Exiting the Market: Understanding the Factors behind Carriers' Decision to Leave the Long-Term Care Insurance Market. Notes

07/01/2013

  1. Mature Market Institute (2011). Market Survey of Long-Term Care Costs: The 2011 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs. October.

  2. O'Shaughnessy, CV. The Basics: National Spending for Long-Term Services and Supports. National Health Policy Forum, 2012. http://www.nhpf.org/library/the-basics/Basics_LongTermServicesSupports_02-23-12.pdf. Washington, DC.

  3. America's Health Insurance Plans (2004). Long-Term Care Insurance in 2002. Research Findings, Washington, DC. June.

  4. LifePlans, Inc. (2012). 2011 Long-Term Care Top Writers Survey Individual and Group Association Final Report, Waltham, MA. March.

  5. Ibid.  

  6. America's Health Insurance Plans (2004). Long-Term Care Insurance in 2002. Research Findings, Washington, DC. June.

  7. National Association of Insurance Commissioners (2001). Long-Term Care Insurance Experience Reports for 2000.Kansas City, KS. November.

  8. National Association of Insurance Commissioners (2010). Long-Term Care Insurance Experience Reports for 2009.Kansas City, KS. November.

  9. National Association of Insurance Commissioners (2011). Long-Term Care Insurance Experience Reports for 2010.Kansas City, KS. November.

  10. National Association of Insurance Commissioners (2012). Long-Term Care Insurance Experience Reports for 2011.Kansas City, KS. November.

  11. While interim years were available from NAIC, in order to capture the trend over the decade, we focused exclusively on these years.

  12. This theory of the firm parallels the theory of the consumer which states that consumers seek to maximize their overall well-being (utility).

  13. It is important to note that the information about firm entry to the market is based primarily on interviews with companies that have since left the market. The exception is the presentation of some historical information on Amex Life -- currently Genworth Financial.

  14. Long-Term Care for the Elderly and Disabled (1977). Congressional Budget Office, Congress of the United States, Washington, DC. February.

  15. Health Care Financing Administration, Office of the Actuary, Data from the Office of National Health Statistics in Health Care Financing Review, Fall 1994, Volume 16, Number 1.

  16. Among others, these included the Mitchell Bill, which proposed paying for the care of individuals who stayed more than two years in a nursing home and the Kennedy Bill which proposed paying for front-end LTC costs.

  17. Kemper Peter (2010). Long-Term Services and Supports. The Basics: National Spending for Long-Term Services and Supports. Presentation to the National Health Policy Forum, Washington, DC. June 18.

  18. Market Survey of Long-Term Care Costs (2010). The 2010 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs. MetLife Mature Market Institute.

  19. Moody's: Long-Term Care Insurers Face Uncertain Future (2012). Moody's Investor Service, Global Credit Research, New York, NY. September 19.

  20. Cohen, M. (2011). Financing Long-Term Care: The Private Insurance Market. Presentation to the National Health Policy Forum, Washington, DC. April 15.

  21. It is important to note that a number of companies exiting the market have transferred their group business to other carriers and in some cases this may be counted as a "sale", even if individuals purchased their coverage years beforehand. Thus, some of the 42% of new sales could have been comprised of such takeover activity, which was particularly prevalent in 2010-2012.

  22. Note that for life insurance first-year commissions are commonly above 100% and the dollar value of annuity commissions is often greater than the value of LTC commissions. Thus, LTC commissions are not out of line with other voluntary insurance products.

  23. Stevenson, D., Cohen, M., Tell, E. and Burwell, B. (2010). The Complementarityof Public And Private Long-Term Care Coverage. Health Affairs, 29:1. January.

  24. Brown, J.R., Coe, N.B., and Finkelstein, A. (2007). Medicaid Crowd-Out of Private Long-Term Care Insurance Demand: Evidence from the Health and Retirement Survey. In J.M.Poterba, Ed., Tax Policy and the Economy, Vol. 21, pp.1-34.

  25. Based on analysis of 500 individuals age 50 and over surveyed in 2010, 2005, and 2000 as well as 1,000 individuals age 55 and over surveyed in 1995 as reported in Who Buys Long-Term Care Insurance in 2010-2011? A Twenty-Year Study of Buyers and Non-Buyers (in the Individual Market), AHIP, 2012.

  26. Long-Term Care Insurance 2000: A Decade of Study of Buyers and Non-Buyers. The Health Insurance Association of America, July 2000.

  27. Note that the decline in sales in 1994 coincided with the Clinton health care reform debates which included provisions for expanded home and community-based care. This was seen to depress demand as potential buyers waited to see whether or not the legislation would pass.

  28. Authors calculations based on policy design data from more than 10,000 policies in 1990, 1995 and 2000 as reported in Who Buys Long-Term Care Insurance in 1994? Profiles and Innovations in a Dynamic Market (2005). Health Insurance Association of America, Washington, DC, and Who Buys Long-Term Care Insurance in 2005? A Fifteen Year Study of Buyers and Non-Buyers (2006). America's Health Insurance Plans, Washington, DC.

  29. Bazer, L. (2012). An Outsiders View: The State of the LTCI Industry--Long Term Care from a Rating Agency Perspective. Presentation at the 12th Annual Intercompany Long Term Care Insurance Conference, Las Vegas, March. Moody's: Long-Term Care Insurers Face Uncertain Future (2012). Moody's Investor Service, Global Credit Research, New York. September 19.

  30. Meyer, D. (2012). Why Get in? Why Get out? Ratings Agency Perspective on Long-Term Care. Fitch Ratings, presentation at the 12th Annual Intercompany Long Term Care Insurance Conference, Las Vegas, March.

