The group long-term care insurance market is shrinking as two major players have bowed out of future sales in the last two weeks. American General and Prudential both announced this month they will stop accepting new applications for LTC policies.
Jesse Slome, executive director of the American Association for Long-Term Care Insurance says these are just the latest casualties of the "new economic times we are experiencing, the historic low interest rates and the regulatory environment at the state level."
"The problem [of needing long term care] certainly has not diminished and a government option is not anywhere on the horizon but for the immediate future insurers seem to be saying to governments 'this is your problem' or really your state's taxpayers' problem," Slome said in an email. "At some point, we are optimistic that things will turn around and there will be an environment that makes a private solution attractive again to insurers."
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In the meantime, according to Tom Riekse, managing principal at LTCI Partners, employers concerned about LTC issues are hard-pressed to find a carrier with an appetite for "taking on guaranteed issue coverage decreases in a low interest rate environment when they may be subject to adverse selection."
There is a market for group LTCI, Rieske argues. According to LIMRA, he says, in 2011 total new premium for the group LTC market grew 16 percent in 2011 to $182 million in sales, driven by sales to existing employer groups. Group LTC is most popular, and often only available, to larger employers. About 40 percent of employers with more than 5,000 employees offer a group LTC plan. "Our firm recently assisted with a large employer where the participation rate was over 20 percent," he says.
Both Slome and Rieske agree employers that are looking to offer an LTC solution for workers will have to partner with companies offering multi-life products or, Slome says, "encourage their aging employees to seek coverage on an independent basis."
"Multi-life LTC allows employers to offer premium discounts and simpler underwriting, while carriers get the advantage of state-specific individual policies that still include health underwriting," Rieske says. "Another advantage for carriers is that they can offer new policies with updated actuarial assumptions—new hires are issued the new contract.
"In the past, multi-life policies were difficult for benefit brokers and employers to administer. However, companies now have e-applications to allow a simpler enrollment process, and direct billing (since the contract is between the employee and the insurer, with the employer assisting in facilitation) is becoming more popular than payroll deductions. Since LTC insurance is not a section 125 pre-tax benefit, direct billing works well," Riekse says.
"Benefit brokers are turning to group LTC specialist firms who can assist with plan design, carrier selection and web and telephonic enrollment. The downside for employers and employees is that guaranteed issue coverage often is not available, as it is apparently a risk many insurers are not willing to take."
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