Benefits Selling. October 2004. BenefitsSellingMag.com

INDUSTRY INSIDERS >> By Margie Barrie and Carroll S. Stuart

Part Two: A Guide to the Voluntary Group LTCI Marketplace

A: With so many carriers offering group LTCI coverage, I’m confused about product design and the kind of benefits being offered. Can you provide some insight on the voluntary guaranteed issue situation that must be carefully reviewed when selecting what policy to recommend to a business client? -E.N., San Antonio

Q: This is the second of two columns devoted to this topic. To reiterate, we asked Claude Thau, president of Thau Inc., to share the results of his survey exploring product design in the group LTCI marketplace. Thau surveyed 11 carriers with substantial experience in group/worksite LTCI.

We asked Thau to answer the following questions:

The Insiders: Do any companies base guaranteed issue (GI) on expected penetration rates? More importantly, what happens if the penetration rate is not achieved?

Thau: Yes, some companies base GI on penetration rates. Some carriers still provide the GI when the rates are not realized, but may be more cautious with the broker in the future. Others shift to heavier underwriting requirements.

The Insiders: If the employee certificate holder separates from the group and wants to continue the same coverage, what happens to the premium?

Thau: Most carriers offer the same premium. However, nearly half of the companies indicate that the departing employee might end up with a different premium. Some companies report that a higher loading factor could apply because payroll deduction is no longer being used. These are not usually substantial increases.

The Insiders: Is a spouse discount offered?

Thau: Eight of the 11 companies offer a spouse discount and two of them permit reduced underwriting requirements for working spouses. Six of the eight companies report 40 percent to 51 percent of married employees buy coverage for their spouses.

The Insiders: Do group policies contain specific disease exclusions?

Thau: Four companies have such exclusions, while seven do not. Two of those four have “specified disease” exclusions, for illnesses such as schizophrenia. These exclusions are more restrictive than "inorganic mental and nervous disorders."

The Insiders: We hear a good deal about the very low lapse rates for LTCI. Is there a difference in lapse assumptions between voluntary group and individual? Is that expected to affect group/worksite product pricing?

Thau: Five companies have higher-level lapse assumptions for voluntary group. The differences range from .5 percent to 2 percent. Higher lapse assumptions (meaning that fewer policyholders continue their coverage) could cause group policies to be priced lower than individual policies. If this occurs, and if group policy features continue to improve, people could be more likely to buy group products than individual policies.

The Insiders: Have group/worksite LTCI products undergone any significant changes that indicate a responsiveness to consumer demands or the care delivery system that seems to be undergoing an evolution of its own?

Thau: At the Group LTCI National Forum held this May, LIMRA International researcher Jennifer Douglas reported that Home Health Care Coverage ranked as the most appealing policy feature. Group LTCI has added more options for Home Care coverage, making group policies more responsive to consumer needs. This also may indicate buyers have specific types of care in mind.

According to the Nursing Home Statistical Yearbook (2002 edition), published by Cowles Research Group, the most important benefit of LTCI is the ability to receive care in the setting of choice. That choice is rarely a skilled nursing facility. Group LTCI policy designs and features have evolved — and continue to evolve — in response to that reality and change in care delivery settings.

Margie Barrie, author of the book 50 Ways to Boost Your LTCI Sales, is president of Margie Barrie & Associates, an LTC consulting firm, and a principal of LTC Sales Training Solutions, a company specializing in agent education and training. Barrie can be reached at margiebarrie@comcast.net.

Carroll Stuart, CLU, ChFC, CMFC, CLTC, LTCP, has worked as national director of LTCI group markets for Transamerica Life Insurance Co., and vice president of group marketing and sales at a large East Coast LTCI brokerage agency. Stuart is chairwoman for the 5th Annual Intercompany Society of Actuaries Long Term Care conference. She can be reached at carrollcarroll@comcast.net