A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program. Appendix Pa: Agenda and Discussion Issues and Questions

10/14/2011

Technical Expert Panel Meeting
On
Actuarial Modeling of the Community Living Assistance Services and Supports (CLASS) Program

Agenda

June 22, 2011
9:00 am - 3:30 pm

Hubert H. Humphrey Building, Room 705A
200 Independence Avenue, SW
Washington, DC 20201

  Contact: Marie Belt or Goldwyn Smith at 202-690-6443  

9:00 - 9:15 Welcome and Introductions

Ruth Katz
Acting Deputy Assistant Secretary for Disability, Aging, and Long-Term Care Policy

Kathy Greenlee
Assistant Secretary for Aging

9:15 - 9:45 Overview of CLASS and Major Modeling Issues

William Marton
Director, Division of Disability and Aging Policy

Bob Yee
Actuary, CLASS Program Office

9:45 - 10:15 Actuarial Research Corporation (ARC) CLASS Model

John Wilkin
Senior Actuary, ARC

10:15 - 10:45 Questions and Comments on the ARC CLASS Model

10:45 - 11:00 Break

11:00 - 11:30 Avalere Long-Term Care Policy Simulator (LTC-PS)

Anne Tumlinson
Senior Vice President, Avalere Health

Eric Hammelman
Director, Avalere Health

11:30 - 12:00 Questions and Comments on the Avalere LTC-PS

12:00 - 12:45 Lunch

12:45 - 2:00 Review and Discussion of Core Assumptions and Model Output

John Wilkin
Senior Actuary, ARC

Eric Hammelman
Director, Avalere Health

2:00 - 2:15 Break

2:15 - 3:30 Presentation and Discussion of Alternative Approaches

William Marton
Director, Division of Disability and Aging Policy

Bob Yee
Actuary, CLASS Program Office

3:30 Adjourn

 

ISSUES AND QUESTIONS TO DISCUSS AT THE JUNE 22nd TEP MEETING

Thank you for your participation on the Technical Expert Panel on Actuarial Modeling of the Community Living Assistance Services and Supports (CLASS) Program. The agenda for the meeting is organized around addressing six major questions (below) and our efforts to develop estimates of premiums, participation and other important aspects of the CLASS program. Please review the questions and materials prior to the meeting. After the meeting, we would very much appreciate it if you could provide follow up comments or thoughts within a week so that we can incorporate them into our future modeling efforts.

  1. Who is likely to enroll in the CLASS program?

    1. Do you think that the models’ approach to adverse selection is reasonable?
    2. Can you suggest approaches to validate the models with regards to their treatment of adverse selection?
    3. What alternative approaches would you recommend?
  2. What is the future long-term care utilization of enrollees likely to be?

    1. Do you think that the approach for estimating future claim costs is reasonable?
    2. What are the strengths and weaknesses of the survey data that are the basis for estimating future claim costs?
    3. What other data could be used to model future claims?
  3. Are other key assumptions reasonable?

    1. Are the interest rate assumptions reasonable (e.g., 4.7%, 5.7%, 6.7% average annual rate of return)?
    2. Are the annual voluntary lapse assumptions reasonable (e.g., .5%, .75%, 1% per year)?
    3. How should the progression of disability among workers be modeled during their working years and beyond?
    4. Are the assumptions of morbidity improvement reasonable (.25%, .5%, .75% per year for 20 years; 0% thereafter)?
    5. Are the mortality improvement assumptions reasonable (e.g., 1.31%, .78%, .32% per year)?
  4. What level of participation should we expect?

    1. What are reasonable lower and upper bounds to participation? What do you think is the best point estimate of participation?
    2. Do you think the models reasonably reflect the dynamic between participation and adverse selection?
    3. How should we model the interaction between program demand and premium levels?
  5. What alternative designs would put the program on stronger financial footing?

    1. Other than underwriting and mandatory enrollment, what features would you suggest to mitigate adverse selection?
    2. What aspects of the program should be changed to maximize participation?
  6. Other than specific changes to the benefit plan, what strategies should we pursue to mitigate program risk?

