Tag Archives: U.S. Department of Health and Human Services

Can Long-Term Care Insurance Survive?

Why are long-term care insurance premiums rising faster than a speeding elevator? And what will become of the long-term care insurance marketplace? If you are interested in long-term care insurance, what’s going on and what may happen, read on.  If you have no interest in long-term insurance, then this is not the article you are looking for. (The next edition will take a closer look at the insurance consumer Bill of Rights).

Why Would Anyone Want Long-Term Care Insurance?

One of the largest projected expenses for the average American in retirement is medical expenses, with estimates approaching a total of $250,000.

Medicare and Medicare supplements provide coverage for medical expenses that are typically short-term or one-time, such as an annual physical, medical test or surgical procedure. Long-term care insurance provides coverage to pay the costs of service such as nursing home, in-home care and skilled nursing facilities that are not covered by Medicare or Medicare supplements. These costs are quite high—hundreds of dollars a day.  To see what the average cost of care in your area is, visit the Genworth Cost of Care page here.

The odds of needing some form of long term-care insurance can reach 50% or more, with an average claim period of two to three years (depending on the statistics you look at). According to the U.S. Department of Health and Human Services (HHS), by 2020, about 12 million Americans will require long-term care.

See Also: What Features of Long-Term Care Should You Focus On?

Long-term care insurance premiums will typically be in the thousands of dollars a year. However, just like with any other type of insurance, it is about the leverage of protecting against a risk—a simple financial calculation: Can you afford to pay for the risk in the event of a claim out of pocket and can you afford to pay the premiums? In terms of leverage, if you have a long-term care insurance policy with a total benefit pool of $250,000 and an annual premium of $5,000, the annual premium is 2% of the total benefit pool. If 2% sounds like good leverage to you, this policy makes sense.

The Big Question: Why Are Long-Term Care Insurance Premiums Rising? 

There are multiple layers to this questions, but the main underlying factor is that the first long-term care insurance policies offered by insurance companies had unlimited benefit periods on a type of coverage where they had minimal historical data. Think about it this way: If I offered you a bet on a football game this weekend with the provision that, if you win, I’ll pay you $100, and, if I win, you’ll pay me a $1 a month for the rest of my life. Now, that’s a great bet for me if my team consists of all-pros and your team consists of benchwarmers. Without knowing who is on your team, would you make this bet? There’s no need to answer; of course you wouldn’t.  Yet this is exactly the bet insurance companies made, just with much bigger numbers. And, unsurprisingly, this business model hasn’t been profitable for them.

There are some other major factors to consider, such as the prolonged historically low-interest-rate environment where insurance companies have not been able to make their historical investment returns. (This is something that no one could have foreseen.)

Another major factor is that insurance companies counted on a certain percentage of people lapsing (terminating) their policies at some point. Again, the insurance companies made this prediction without much historical data. And guess what? Policy owners actually liked and valued the coverage they purchased, and they have kept their long-term care insurance policies in force, despite some significant rate increases.

Premiums have had to be increased because, at the end of the day, it is in everyone’s best interest for insurance companies to be profitable. If an insurance company is not profitable, it will go out of business and will not be able to pay claims, which is definitely a problem.

Rate Increase Oversight and Perspective

Rates for in-force policies have been increased and will almost certainly face future increases; older policies still are priced lower than what a current policy would cost. Premium increases on long-term-care insurance policies have to be approved, in most states, by the state insurance commissioner. When faced with a rate increase, policyholders will need to consider whether their benefit mix makes sense and fits their budget. These are the “visible” rate increases.

If you have a long-term care insurance policy with a mutual insurance company where the premium is subsidized by dividends, you may not have noticed (or been informed) of a reduced dividend scale. When an insurance company reduces its dividend scale, it does not have to get approval from anyone or disclose that it has reduced its dividends. Reduced dividends mean a higher premium. This is a hidden rate increase.

As mentioned, policies issued today have significantly higher premiums than those issued in the past. Some rate increases are attributed to companies “catching up” on premiums to get closer to current premiums they hope are more accurate. The bottom line is that insurance companies are trying to bring the premiums on older policies into line with their current pricing on new products. The closer that pricing gets, the less likely it is there will be future premium increases. So, if you have an older policy (even if you’re faced with a significant premium increase), keep in mind you’ve gotten a discount on past premiums. While that’s not comforting in the face of a premium increase, it will help put things into perspective.

Insurance departments will approve premium increases so that they are sufficient to meet anticipated claims. Any increase granted must apply equally to all policy owners from the requested class of policies, and the carrier must keep the policy in force if the premium payments are made. Changes in age or health have no bearing on the contract premiums once issued; the policy may only be canceled if premiums are not paid. Nearly all existing long-term-care insurance policies have had one or more rate increases granted.

