A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program. Appendix Pb: Presentation Entitled "Core Assumptions and Model Outputs"

10/14/2011

Core Assumptions and Model Outputs

John Wilkin, ARC
Eric Hammelman, Avalere Health

    CLASS Benefit in Statute     Modified CLASS  
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-U
   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)*
   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 ADLs TBD
   Tiered Benefit Yes Yes
   Elimination Period in Days 0 0
   Presumptive Eligibility Yes - if in Inst. Yes - if in Inst.
   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 65 After Age 65
   Return of Premium TBD TBD
* Modified CLASS changes these three options.

 

Average Premium for CLASS in Statute vs. CLASS Modified with Full Waiver of Premium, 2+ ADL trigger, and 2% Participation

Average Premium for CLASS in Statute vs. CLASS Modified with Full Waiver of Premium, 2+ ADL trigger, and 2% Participation

CLASS Modeling Assumptions: 3 Scenarios
Scenario I
Worse than Expected
II
Expected
III
Better than Expected
Description
Antiselection: ARC 0.85 0.70 0.55 Dampening factor: 1=perfect antiselection
Antiselection: Avalere   0.85 0.70 0.60  
Relative Claim Costs 1.2 1.1 1.0 Increased incidence from survey data
Return on Investment 4.70% 5.70% 6.70% Average annual rate of return
Lapsation 0.50% 0.75% 1.00% Percentage lapse per year
Morbidity Improvement   0.25% 0.50% 0.75% Annual percentage improvement for first 20 years; 0% thereafter
Mortality Improvement 1.31% 0.78% 0.32% Annual percentage improvement over the 75 year period
Participation 1% 2% 4%  

Average Premium for Scenarios I, II and III
Full Waiver of Premium, 2+ ADL trigger, and 2% Participation

Average Premium for Scenarios I, II and III Full Waiver of Premium, 2+ ADL trigger, and 2% Participation

Average Premium for Scenario II by Selection
1% and 4% Participation with Full Waiver of Premium, 2+ ADL trigger

Average Premium for Scenario II by Selection 1% and 4% Participation with Full Waiver of Premium, 2+ ADL trigger

Average Premium for Scenario II by Claim Costs at 1% and 4% Participation with Full Waiver of Premium, 2+ ADL trigger
(ARC)

Average Premium for Scenario II by Claim Costs at 1% and 4% Participation with Full Waiver of Premium, 2+ ADL trigger (ARC)

Average Premium for Scenario II by Claim Costs
1% and 4% Participation with Full Waiver of Premium, 2+ ADL trigger
(Avalere)

Average Premium for Scenario II by Claim Costs 1% and 4% Participation with Full Waiver of Premium, 2+ ADL trigger (Avalere)

Average Premium for Scenario II by Participation Rate
Full Waiver of Premium and 2+ ADL trigger

Average Premium for Scenario II by Participation Rate Full Waiver of Premium and 2+ ADL trigger

Average Premium for Scenario II by ADL Trigger
Full Waiver of Premium and 2% Participation

Average Premium for Scenario II by ADL Trigger Full Waiver of Premium and 2% Participation

Average Premium for Scenario II by Waiver
2+ ADL Trigger and 2% Participation

Average Premium for Scenario II by Waiver 2+ ADL Trigger and 2% Participation

Average Premium by Return on Investment
Full Waiver of Premium, 2+ ADL Trigger, and 2% Participation

Average Premium by Return on Investment Full Waiver of Premium, 2+ ADL Trigger, and 2% Participation

 

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