, or face the possibility that future federal regulation would require them to do so.
Forte noted that the issues he was discussing were causing concern even when times were good.
"Over the next 5 to 10 years," he said "we'll have the most difficult economic climate in 80 years."
