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Scott Olson
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BG: So, the same industry, and many of the same companies that sold older policies, including a policy to my wife, have corrected their misdeeds and miscalculations with the help of new state government regulations and stricter public sector oversight? SAO: That's correct BG: That certainly gives me comfort to know my government is acting as a watchdog over the LTC insurance industry. SAO: It should. BG: I'm also charmed that bad-faith pricing behavior has now been cloaked in euphemistic language: "Long-Term Care Partnership Programs." SAO: The original pricing was not made in bad faith. The original LTCi regulations were designed to keep prices as low as possible. The problem was that claims were about twice as high as anyone had expected. The Long-Term Care Partnership Program has nothing to do with pricing. It has to do with the middle-class being able to purchase a policy that protects all of their assets from Medicaid. BG: I'm curious how much the LTC insurance industry has had a hand in shifting the potential burdens of consumer protection to state governments through lobbying and political influence. SAO: States have been regulating insurance since 1945. LTC insurance has been in existence for about 40 years. The LTC insurance industry has pushed for federal regulation of LTC insurance particularly to help standardize benefit triggers and to help protect seniors from losing their coverage through unintentional lapses. BG: Further, your statistic of 7.2 million current LTC insurance policyholders seems impressive upon first glance, but there are 100 million+ consumers over age 50 in the United States, 76 million of whom are Baby Boomers. SAO: At least half of the 50+ population should not own LTC insurance. Most people aged 50+ can qualify for government-funded long-term care through Medicaid. BG: LTC insurance has not exactly caught fire with insurance consumers, and I'm guessing it's because of generally perceived deficiencies in all aspects of LTC insurance products, including the spurious costs of premiums and distrust of the industry. SAO: That's correct. BG: I have nothing to gain from critiquing LTC insurance or taking an editorial stand against these products as presently conceived. Maybe we should instead examine the benefits you derive financially, Scott, from LTC insurance before we become too reassured by your reassurances. Thanks for commenting anyway. SAO: I only commented because I'm sure you don't want your readers to be misinformed. Your hypothetical scenario gives the impression that an insurance company can raise the rates when someone reaches age 90. That's not true.
Fortunately, today, no senior needs to spend down their assets to qualify for Medicaid. To help the middle-class plan for long-term care 43 states have passed landmark legislation creating a “public-private” partnership. These “Long-Term Care Partnership Programs” encourage the middle-class to purchase an amount of long-term care insurance that is equal to their assets. If their long-term care insurance policy runs out of benefits they can apply for Medicaid to pay for their care and all of their assets are protected from Medicaid “spend down” and “estate recovery”. It is true that most of the older LTCi policies have had large premium increases. To protect consumers purchasing policies today, 41 states have passed strict pricing regulations. Consumers purchasing policies today are protected from the pricing mistakes of older policies. This year nearly 300,000 people will make claims on their long-term care insurance policies and receive approximately $10 Billion in cash from those policies. The LTCi industry currently serves 7.2 million policyholders and is expected to pay out roughly $700 billion in claims over the life of those policies--the majority of the claims are for care received at home. Scott A. Olson
The CLASS Act's $50 per day "average benefit" will only cover a small portion of the $75,000+ per year most Americans pay for in-home care. Most people who want to protect their savings will still need to purchase long-term care insurance to supplement the CLASS Act benefit. One of the biggest problems we face is that most Americans still think that Medicare or their medical insurance covers the cost of long term care. The CLASS Act addresses this problem by making a very clear statement: You have to pay for your own long term care. You either have to pay for your own long term care by using your savings, the $50 per day CLASS Act benefit, long term care insurance, or a combination of these. Most of the ten million Americans who own long term care insurance, own it because they've seen friends or family have to spend down their assets before qualifying for Medicaid. The CLASS Act will help alert the rest of the country to the fact that they need to financially plan for their future long term care needs. Scott A. Olson
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Mar 30, 2010