Tuesday, March 23, 2010

My Thoughts On CLASS - Next Steps

If you market and sell long-term care insurance, sooner (or later) you are going to hear the following words from a prospect; "I'm going to wait and check out the new federal long-term care plan."

It was inevitable that media coverage of health care reform would shift from "will the bill pass" to "what does the new law mean for you?" That shift is already taking place and the media watch each other and compete.

As a result, it is very likely that we will see continued and growing coverage of the fact that the health care law contains a new "federal government long-term care insurance plan". And, in a world of 15-second sound bites, that's about as much attention as it will be given ... and also all consumers need to hear to once again put any thoughts of planning on the back burner (the way baxck burner).

I will be writing more about CLASS and shortly will be creatintg material for members of the American Association for Long-Term Care Insurance to use to 1) educate themselves and 2) educate their clients and prospects. Undoubtedly, insurers will be doing likewise and we'll watch for such items and gladly share.

First, it is too early to predict how the CLASS Act will really impact either the individual or the employer-sponsored long-term care insurance markets. The three most important elements are undefined by Congress; (premium) cost to participants, benefit levels and requirements imposed on employers. These may not be available until well into 2011 or 2012 and then it will take time for implementation.

On the positive side, the CLASS Act should create enormous awareness among individuals of the real risk they face and the need to plan. If the plan is priced properly to take into consideration that it is guaranteed issue, then individual (traditional) policies will be able to compete based strictly on more benefits for less cost.

If, however, policies are insufficiently priced (too low to ultimately cover the potential claims risk) it will be more difficult to create differentiation between CLASS LTC insurance and private LTC insurance. Certainly those in positions of responsibility within the industry will work hard to achieve this (but it will not be an easy task).

Because there is a five year plan participation requirement, whatever benefits CLASS ultimately offers will really only have value for those who are currently age 55 or younger. As a result, a significant segment of Americans (those currently between 55 and 65) will fall through the donut hole and fail to have long-term care protection.

Jesse Slome
Executive Director
American Association for Long-Term Care Insurance

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