At the NAIC Summer 2016 National Meeting, the Long-Term Care Innovation (B) Subgroup held a public hearing as part of an initiative to address the challenges facing the private LTC market. With baby boomers retiring at a rate of 10,000 per day, and under 10 percent having any form of LTC coverage, the subgroup seeks to develop actionable, realistic policy options to increase take-up rates for private LTC insurance and create a stronger market by examining potential product modifications, reduction of regulatory barriers, and appropriate incentives. An array of insurance industry participants, regulators, consumer representatives offered thoughtful comments, highlighted below.

Product innovations

  • Moving from today's level premium construct to an annual re-rating approach, as level premiums have proven incompatible with insurers' 30-plus year risk horizon on interest rate, lapse, morbidity, and mortality assumptions; alternatively, index premiums and benefits to reduce consumers' inflation risk and insurers' required reserves.
  • Combination products (such as LTC extension of benefit or accelerated death benefit riders) that reduce insurers' overall risk volatility and provide flexibility to consumers;
  • "Lifestage" products that provide life insurance protection through a specified age, with pre-funded LTC benefits thereafter.
  • Simpler, lower cost, lower benefit products could be offered at a more attractive price point for consumers, and could also allow wider distribution through direct marketing or exchanges.
  • Very low cost, limited benefit "worksite" policies targeted to younger employees, with periodic windows to increase coverage amounts.

Regulatory innovations

  • Increase number of states that allow filings through IIPRC.Clearer regulatory guidelines for rate increases.Eliminate certain required product features, such as mandatory 5 percent inflation offer.
  • Re-engineer point-of-sale disclosure requirements.

Appropriate incentives

  • Permit payment of LTC premiums from retirement accounts with no early withdrawal penalties.
  • Eliminate 7.5 percent of AGI limitation on tax deductibility of premium payments.
  • Provide legal incentives to employers that sponsor retirement plans providing LTC insurance on an opt-out basis (such as fiduciary safe harbor).

The NAIC is devoting substantial resources toward this effort, which hopefully will benefit consumers and industry.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.