Long term care insurance should be the ideal product for the baby boomers. Their parents' experiences with deteriorating health and need for care is giving them a front-row seat on the problems of aging. The common, often unspoken assumption that "we'll take care of mom and dad" has created a sandwich generation that's being squeezed between their own families' demands and their parents' growing need for assistance. To make matters worse, many boomers who believed they could self-fund long term care exposure saw their portfolios shrink substantially during the bear market, increasing the risk of savings depletion due to long term care expense.
Even though the need is obvious for LTCI, sales stats reflect that the insurance has yet to penetrate the market very deeply. According to the American Association for Long Term Care Insurance's 2009 Sourcebook, 8.25 million Americans have LTCI coverage; 400,000 of those policy owners purchased the coverage in 2008. But there are an estimated 74 million baby boomers, indicating a low rate of purchase.
Experienced LTCI sales reps are the first to admit that LTCI become a tougher sale than it was a few years ago. As one producer expressed a widely held attitude, "The low-hanging fruit has been plucked." In other words, it's much less common to encounter a qualified prospect who seeks out a LTCI adviser or who is anxious to buy the coverage after being approached. That doesn't mean there's no demand for the product, of course, but you should stay abreast of the following changes in the industry to increase the likelihood of success with less eager buyers.
The government's role
Before his death, Senator Ted Kennedy introduced the Community Living Assistance Services and Supports Act of 2009. The law would create a LTCI program to provide coverage for adults who become functionally disabled. Although it's only a small part of the ongoing debate over health care reform, the CLASS Act has thrown a wrench in the works for advisors because it is viewed as a potential competitor to the LTCI partnership programs that roughly two dozen states have implemented in recent years.
If you're unfamiliar with partnership programs, it's time to get up to speed because prospects are likely to ask about them. Partnership policies allow insureds to protect part of their assets while still qualifying for Medicaid. Here's an example of how the contracts work, from the description of Florida's program: "Traditionally, to be eligible for Medicaid, applicants' assets cannot exceed certain financial eligibility thresholds. When applying for Medicaid long term care benefits, the program allows individuals who purchase qualifying insurance policies or certificates to retain one dollar in assets for each dollar of long term care insurance benefits paid by the policy or certificate. For example, the typical asset limit for an individual applying for Medicaid nursing home services is $2,000. If an applicant received $100,000 in benefits through a partnership program insurance policy or certificate, they may retain up to $102,000 in assets."
If the CLASS Act becomes law, industry observers believe there is a significant risk that prospective buyers will procrastinate as they compare the Act's coverage with partnership and private policies. Over time, however, consumers should realize that the CLASS coverage is limited; that will create sales opportunities for additional coverage to supplement or replace the CLASS-policies. Until the Act's outcome is determined, the best strategy is to keep on top of its progress and be prepared to show how partnership and private policies provide prospects with better coverage.
Expanded networking opportunities
Marlys Fiterman, CSA, LTCP, is a partner with Newman Long Term Care in Minneapolis. She's been selling LTCI since 2001 and works primarily with the clients of financial planners, CPAs and other advisors. Those sources have been sending fewer referrals since the economy slowed, so Fiterman has been actively expanding her networking efforts to include online venues. Although she was unfamiliar with online social networking tools at first, she took classes and enlisted a colleague's aid to help her get up to speed. She now uses LinkedIn and maintains a blog to interact and build relationships with prospective referral sources; to date, the results have been good, she says.