Please keep in mind that rates on other types of insurance also increase over the years, some slowly like auto insurance and homeowners insurance and some rapidly like health insurance.  Inflation affects everything. There are no nickel candy bars any more. This is all about the value of the coverage and the leverage of your premium to the total benefit pool.

Options When You Have A Premium Increase

When you have a premium increase, you should always start by reviewing your coverage and deciding whether you still need the current coverage or whether you can make changes. For example, because the average claim period is two to three years and there is a much longer benefit period, is the trade-off in premiums for the longer benefit period worth it? It is important to understand that, once a change is made, it cannot be undone, so be sure you are comfortable with any modifications.

The following are options when you have a premium increase:

  • Pay the increased premium.
  • Reduce the daily/monthly benefit amount.
  • Increase the waiting period.
  • Shorten the benefit period.
  • Change the inflation rider 
(e.g. go from compound to simple or reduce inflation percentage from 5% to 4%).
  • Change/remove other riders.
  • Terminate the policy.
  • If your policy has a non-forfeiture benefit that allows for a “paid-up reduced benefit,” consider this option: You’ll get at least some value for the premiums you’ve paid. But remember, once you accept the option, the policy will not be reinstated. Some states are now requiring all new policies to include this feature. (It’s relatively rare in older policies.)

New Long-Term Policy Designs (Hybrid/Combination Products)

With all the issues in the traditional long-term care insurance marketplace, there are very few companies selling individual long-term care insurance policies. Instead, insurance companies have come out with whole new types of products: hybrids and combinations. For instance, you can purchase a life insurance policy or an annuity with a long-term-care insurance rider. Other options are a life insurance policy or annuity that is combined with a long-term-care policy. (Rather than the long-term-care insurance being part of the rider, it is part of the policy.)

While, in theory, these sound like great ideas, they ignore some simple facts:

  • There may be no need for life insurance or an annuity, but you will be paying for the life insurance or annuity in addition to the long-term care insurance component.
  • Some require an up-front lump-sum premium payment.
  • These policies are complex and opaque. There are multiple variables to these policies that the insurance company can change and that will affect the performance of the policy—many of which do not have to be disclosed to the policy owner and do not show up anywhere. The more complex the product, the greater the chance that something won’t work properly.

Considering that insurance companies are still working on accurately pricing long-term-care insurance products and that universal life insurance policies are having issues (see: Will Your Life Insurance Policy Terminate Before You?), it is hard to imagine that combining two problematic products will magically work out.

The big selling point for these policies is that, with a traditional long-term-care insurance policy, the policy owner does not get anything back if there is no claim made. However, there is no expectation with any other type of insurance (except for life insurance) that there is a return if a claim does not occur, and most homeowners, for example, are happy when their house doesn’t burn down even though they don’t get any payout from their insurer.

Lessons Learned and a Positive Outlook For Long-Term Care Insurance?

There is no doubt of the importance of a thriving private sector long-term-care insurance marketplace. Public policy would seem to favor long-term-care insurance paid for by the private sector.

The Internal Revenue Service (IRS) is increasing the amount people may deduct from their tax returns this year when buying long-term-care insurance or paying monthly premiums. Check out the IRS page on long-term care Insurance premium deductibility here .

The Bipartisan Policy Center (BPC) released its first set of recommendations calling for increasing access to the private insurance market. BPC initiatives call for increasing access to the private insurance market, improving public programs such as Medicaid and pursuing a catastrophic insurance approach for individuals with significant long-term-care needs such as Alzheimer’s or a debilitating physical impairment. These proposals were developed by former U.S. Senate Majority Leader Tom Daschle along with Bill Frist, another former U.S. Senate majority leader, former U.S. Secretary of Health and Human Services Secretary and Wisconsin Gov. Tommy Thompson and Alice Rivlin, the former director of the Office of Management and Budget. They aim to address the needs of America’s seniors and specifically target middle- and lower-income individuals and families. Daschle said, “Today, families and caregivers are becoming impoverished by the financial demands of long-term care … Since there is no single, comprehensive solution to solve this unsustainable situation, our strategy calls for a combination of actions that could help ease the extraordinary financial burdens Americans are facing.”

If the BPC has its way, these retirement long-term-care policies would be sold on federal and state health insurance exchanges. The question is whether this can be accomplished. Part of the Affordable Care Act (ACA, aka Obamacare), the Community Living Assistance Services and Supports (CLASS) program established a national, voluntary insurance program for purchasing community living services and supports that is designed to expand options for people who become functionally disabled and require long-term help. Unfortunately, this program was abandoned because it wasn’t financially feasible.

