Senior Issues (B) Task Force s2

Attachment ? Senior Issues (B) Task Force 8/??/16

Draft: 9/28/16

Long-Term Care Innovation (B) Subgroup Conference Call September 19, 2016

The Long-Term Care Innovation (B) Subgroup of the Senior Issues (B) Task Force met via conference call Sept. 19, 2016. The following Subgroup members participated: Teresa D. Miller, Chair (PA); Fred Andersen, Vice Chair (MN); Mary Ellen Breault (CT); Rich Robleto (FL); Doug Ommen (IA); Dean L. Cameron (ID); Anne Melissa Dowling (IL); Marti Hooper (ME); Brendan Peppard (NJ); Elizabeth Kelleher Dwyer (RI); Susan Anderson (SD); and Mike Bryant and Jim Freeburg (WA).

Also participating were: Steve Ostlund (AL); Mel Anderson (AR); Perry Kupferman and Tyler McKinney (CA); Rolf Kaumann and Michael Muldoon (CO); Paul Lombardo (CT); Sally Frechette (DE); Debra Peirce (GA); Rebecca Vaughan (IN); Mark McClaflin (KS); Stephanie McGaughey-Bowker (KY); Michael Draminski (MI); Mary Mealer (MO); Phillips Strickland and Bob Williams (MS); Bob Potter (NC); Chrystal Bartuska, Nishit Goradia and Yuri Venjohn (ND); Martin Swanson (NE); David Sky (NH); Terry Seaton (NM); Annette James and Mackay Moore (NV); Martin Wojcik (NY); Laura Miller (OH); Cuc Nguyen and Joel Sander (OK); Gayle Woods (OR); Andrew Dvorine (SC); Chlora Lindley-Myers (TN); Jan Graeber and Philip Reyna (TX); Tomasz Serbinowski and Jaakob Sundberg (UT); Bob Grissom (VA); Linda Low (WI); and Dena Wildman (WV).

1. Heard a Presentation from Robert A. Kerzner

Mr. Kerzner (LIMRA, LOMA & LL Global) began his presentation by pointing out that the projected number of retirees will continue to climb. He said there are currently about 48 million retirees. He said by 2025 there will be 66 million retirees and by 2040 there will be 82 million retirees. He also said that, according to the World Health Organization (WHO) estimates, there are 47 million people living with dementia today and by 2050, there will be 132 million people with dementia. He also said that the number of Americans living with Alzheimer’s will nearly triple in 35 years, from 5.1 million in 2015 to 13.5 million by 2050.

Mr. Kerzner provided statistics showing that 53% see Alzheimer’s/dementia as the scariest disabling condition in later life, twice the percentage who view cancer as the scariest disabling condition. He said the average health care cost for people with dementia in their last 5 years of life is $250,000, which is 57% greater than costs associated with other diseases. Mr. Kerzner said Americans will spend $48 billion on long-term care (LTC) expenses in 2015. He also said that the cost of LTC and hospice care will multiply 10-fold by 2030 worldwide, from $183 billion in 2011 to $2 trillion in 2030.

Mr. Kerzner said that 7 million Americans have LTC insurance (LTCI) but it is projected that 45 million Americans will need LTC services by 2025. He said surveys find that Americans’ top three financial concerns are: 1) money for a comfortable retirement (66%); 2) paying for LTC services (58%); and 3) paying for medical expenses (58%). He also said that retirees are becoming more aware of the LTC risks while individual LTCI sales have declined over the past decade and group LTCI sales have plummeted since 2011.

Mr. Kerzner said that life-combination product sales have grown five-fold in the past 8 years and that 9% were extremely likely, 34% were very likely, and 34% were somewhat likely to choose a combination life/LTCI product. He said his research also found that 40% of Millennials said they would be interested in a combination life/LTCI product. Mr. Kerzner said the top three reasons consumers would consider life/LTCI combos are: 1) benefits will be paid even if there are no LTC expenses incurred (36%); 2) a more economical use of current assets (36%); and 3) concern that LTC costs may deplete or exceed savings (35%). He also that research has found that Millennials (62%) and Gen X (62%) are more concerned about paying for long term care than Boomers (55%) and Seniors (50%).

Mr. Kerzner said the majority of consumers understand the value of LTCI but few buy because cost is top reason people do not buy LTCI. He said consumers seem to opt for shorter benefit durations to save money. He said consumers want simplicity and that there are too many confusing choices. He said consumers are seeking new products and new solutions.

Mr. Kerzner highlighted some innovative products that currently exist from John Hancock and Genworth. He also highlighted some international examples, such as in the United Kingdom and in Japan. He concluded that health savings

© 2016 National Association of Insurance Commissioners 1 Attachment ? Senior Issues (B) Task Force 8/??/16 accounts (HSAs) are slowly gaining acceptance with consumers as they had to pay a greater share of the health care costs. He asked if something similar could be used to encourage systematic savings for LTC costs.

Commissioner Miller asked what Mr. Kerzner thought of rebranding LTCI since it has a stigma and that it is not nursing home care any longer. Mr. Kerzner replied that names and how something is named is important. He said there is a lot of data and a lot of money spent on branding and behavioral economics would suggest rebranding LTCI is a good idea.

Director Cameron said that, in the early days of LTCI, most people purchased LTCI to protect their assets but now look at it as protection for nursing home coverage and costs and he asked if there is a dichotomy in this shift. Mr. Kerzner said there is not a lot of data on why there is a shift. He said data does show more people are worried about their future and want to insure for it, but also more worried they cannot afford it.

Director Cameron asked about Medicaid and how it covers those without LTCI but meet a certain level and whether there is data showing people are influenced to buy or not buy LTCI because of Medicaid. Mr. Kerzner said there is no data he is aware of that gives a good answer to that question. He said he would be very surprised if the number influenced by Medicaid coverage is high. He said data shows the biggest concern among consumers is priority in their lives and costs.

Ms. Mealer asked about the presentation slides that show 49% say they can’t afford LTCI and since riders are really popular with life/annuity products, should a similar LTC rider be offered on health and Medigap products. Mr. Kerzner said he did not think the economics of such riders to health and Medigap products would work.

Ms. Mealer also asked Mr. Kerzner if he sees short term policies of less than one year and fixed benefits as being a viable option and providing at least some protection. Mr. Kerzner said he did not think short term policies would work because he did not see people really looking for interim or short term gap coverage and expressed concern that these policies may be too expensive for their value. Mr. Kerzner felt an LTC benefit for a low cost over a short term might work but the hard part is finding the balance between costs and benefits.

Mr. Goradia asked if anyone is looking at how inflation influences LTC costs. Mr. Kerzner said inflation is a concern across the board regarding health care but he does not see any discussion or data on the horizon on how inflation plays a role in LTC costs.

Bonnie Burns (California Health Advocates—CHA) commented on the high costs of home health care and said that those costs could be lowered and made affordable if plans utilized care management, electronic services, and other benefits that would help keep people in their homes. She also said there should be a specific home health care-only policy.

Robert Yee (PricewaterhouseCoopers—PWC) asked if the “Annual Costs – National Average” table in Mr. Kerzner’s presentation are correct. He said it is hard to believe that assisted living costs are more than nursing home costs. Mr. Kerzner said he would double check but the numbers were provided by Genworth.

Having no further business, the Long-Term Care Innovation (B) Subgroup adjourned.

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