such as the common misperception among enrollees that these offers are
the same as rate increases, which makes extra work for call centers. There
is also the expense associated with preparing and mailing complex personalized option packages at regular intervals. Pegging the rate of inflation
adjustment to an inflation index such as the CPIU makes sense both as
an offset against rising interest rates—because interest rates and inflation
generally move in tandem—and administratively, because premium and inflation adjustments would be linked.
Determining benefit eligibility remains problematic because of subjective elements despite a carefully administered process. There is no question
that functional and cognitive triggers are better indications of conditions
that necessitate long-term care support than earlier medically oriented
requirements, such as prior hospitalization, because many requiring long-term care services do not require skilled medical intervention. Activities of
daily living are recognized by health professionals as having a high degree of
inter-rater reliability. They may be depended on by insurers wishing to establish dependency on an objective basis, but this does not prevent attempts
made by insureds and family members to manipulate situations not in their
favor, which can in turn elicit further controls by insurers. The jury remains
out on how best such triggers can be administered satisfactorily without risk
of abuse. Increasingly specialized data drawn from experience, based not on
triggers alone but on multiple information sources, including medical reports, health provider notes, and cognitive evaluations, should fill any gaps.
Another controversial item is informal benefits—those covering services
by nonprofessionals, including friends and neighbors. While hard evidence
of significant fraud is lacking, concerns exist around the difficulty of verifying actual hours worked vs. those reported by caregivers.
15 More controls
need to be in place to ensure that criteria are met for what is likely to become the most popular feature of private LTCI.
We need not dwell on state partnerships, which allow a policyholder,
upon exhaustion of policy benefits, to keep an amount of his or her assets equal to what those received in private LTCI policy benefits and still
qualify for Medicaid relief. These partnerships continue to struggle due
to variations in state Medicaid policy rules. The difficulty in making them
work is likely to be increased by the recent provision that states will not
be keeping records on the insurance policies held by their residents. This
means that insureds will be entirely dependent on insurers to furnish compliant documentation of insurance and that insurers may incur additional
Stand-alone LTCI Policy
Administration Challenges
■ ■ Inflation adjustment
■ ■ Benefit eligibility via ADLs and cognitive deficits
■ ■ Informal benefits
■ ■ State Medicaid partnerships
■ ■ Discount provider networks
■ ■ Benefit reductions in lieu of rate increases
■ ■ Blended rates that reflect prior value of policy and new risk
assumed in pricing
■ ■ Closed blocks
