A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program. Section Five: Marketing Research and Ltc Planning

10/14/2011

Secretary Sebelius and Administrator Greenlee have clearly stated on multiple occasions that the CLASS program will not go forward unless it is solvent, sustainable, and consistent with the law. Program solvency depends on premiums, benefit payouts, and take-up rates -- enough people buying CLASS policies. Attracting enrollees with lower health risks, people who pay premiums over a long period of time before needing long-term services and supports, is also critical. Achieving sufficient take-up rates and attracting an average mix of enrollees with respect to their health status both depend heavily on marketing.

To prepare for implementing the CLASS program, the Department made a targeted set of investments in consumer awareness and marketing of possible CLASS benefit options that are described below. Not all of the findings from the marketing research are available yet. The research will provide an understanding of: how potential buyers think about long-term care planning; how they make decisions about what and when to buy and how much they are willing to spend; and, how employers think about whether to offer LTC coverage and how they would respond to the opportunity to offer CLASS to their employees. HHS commissioned this research in order to understand whether potential CLASS plan designs would be attractive to a large enough group of buyers. The observations about marketing that are made later in this report rest on preliminary analyses of the marketing research conducted thus far or consultations that HHS has had with experts in long-term care insurance.

In addition, HHS has conducted research for the past fifteen years to understand consumers’ knowledge about long-term care, their experiences arranging or providing care, their attitudes about planning ahead, and their assessment of their own risk for needing long-term care. HHS has considered findings from this research in formulating and modeling premiums and take-up rates for the proposed plan options.

Initial CLASS Marketing Strategy. Initial planning for a CLASS marketing strategy identified two primary sets of customers -- employers and consumers. For CLASS to obtain a sufficient level of enrollment, marketing campaigns would have to target both groups. To determine how best to market to each group, HHS sought to learn more about their respective attitudes and preferences, then identify those within each group who were most likely to participate in the CLASS program. To prepare for developing marketing strategies for both groups, several research and message development procurements were conducted by ASPE and the CLASS Office in the three following areas: Consumer Research, Employer Research and Long-Term Care Awareness Activities.

Long-Term Care Awareness Survey. In 2010, ASPE awarded a contract to RTI International to design a large, nationally-representative survey to study the attitudes, experiences, opinions and actions of Americans related to planning for long-term care services. The data collection contract was awarded to Knowledge Networks. At the time of contract award, ACA had not yet passed and the purpose of the contract was to gain knowledge for future phases of existing long-term care policy (such as the Own Your Future campaigns). Upon passage of ACA, ASPE expanded the scope of the project to include background research for CLASS. The survey, which is not yet completed, will also employ a discrete choice experiment that will measure individuals’ preferences for various attributes of plans at specific price points.

Qualitative Research. ASPE contracted with Thomson Reuters to conduct a number of in-person focus groups and interactive discussions as part of the background research for both the CLASS program and the larger survey effort. Participants in the focus groups, which took place in three cities (Baltimore, MD, St. Louis, MO and Edison, NJ) considered the value to consumers of various CLASS program proposals, consumers’ cost/benefit analyses and their reaction to federal government sponsorship. The research sought to help identify factors that facilitate or inhibit planning for long-term care. Knowledge Networks convened the interactive discussions using members of their KnowledgePanel®. The data from the interactive discussions informed hypothetical questions for the design and administration of the survey mentioned above. Each interactive and in-person discussion solicited from participants reactions, opinions and ideas related to various aspects of long-term care planning and awareness.

Highlights of the findings from the focus groups include: (1) women are more likely to believe that they will need care in their older years compared to men; (2) the belief that one will need long-term care does not necessarily translate into purchasing LTC insurance; (3) many people believe that postponing the purchase of insurance will save money; and (4) many people think that an insurance policy should cover all costs of care; anything less is inadequate. Respondents reacted negatively to vesting periods and complicated benefit plans. Respondents reacted positively to the absence of underwriting, and the option of a cash benefit. Reasons for not purchasing insurance involve cost, first and foremost, but also involve other expenses (such as college tuition and weddings), a perception that insurance is akin to gambling, and the lack of a perceived need for it (particularly among men). Respondents also believed that there should be incentives to purchase long-term care insurance, such as tax deductions.

Development of a Strategic Brand for CLASS. The CLASS Office released a solicitation to develop a strategic brand for CLASS, but no procurement was awarded.

Employer Research. The CLASS Office released a solicitation to assess the potential for employers of all types and sizes to sponsor the CLASS program as a voluntary employee benefit, but no procurement was awarded.

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