At this year's NAILBA 34 conference in Orlando, LTCI is one of the hot topic sessions that will be covered by professionals within the industry. As we prepare to kick off the annual conference, Stephen Forman, vice president of Long Term Care Associates, answered a few burning questions on LTCI, short-term care, critical illness insurance and what the LTCI session at NAILBA 34 will cover.
Q: Some of our readers have spent many years talking about why stand-alone LTCI is generally better than products that combine LTC benefits with life insurance or annuity products. What would you tell them now?
SF: It's funny, as one of the industry's staunchest defenders I've certainly had to endure my share of potshots from combo product proponents who've argued that LTCI is risky and overpriced. But I don't think it's necessary to beat up on one another when making a client-facing recommendation. On the contrary, it's a huge shot in the arm for our industry to say we've evolved from an "LTC Insurance" world to one of "LTC Solutions." So I don't feel the need to argue one type of solution is superior to the other, any more than I'd say chocolate is better than vanilla — each has its pros and cons.
Now, if you're asking me to name the pros of traditional LTCI, I'd say it's analogous to "buying term and investing the rest." There is no cash value, but an extreme amount of leverage: it's the least expensive way to purchase the most amount of pure protection. Traditional LTCI is also worth considering in a rising interest rate environment to guard against "opportunity cost" risk. And of course, anyone who values partnership protection must choose qualified LTCI.
Q: What do you think about short-term care insurance products?
SF: I've been singing the praises of STC for years! Not only does the product address the twin objections of affordability and accessibility (i.e. the challenging underwriting associated with LTCI), but these products have an extremely rate-stable history. Stats show about half of claims will be contained within the period of short-term care (365 days or less), and even if the amounts don't seem catastrophic to some, it's important to remember the ancillary benefits insurance provides at claim time. Families who receive care coordination at a time of crisis have much greater peace of mind than those who must wade into the unknown without a helping hand.
Q: Do you see any kind of new or expanded role for critical illness insurance, hospital indemnity and other supplemental health insurance products in LTC planning?
SF: The products that seem to have the greatest likelihood of creating permanent shelf space for themselves in LTC planning are those in the critical illness group. The latest survey I read showed nearly 60 carriers in this market, covering 3 million lives. (By comparison, the LTCI market covers about 8 million in-force lives.) It's primarily been a worksite or employee benefit product up until now, but within the last few years there's been a major push to re-frame it as an alternative to LTCI, especially for impaired-risk clients who cannot qualify for traditional LTCI.
The rationale behind using CI or CHAS (cancer, heart attack and stroke) products as alternatives to LTCI goes like this: Benefits are triggered by a dozen or more "dread diseases," but upon closer inspection we find that many of these are the same ones suffered by the majority of our LTCI claimants. (For instance, cancer accounts for over half of all CI claims.) There may also be fewer restrictions on how one's benefits can be spent (often a lump sum), and none of the training requirements producers associate with traditional LTCI.
