Study Reveals Federal Long-Term Care Insurance Plan Flaws

The proposed federal health plan being discussed by the U.S. Senate includes proposed long-term care protection. The Community Living Assistance Services and Supports Act (CLASS Act) would provide coverage paid by individuals who would have the ability to opt out.The goal of the American Association for Long-Term Care Insurance, the industry's professional organization, is to serve as an advocate for sound long-term care planning that ensures the future of all Americans -- those who can afford private long-term care insurance, and those who can not.

That said, the proposed CLASS Act (Senator Kennedy's new tax on Americans) is not the solution and a report released today by the American Academy of Actuaries reveals the plan's significant flaws. The plan's proponents believe a $65-per-month tax for individuals would be sufficient to provide a $50 average monthly benefit. The study reveals that the sound monthly premium level would be closer to $110 a month or over $1,300 a year per-individual.

The CLASS Act proposes a voluntary federal program that is sustainable and actuarially sound over a 75-year horizon. Based on the current assumptions, the independent actuaries project the new government fund established to pay long-term care claims will be insolvent by 2027. Sometime well before that date, taxpayers can expect the voluntary plan to become a new mandatory tax.

The report notes that part of the problem with the proposed plan is the increased likelihood of adverse selection. Simply stated, those individuals in poorer health will sign-up for the plan and those who are in better health will likely opt-out. Once claim payments begin after the five-year waiting period, one can expect an increasingly steady flow that will stretch the fund beyond what proponents expect.

The American Association for Long-Term Care Insurance is the independent trade organization providing information on long-term care planning to consumers and providing marketing and sales support to information. The organization maintains the industry's most comprehensive website on long-term care planning which can be found at http://www.aaltci.org/

If you would like to receive a PDF copy of the American Academy of Actuaries letter to the U.S. Senate Committee on Health, Education, Labor and Pensions, please click here to send an E-mail to Jesse Slome, Executive Director.

Will The "Kennedy Legacy" Kill The Long-Term Care Insurance Industry

Will the (Ted) Kennedy Legacy - a healthcare plan that includes provisions for a government-offered long-term care insurance provision - kill the private long-term care insurance industry?

The stort answer is, yes it indeed could. After all, what a sweet proposal - pay $65 a month ($780 a year) for five years ($3,900) and you've got long-term care coverage. And, you don't even need to health qualify. Everyone qualifies.

If you don't think there's already interest, just do a Google search for "Kennedy long term care". As a long-time and highly successful public relations guys, I know how I would spin this story to the media and thus to consumers. "We can do this because of mass numbers, and because we are cutting out those pesky middlemen - the long-term care insurers and the commissions paid to agents which can be as much as ..." (I won't go on ... why make life easy for them ... though they have bright minds working on this).

Best of all, this is the perfect time to make something like this happen. Insurers are happy to be surviving (who isn't these days) ... and agents aren't organized. The Washington D.C.-based insurance lobbying groups have to contend with health insurance and you really don't want to offend Ted Kennedy or others when the stakes (health insurance) are so huge.

Is the Kennedy "plan" attackable. Of course it is. And, at so many levels ... and that's before even talking to the real bright minds. From what I understand, no actuaries have even been called in to assess the real price.

But, perhaps most important, the time to seize the opportunity to respond is short. Those advocating an alternative plan are organized. They have egos and if they see this is generating good press ... they'll make every effort to secure more.

I hesitated a while before writing this blog. The American Association for Long-Term Care Insurance does not lobby and personally I have no intentions to walk the halls of the Capital.

But I am truly concerned. And, I believe others with a vested interest in both protecting Americans and not saddling taxpayers with another entitlement that isn't properly priced and will ultimately balloon beyond any reasonable expectation should be concerned as well.

I have already seen a dozen online reports about the Kennedy bill (I'm sure it's also appeared in print editions). They all focus on the $65-a-month figure. As the publicity grows (and it will), why would any sane consumer buy something that costs more? They'll wait until they see what the government ends up doing.

Publicity builds momentum. Trust me, I introduced the Cabbage Patch Kids dolls ... and it wan't my brilliant work or that of the publicists who worked with me ... we just keep feeding a little fuel to the momentum. Before you know it, we had a national phenomenon and the cover of Time magazine.

What's my answer? I'm not really sure. I am reaching out to those I consider leaders in the industry. My personal commitment to members of the American Association for Long-Term Care Insurance is to do the best I can to serve the members, the industry. But on a personal note, my goal isn't to be self-serving. I want to do what's right for our country's future ... and the lives of my five children who will be paying the bill for Senator Kennedy's legacy.

Lots of what happens in Washington never gets traction and so it's been easy to ignore. This one shouldn't be categorized as such.

I'll keep you posted and be interested in feedback and your thoughts. Send to my E-mail (click here).

Jesse Slome