History repeats itself

Back in the 1980s, insurance companies made similar poor product design decisions with individual disability income insurance. Unsurprisingly, claims experience was not great, and a number of companies left the marketplace. Is this sounding familiar?  The current individual disability insurance marketplace has returned with more sensible products, where the companies do full underwriting, offer benefits that are less than earnings and do not guarantee the premiums. A great read on this is: IDI Déjà Vu: Optimism For The LTCI Industry, by Xiaoge Flora Hu and Marc Glickman.

The long-term-care insurance industry is making similar changes to its products, which should buoy the marketplace. Products are being priced based on actual experience, policies are being fully underwritten and unlimited benefits are no longer available.

Smarter product design, better risk selection and a strong need should result in a solid long-term-care insurance marketplace. As America continues to age, there will be a stronger need for the coverage. It may take a few years, but there is a future for long-term-care insurance. The only real question is when.

Let me know what you think.

Urine Drug Testing Must Get Smarter

Medical treatment guidelines, such as the American College of Occupational and Environmental Medicine and the Work Loss Data Institute’s Official Disability Guidelines, recommend urine drug testing (UDT) for monitoring injured workers who are prescribed opioids. Yet studies show that few physicians actually order the tests.

There are a variety of concerns about UDT, including its potential overuse, underuse, effectiveness and cost. The guidelines are fairly nonspecific in terms of the frequency and type of testing that are most appropriate for injured workers. The fact is, all UDTs are not created equal and should not be used interchangeably.

Immunoassay tests, for example, are preferred when simply trying to detect the presence or absence of illegal drugs in a person’s system. More sophisticated tests, such as liquid chromatography, may be more suitable for clinical applications. They are far more accurate than immunoassay tests, can identify parent medication and metabolites and can identify specific medications, rather than just drug classes.

The differences in the types of drug testing have important ramifications for patients. For example, inappropriate or insufficient testing can put injured workers at risk for drug overdoses.

“The type of testing clinicians use should depend on the purpose,” said Steve Passik, vice president of Clinical Research and Advocacy for San Diego-based Millennium Health. “The immunoassay test comes from a forensic application and vocational application. In those settings, only the most egregious offenders are meant to be caught.”

Job seekers, workers involved in workplace accidents, and athletes are among those typically subject to forensic tests. For them, immunoassay testing is appropriate and is based on the Mandatory Guidelines for Federal Workplace Drug Testing Programs, developed by the U.S. Department of Health and Human Services.

Because much of UDT today has its roots in forensic applications, the methods and mindsets of simple immunoassay testing are often used in clinical settings. These tests are subject to a high number of false positives; therefore, only positive results are typically sent for confirmatory testing to avoid falsely accusing people of drug use that might have dire consequences, such as job loss.

“This is problematic,” Passik said. “An injured worker who is using drugs and has a false negative result is potentially at risk if the physician uses a forensic mindset and only confirms positive test results. If the injured worker’s pain medications are mixed with whatever drugs he may be abusing, he could suffer an overdose. Or, his addiction could worsen since it is not being detected by the workers’ comp claims administrator.”

Immunoassay tests are generally cheap, fast and readily available. However, they are not designed for, nor are they very effective for, many clinical applications on their own.

“Take a worker who is being prescribed pain medications and is overusing them. The worker runs out of his or her medication and then borrows some from a friend or family member and even further supplements by abusing heroin when these are unavailable,” Passik said. “If his result on an immunoassay test comes back positive for an opioid, this lends a false sense of security that it is, in fact, the prescribed opioid that caused the result. This result is actually a ‘clinical false negative’ for the non-prescribed opioid and heroin. If the clinician has a forensic mindset that sets out simply to catch people but not falsely accuse them, the testing would end there.”

Another example might be seen in the worker prescribed an opioid for pain but also using cocaine who knows not to use it within two to three days of doctors’ visits to avoid testing positive on the immunoassay. The immunoassay test would likely yield a false negative, and testing would, again, end there. “This worker could be quite vulnerable and might even engage in the type of self-deception whereby he convinces himself that he has no drug problem because he can stop in time to produce a negative specimen for cocaine, ”said Passik.

The mixing of cocaine or heroin and prescribed and borrowed pain medications would make the worker susceptible to an overdose and to other drug interactions or to triggering his addiction. But the medical provider in this case would have no idea the person is abusing drugs.