  31. Tolerating Risk: A Look at LTC Underwriting Strategies. Behind the Data, Issue 2, January 2011. LifePlans, Inc., Waltham, MA.

  32. Ibid.  

  33. U.S. Department of Health and Human Services, Office of Disability, Aging and Long-Term Care Policy (2008). Private Long-Term Care Insurance: Following an Admission Cohort over 28 Months to Track Claim Experience, Service Use and Transitions. Final Report. Washington, DC. April. http://aspe.hhs.gov/daltcp/reports/2008/coht28mo.htm.

  34. LTC Financing Strategy Group, 2008. Washington, DC.

  35. Authors' analysis of data summarized in AHIP Study of Buyers and Non-Buyers of Private LTC Insurance in 2010, Washington, DC.

  36. Website on Partnership Programs: http://w2.dehpg.net/LTCPartnership.

  37. Who Buys Long-Term Care Insurance in 2010-2011? A Twenty-Year Study of Buyers and Non-Buyers (in the Individual Market), AHIP, 2012.

  38. Ibid.  

  39. National Association of Insurance Commissioners (2009). Long-Term Care Insurance Model Act, Legislative History, 640-21. October.

  40. Ibid, 2009.

  41. Baer, D. and O'Brien, E. (2010). Federal and State Income Tax Incentives for Private Long-Term Care Insurance. AARP Public Policy Institute. Washington, DC.

  42. Stevenson, D., Frank, R. and Tau, J. (2009). Private Long-Term Care Insurance and State Tax Incentives. Inquiry 46:305-321. Fall.

  43. Wiener, J.M., Tilly, J., and Goldenson, S.M. (2000). Federal and State Initiatives to Jump Start the Market for Private Long-Term Care Insurance. Elder Law Journal 8(1):57-99.

  44. Moody's Investor Services. (2012). Special Comment: Long-Term Care Insurance: Sector Profile. September 18.

  45. California Department of Insurance Website relating to rate histories of LTC insurance companies. http://www.insurance.ca.gov/0100-consumers/0060-information-guides/0050-health/ltc-rate-history-guide/index.cfm.

  46. Helwig, D. (2005). The Basics of Long-Term Care Insurance, New Orleans Life Spring Meeting, May 22-24, Record, Volume 31, Number 1, Society of Actuaries.

  47. Meilender, B. (2003). Risk Based Capital, 2003 Valuation Actuary Symposium, SanDiego, CA. September 11-12, 2003. Session 37 PD, Society of Actuaries, 2004.

  48. Charsky, D., FSA and Nelson, R., FSA (2012). Personal Communication. December 28.

  49. Personal communication with Don Charsky, FSA President of Ability Re and Ray Nelson, FSA Senior Actuary at Ability Re.

  50. Note that not all companies hold assets in AAA bonds, but many of them do. In general and across various asset classes in which companies typically invest, returns have declined over the period.

  51. Helwig, D., Bhandula, R. and Barrett, N. (2007). Long-Term Care: Hedging Your Bet. Long-Term Care News, Long-Term Care Insurance Section, Society of Actuaries. December.

  52. America's Health Insurance Plans (2004). Long-Term Care Insurance in 2002. Research Findings, Washington, DC. June.

  53. LifePlans, Inc. (2012). 2011 Long-Term Care Top Writers Survey Individual and Group Association Final Report, Waltham, MA. March.

  54. This figure is difficult to determine with precision. Broker World estimates that in 2010 there were 25 companies selling stand-alone policies, but many of these were selling a very small number on an annual basis.

  55. Other companies include Auto-Owners Insurance Group, Blue Cross Blue Shield of Michigan (LifeSecure), Country Life, Humana, United of Omaha, and United Security as reported in Brokers World, 2012.

  56. Prudential announced its exit from the individual market but took applications through March 2012 and in July it announced its exit from the group market but is taking applications through the middle of 2013.

  57. We focus on the individual market due to data limitations associated with group carrier experience in the 1990s.

  58. A "closed-block" means that while policyholders who hold policies continue to receive services from the company, no new sales are occurring and hence, no additional individuals are being added to the risk pool.

  59. A company may decide to exit one market segment but stay in another if it perceives greater risk or unique challenges in a particular market segment. For example, the administrative burden of implementing rate increases in the group market may be perceived as far greater than in the individual market, and therefore exiting this market may be more attractive to some carriers.

  60. This is similar to designing LTC insurance like Universal Life. An account value is credited with premiums and interest earnings and charged with current insurance charges, withdrawals, and expenses. As the account value increases, the net amount-at-risk decreases. The early pre-funding is available to the policyholder in the event of lapse or early death.

  61. Mohoric, E. (2013). Long-Term Care Product Design: Two Common-Sense Recommendations. Long-Term Care News, Long-Term Care Insurance Section, Society of Actuaries. January.

  62. Both Genworth Financial and MetLife conduct annual cost of care surveys that track changes in the cost of key LTC services including nursing home care, assisted living, and home health care.

  63. Helwig, D.,Bhandula, R. and Barrett, N. (2007). Long-Term Care: Hedging YourBet. Long-Term Care News, Long-Term Care Insurance Section, Society of Actuaries. December.

  64. A guaranteed renewable product in this context means that the insurer cannot cancel a policy if the individual continues to pay premiums but the company does have the right to change premiums based on credible experience for a class of individuals. A non-cancellable policy implies that the company cannot change premiums once they are set, regardless of whether or not pricing assumptions are met.

  65. See Frank, R., Cohen, M. and Mahoney, N. (2013). Making Progress: Expanding Risk Protection for Long-Term Services and Supports through Private Long-Terms Care Insurance. Unpublished policy brief submitted to the SCAN Foundation. January.

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