Hartford Business Journal

www.HartfordBusiness.com • March 12, 2018 • Hartford Business Journal 15 term care policy. Such insurance is one of the few ways to cover those costly services, short of paying large sums out of pocket or becoming impoverished enough to qualify for Medicaid, which is the single largest spender for long- term care services in Connecticut. "Why would we, after paying these premiums for so many years, reduce our benefit package or terminate en- tirely when we potentially need it the most — when we are older and are on a fixed income?" Joan Wallack said. "But that is precisely what the insur- ance companies want you to do so that they will not have to be respon- sible for payment of benefits." In a statement, Brighthouse Financial said the long-term care industry is facing challenges as a result of evolv- ing actuarial assumptions on pricing. "We understand that rate increases on our policies may be a challenge to policyholders," the company said. "To provide flexibility, the contracts offer options that give policyholders a choice in managing to a premium level that works for their needs." A long-term trend The insurance industry has had a difficult time projecting the costs of long-term care plans. Many insurers that have asked the Connecticut Insurance Department for double-digit premium increases in recent years have explained the chal- lenge this way: "Unlike medical health insurance with premiums set to cover expenses incurred only during the upcoming policy year, long-term care premiums are set to cover expenses that are not expected to occur until a distant date, sometimes 20 years in the future." Jesse Slome, executive director of the American Association for Long-Term Care Insurance, says much of the bad experience from older policies has been priced into newer plans. Many insur- ers, however, don't often get the full premium increase they want. For example, Genworth — which leads the Connecticut market with more than 26,000 active long-term care policies as of late 2016 — asked regulators late last year for a nearly 59 percent rate hike on a plan sold between 2002 and 2005 that's held by 4,700 residents. State insurance regulators ac- knowledged that Genworth's claims costs were "much higher" than it had originally anticipated, but approved an 18 percent increase instead. Slome said long-term care insurance is similar to a reverse lottery: people put in money and hope not to win. However, if one ends up needing long-term care, insurance is a god- send, helping improve a policyholder's quality of care and lifestyle, he added. "It will give you more choice, more op- tions and faster access to care," he said. Sales plummet As long-term care premiums have climbed, policy sales in Connecticut have plummeted since the turn of the century, particularly during the most recent recession, which fits into a national industry decline. "A lot of that is due to large increas- es in the cost of policies," said David Guttchen, director for the Connecti- cut Partnership for Long-Term Care within the state Office of Policy and Management. In 2016, policy sales in Connecticut numbered 2,583, the lowest in at least two decades, and down from a 2000 peak of 16,674 policies sold. Of all the Connecticut policies sold over the years, 107,607 remained ac- tive at the end of 2016. Nationally, annual sales in the indi- vidual long-term care insurance market fell from a peak of 754,000 in 2002 to 129,000 in 2014, according to a National Association of Insurance Commission- ers (NAIC) report released in 2016. The number of insurers offering long-term insurance policies has also fallen steeply. Nationally, there were 125 insurers selling policies in 2002. By 2014 that had fallen to 15, accord- ing to NAIC. In Connecticut, 24 insurers sold plans in 2005. That number had been cut in half by 2016, according to OPM data. "Many of the big names in long- term care insurance have just got- ten out of the market completely," Guttchen said. Big players that stopped selling plans in Connecticut include MetLife and Prudential. Meanwhile, Genworth has seen its sales fall from 2,353 in 2005 to just 45 in 2016. John Han- cock, which sold 814 policies in 2005, sold 78 in 2016. The most active sellers of new poli- cies today include Bankers Life, Unum, TransAmerica and Northwestern. The partnership Guttchen has overseen the Con- necticut Partnership for Long-Term Care since it launched in 1992. About 40 percent of Connecti- cut's currently active long-term care policies have been sold through the partnership, which markets plans that meet its design standards. Despite rising premiums, the partnership still urges consumers to purchase long-term care insurance. Since its founding, the program says it's helped save Medicaid more than $30 million by shifting long- term care costs to private payers. The partnership requires its insur- ers to increase benefit amounts each year to keep up with inflation, which helps policyholders in the long run but contributes to higher premiums. In addition, partnership policies are the only plans in Connecticut to offer Medicaid asset protection — a key benefit that allows policyholders to shield various assets from Medicaid, should they one day need it. That protection can allow policy- holders to have an estate to leave behind when they die. It can also im- prove older adults' lives by allowing them to access private nursing home rooms or a larger monthly disposable income than Medicaid allows. Hybrid insurance product emerges By Matt Pilon mpilon@HartfordBusiness.com W hile state-collected data points to a clear decline in long-term care insurance sales, it does not account for sales of combi- nation or hybrid policies that com- bine either life insurance or annuities with a long-term care component. For example, a hybrid life insur- ance policy would pay out a death benefit early if a policyholder fell ill and needed long-term care. However, benefits in such plans are typically lower and often don't protect against inflation, said Jesse Slome, executive director of the California-based American Associa- tion for Long-Term Care Insurance. "The tradeoff is most of those products have a fixed amount [of coverage]," Slome said. "You buy at 65, and you get $5,000 a month of benefit. What will $5,000 a month get you when you're 90? We will have to wait and see." Across the country, sales of hybrid policies, es- pecially in the life insurance realm, have grown sharply, according to Windsor-based insur- ance and financial association LIMRA, which does not publish state-level data. In 2015, the number of hybrid life plans sold eclipsed traditional long- term care policies for the first time, LIMRA data shows. More insurers have stepped into the hybrid market in recent years, said LIMRA's Elaine Tumicki, cor- porate vice president of insurance research-product. "The risk is a little bit easier for insurance companies to manage because it's a little bit more known what the maximum costs will be," Tumicki said. While they've filled a gap left by long-term care insurance, Tumicki said there are still far more people approaching retirement age who lack any type of long-term care coverage. "Most people would agree the problem is not solved," she said. Elaine Tumicki, Corporate Vice President of Insurance Research- Product, LIMRA 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Policies sold Source: CT Partnership for Long-Term Care A market's decline Sales of long-term care insurance policies have fallen sharply in Connecticut since the turn of the century.

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