“That’s the rub,” Passik said. “If I were using UDT in a worker’s comp setting, I would have a more flexible policy that allows the provider to use his clinical judgment to determine whether to send either positive or negative results from immunoassay tests to a lab for confirmation testing, or simply skip the immunoassay test and go straight to the lab.”

Immunoassay tests often produce false negative results because of the high cutoff levels that prevent the tests from detecting low levels of medications. They may also fail to detect opioid-like medications such as tramadol and tapentadol, as well as synthetic opioids such as fentanyl and methadone.

False positive results also occur, because certain immunoassay tests are subject to cross-reactivity from other medications and over-the-counter drugs and may produce inaccurate results. And there is a limited specificity for certain medications within a class.

Liquid chromatography tests, on the other hand, enable detection of a much more expansive list of drugs. This is significant, as virtually all injured workers on opioid therapy would be expected to test positive on a drug screening. The liquid chromatography test could detect which opioid was present in the injured worker’s system and at which levels.

In a 2012 study that analyzed results for point-of-care tests using immunoassay in physicians’ offices or labs, Millennium Health found 27% of the test results were incorrectly identified as positive for oxycodone/oxymorphone. The low sensitivity of immunoassay tests can mistakenly identify codeine, morphine or hydrocodone as the same drugs. Similarly, the study results showed the immunoassay tests missed the identification of benzodiazepines in 39% of the results.

One example of clinical chromatography is liquid chromatography tandem mass spectrometry (LC/MS-MS). These tests are far more accurate than immunoassay tests, can identify parent medication and metabolites and identify specific medications, rather than just drug classes.

“Professionals can now accurately test with both great sensitivity and specificity to understand whether patients are taking their prescribed medication, avoiding the use of non-prescribed licit controlled substances and whether or not they are using illicit drugs, which allows for better clinical decision making,” Passik explained. “LC/MS-MS results are now rapidly available to clinicians, allowing for a much greater integration of these results into clinical practice.”

In fact, Passik says much of the growth in the use of LC/MS-MS in recent years is because of the speed with which results can now be obtained, often within 24 hours.

In terms of drug monitoring for injured workers, Passik says immunoassay testing alone does not provide the physician with an accurate basis on which to make good clinical decisions. These tests may be positive for opiates – which, if the person has been prescribed opiates, would be expected.

“In this case, a positive result would need to be sent to the lab to confirm that the opioid detected in the test was solely the medication prescribed and there are no other licit — or illicit — drugs present. The immunoassay positive result by itself doesn’t provide enough information,” Passik said. “However, if the worker is well known to the prescriber and has a long history of UDTs showing he is taking his medications as prescribed, the provider might decide the immunoassay test result will suffice at that point. But, again, it would need to be in the context of appropriate results of UDTs and a clinical exam that do not suggest otherwise.”

Beyond the confusion about the types of UDT, a handful of unscrupulous clinicians are overusing the tests by performing them in their offices or labs they own, regardless of the patient’s risk factors for abuse or overdose. Payers are overcharged by these providers, as they do more testing than is necessary and charge for the initial test, analysis and confirmatory test (because virtually all tests on injured workers receiving opioid therapy would be positive), resulting in three separate bills.

There are also questions surrounding the frequency with which these tests should be performed on a given injured worker. Passik and other experts say the frequency of the tests should be determined by a medical provider based on the injured worker’s risk factors. An injured worker who is depressed, male, a smoker and has a personal or family history of substance abuse would likely warrant more frequent testing than someone with no known risk factors who is fully cooperating with those handling his claims and is eager to do, or is already doing, light duty work. It’s a tough call, and, so far, it is not an exact science.

“If the patient is older and has no history of addiction or other risk factors, you would probably test her a couple of times a year,” Passik said. “But a coal miner in southeastern Kentucky who has been traumatized from an accident, has addiction history in his family, lives in an area where he can make money [by selling the drugs] — that’s a high risk person who likely needs to get tested more often. Most people fall in between, so it’s best to rely on the clinician’s extensive training and individual assessments of their patients and potential risk factors to consider when developing a treatment plan.”

Part of the decision making on the part of medical providers involves figuring out strategies to integrate the two methods of testing, immunoassay and chromatography – “specificity when you need it and the frequency when needed so you can do it in the most cost effective fashion,” Passik said. “The tests should be integrated in a smart way.”

The nature of workplace injuries is such that more testing up front may be required. “Unfortunately, workers’ compensation is heavily loaded with high-risk patients,” Passik said. “They tend to be younger, traumatized because they are injured, and suffer from depression — all of which are risk factors for addiction.”

The best advice for practitioners is to look for thorough documentation from providers, communicate with all parties, especially the injured worker, and become informed on the type and frequency of UDTs performed for each injured worker.