Letter to the editor: CLASS Act will increase private long term care financing 

Scott Olson writes: I support the proposed Community Living Assistance Services and Supports Act, which was the topic of the October LTC e-Wire feature (see the article here).

This is not because I think it's good policy. And it is not because I think the act will help solve the approaching tsunami of long term care financing. I support the CLASS Act because it will dramatically help to improve private LTC insurance sales in this country.

The Number 1 reason why people don't buy LTC insurance is because they are just not aware of the need. The CLASS Act would instantly make 150 million American workers aware of the need to plan for LTC.

Would some of those people think that they would be "fully covered" with the $50 per day CLASS Act benefit? Yes. But many would seek supplemental coverage. Just as millions of Americans buy Medicare supplement coverage, so too would millions of Americans to seek supplemental LTC insurance policies for the coverage they would have under the CLASS Act.

The Number 2 reason why people don't buy LTC insurance is because they say "it's too expensive." Well, the CLASS Act demonstrates that private LTC insurance is priced very competitively. I've run the numbers and a healthy married person, under age 64, can get $50 of daily benefit, an automatic inflation benefit linked to the Consumer Price Index, and a lifetime benefit period, for less than the average projected $65 per month that the CLASS Act will charge.

The Number 3 reason why people don't buy LTC insurance is because "they think the government can do better" or they think there are too many problems with private LTC insurance (such as exorbitant rate increases or arbitrary denial of claims).  But the CLASS Act demonstrates how great private LTC insurance is, in these four ways:

1. No LTC insurer states that the premiums could increase four-fold (200%) in the next 20 years; but the CLASS Act states that. (To my knowledge, only one LTC insurer had increases that approached those percentages and that insurer has been taken over by the Pennsylvania Department of Insurance.)
2. No LTC insurer could decide to decrease benefits at anytime (without your consent) in order to maintain financial viability; but the CLASS Act requires the Secretary of Health and Human Services to do that.
3. No LTC insurance policy would deny all claims within the first five years you pay the premium; but the CLASS Act will do that.
4. No LTC insurer requires that the insured be employed for three of the next five years in order to keep the coverage; but the CLASS Act requires that.

When I bought my wife's engagement ring, I compared several rings at different stores. At the last store, I was holding a beautiful ring that was in my price range. But, I wasn't sure if I should buy it. I had looked at so many rings that day, I was feeling kind of punchy. The salesperson found another ring that was about the same size as the ring I was looking at, but about 15% cheaper. When she put the two rings side-by-side the difference in color and the difference in brightness were evident. 

I didn't appreciate the great ring I was holding in my hand until I saw a ring of lesser quality. The CLASS Act is that ring of lesser quality. It will help demonstrate to the market the "brightness" and "beauty" of private LTC insurance.

Scott Olson, CLTC
LTC Agent
LTC Insurance Shopper.com
Redlands, Calif.
LTCPro@verizon.net

• • 11/11/2009 12:01:27 PM
  • Arthur Rudnick,
  • CLASS Act
  • While Scott makes some valid points regarding the CLASS Act, as a broker of LTCi, the bottom line is our business is tough enough today and the last thing we need to see is competition from the US government. Many people today think the government already pays for LTC services, either through Medicare, Medicaid or the VA. That of course is not the case. We have all run into people who have a group plan through their employer. In most cases, those policies are inadequate and will not cover projected LTC services down the road. But when you ask them about LTCi, the answer is always "I'm covered". Most of these people have no idea what their benefits are and have no idea what catastrophic expenses they'll face down the road if they ever need to use their policy. They're 50 years old, they have a policy that covers them for $100/day with no inflation rider but, "they're covered". If someone purchases a policy through the government's CLASS Act, although it's only $50/day, they will also think "they're covered" and will be taken out of the pool of potential, private LTCi purchasers. Keep in mind that this is a Guaranteed Issue Policy. Yes, there are restrictions regarding employment and there's a 5-year vesting period. But the uneducated consumer will not invest the time and/or effort to call in a LTC Specialist for a review of all available options. In reality, the CLASS Act is a terrible deal. $50.00/day will do nothing for someone who needs to enter a nursing home or Assisted Living Facility. And with a home health aide costing in excess of $20.00/hour,it doesn't do a whole lot for home care either. Generally, if someone requires help with 2 or 3 ADLs, they need more than 2 hours a day of assistance. According to the Congressional Budget Office and the American Academy of Actuaries (both non-partisan)the CLASS Act is actuarially unsound and cannot be sustained. It is projected to implode within 10 years. And, if that does happen, premiums will increase and/or benefits will decrease, in order to maintain the program's viability. BUT, the average consumer does not know that. Their belief will be "I'm covered". If this Act passes, I believe that the LTC industry will be devastated. There are too many negatives that unfortunately will not be offset by the consumer awareness that this Act will generate. I hope I'm wrong and if it does pass, for those of us who remain in the industry, we will just have to learn how to deal with it. Arthur Rudnick, LTCP AR4LTC@aol.com
• • 11/13/2009 4:02:01 PM
  • PB McDonough
  • Olson letter re CLASS Act
  • I agree.....so many holes in proposed benefits that individual plan looks terrific.....will get most of prospective buyers to drill down on the actual cost numbers....will raise public awareness of the issue and the feeble amount our federal budget can fford.....great opportunity to educate and promote our solution! Training and education needed for ltci producers needs to be set up in advance of fed intervention (as is now occurring) to prevent the disaster that fed standards caused for Medicare Advantage plans. PBMcDonough CLTC pmcdonough@metlife.com

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