Summary of CLASS
Program Features   CLASS Benefit in Statute  
Enrollment Requirements:  
   Age 18+ Yes
   Taxable Wages/Income   Yes
   Actively Employed Yes
   Not in Institution Yes
Coverage Benefits:  
   Primary Benefit Cash
   Daily Benefit Amount (DBA) $50 (Average)
   Unit of Payment Daily or Weekly
   Minimum Duration in Years NA - Lifetime
   Total Value TBD
   Inflation Protection CPI-U
   Advocacy Services Yes
   Advice and Asst. Counseling   Yes
Eligibility for Benefits:  
   5 Year Vesting Period Yes
   Work Req. Over Vesting Period At Least 3 Years
   Earnings Req. Over Vesting Period   $1,120/Year
   24 Months of Prior Prem. Payment Yes
   Minimum Benefit Trigger 2 or 3 of 6 ADLs1
   Tiered Benefit Yes
   Elimination Period in Days 0
   Presumptive Eligibility Yes - if in Inst.2
   Administrative Expenses 3%
Monthly Premium:  
   Underwritten (Other Than Age)   No
   Indexed to Inflation No
   Low Income Premium Yes
   Full Time Student Premium Yes
   Waiver of Premium TBD
   Level Premium After Age 653
   Return of Premium TBD

CLASS: Issues for Discussion

  1. Who is likely to enroll in the CLASS program?
    • Modeling adverse selection/antiselection
    • Data limitations
  2. What is the future long-term care utilization of enrollees likely to be?
    • Modeling future claim costs
    • Data limitations
  3. Are other key assumptions reasonable?
    • Return on Investment (4.7%, 5.7%, 6.7% average annual rate of return)
    • Lapsation (.5%, .75%, 1% per year)
    • Morbidity Improvement (.25%, .5% .75% per year for 20 years; 0% thereafter)
    • Mortality Improvement (1.31%, .78%, .32% per year)

CLASS: Issues for Discussion

  1. What level of participation should we expect?
    • Range of 1% to 4%
    • Premium-demand interaction
  2. What alternative program designs would put the program on stronger financial footing?
    • Minor changes (e.g., higher earnings requirements, indexed premiums, etc.)
    • Major changes (e.g., “family of options”; phased enrollment)
  3. What strategies should we pursue to mitigate program risk?
    • Waiver of premium
    • Cross-subsidization
    • Other strategies?
Summary of CLASS Plans
Program Features   CLASS Benefit in Statute   Modified
Enrollment Requirements:    
   Age 18+ Yes Yes
   Taxable Wages/Income   Yes Yes
   Actively Employed Yes Yes
   Not in Institution Yes Yes
Coverage Benefits:    
   Primary Benefit Cash Cash
   Daily Benefit Amount (DBA)   $50 (Average) $50 (Average)
   Unit of Payment Daily or Weekly   Daily or Weekly  
   Minimum Duration in Years NA - Lifetime NA - Lifetime
   Total Value TBD TBD
   Inflation Protection CPI-U CPI (2.8%)
   Advocacy Services Yes Yes
   Advice and Asst. Counseling Yes Yes
Eligibility for Benefits:    
   5 Year Vesting Period Yes Yes
   Work Req. Over Vesting Period At Least 3 Years   5 Years (or 40 Qs)1  
   Earnings Req. Over Vesting Period $1,120/Year $12,000/Year
   24 Months of Prior Prem. Payment   Yes Yes
   Minimum Benefit Trigger   2 or 3 of 6 ADLs2   TBD
   Tiered Benefit Yes Yes
   Elimination Period in Days 0 0
   Presumptive Eligibility Yes - if in Inst.3 Yes - if in Inst.3
   Administrative Expenses 3% 3%
Monthly Premium:    
   Underwritten (Other Than Age)   No No
   Indexed to Inflation No Yes (2.8%)
   Low Income Premium Yes Yes
   Full Time Student Premium Yes Yes
   Waiver of Premium TBD TBD
   Level Premium After Age 654 After Age 654
   Return of Premium TBD TBD

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