Around Florida, other insurance executives are similarly busy. By midsummer, in fact, Floridians are likely to find themselves barraged with pitches for long-term care insurance. Heavy-hitters such as Blue Cross Blue Shield of Florida and TIAA-CREF, the university-employee pension giant, also are introducing plans and marketing campaigns in a push for long-term care customers.
There's so much activity that the state plans a public-awareness campaign for the insurance, which it sees as part of the solution to Florida's growing crisis in elder care.
Long-term care insurance has been around since the 1960s but has never really caught on -- consumers simply didn't see the need, and the policies were almost exclusively focused on nursing home care, an unattractive option to many. The Financial Security Awareness executives hope that by giving policyholders more choices -- such as coverage for home healthcare and adult day-care, for example, along with riders that cover spouses or even parents -- they'll tap into a huge new client base of aging Baby Boomers. The company's research "predicts a radical change in the market if the product is right," says CEO Steve Trattner, a former manager of HMOs. "People are looking for better choices."
Indeed, the first decade of the millennium may see the coming of age of long-term care insurance. Why now? For one, demographics: The percentage of "old-old" Floridians continues to expand -- the number of those over 85 will increase 50% by 2010. Meanwhile, a tidal wave of older residents will wash over Florida by 2025, when more than one of every four Floridians will be 65 or older ["The Age Wave," December 1999].
Those aging Boomers have money to spend and fewer children than previous generations, which means fewer caretakers. Many can't picture themselves in the nursing homes they read about in Florida's newspapers. Those with a parent needing long-term care are more likely to seek coverage for themselves. "The Baby Boomers who have never seen a Medicaid nursing home aren't too worried about this," says Bentley Lipscomb, state director of the AARP and former head of the Florida Department of Elder Affairs. "The ones who have are beginning to say 'Where do I sign up?' " for long-term care insurance.
The market is particularly ripe in Florida, where despite 20%-plus annual growth rates in sales of individual long-term-care policies for the past decade, insurance companies have only reached about 14% market penetration -- far higher than in other states but with plenty of room to grow.
Part of the solution
Another reason for the renewed push for long-term care insurance is government -- and the growing perception that private insurance must be part of the answer to Florida's elder-care problems. "There's less of a feeling that the government is going to be able to take care of things," says Walter Liptak with Blue Cross Blue Shield of Florida.
Indeed, the problems of caring for today's elderly -- evident in the current crises in nursing home care, prescription drug coverage and Medicare HMOs -- already have stretched beyond government's capacity. The federal government, while likely to reform Medicare to some extent, is sending signals that it won't take broad responsibility for long-term care. Congress, for example, is poised to pass an above-the-line tax deduction for the cost of private long-term care insurance -- a policy change the industry has pushed for several years.
The deduction "would send a very clear message to consumers that long-term care is not something the federal government is looking to support through its health programs, but it will support individuals' responsibility and planning and funding for their own long-term needs," says Cheryl DeMaio, a vice president for long-term care products at TIAA-CREF.
The deduction -- which effectively subsidizes consumers' purchases of long-term care policies -- will shift TIAA-CREF and other companies into high gear in marketing new plans. Blue Cross Blue Shield, for example, is awaiting the change to make a new push for group sales. Part of its strategy will be to market to employers who currently offer BCBS health-insurance plans. The company will target employees as young as their 30s with options covering everything from housekeeping services to assisted-living facilities.
It's not clear, however, that consumers will embrace long-term care insurance as eagerly as the companies expect. For one, some financial advisers say that consumers don't need to consider the insurance as early as the industry recommends. Stephen Brotz, 39, and Scott Harris, 40, co-owners of Tampa's Money Advisors Group, haven't yet bought long-term care insurance for themselves, and they don't advise their clients to buy it -- until they reach their mid- to late 50s. "If you're in your 40s, you're talking about something you won't see any benefit from for 30 years," says Brotz.
And while it may help protect middle-class Floridians, private long-term care insurance won't magically solve an elder-care crisis that is worsening as the percentage of older residents in the state balloons. Cost is a big issue: The insurance is generally only affordable to the "moderately affluent," according to Florida's Task Force on the Availability and Affordability of Long-Term Care. For those in their 40s, the average cost of long-term care insurance is about $300 a year. For those in their 60s, it's about $1,000. However, a policy with an inflation rider -- recommended by most financial advisers and care advocates -- doubles those averages.
Larry Polivka, the long-term care task force's lead investigator and the director of the Florida Policy Exchange Center on Aging at the University of South Florida, predicts that 10 years from now, only 25% of elderly Floridians will be able to afford long-term care insurance. Still, he says, a quarter of the population is a huge improvement over the 9% of elders currently covered by the insurance in Florida.
Protecting consumers
Financial advisers and regulators say consumers shouldn't buy a policy unless they're sure they can keep paying for it every year for the rest of their lives. Many seniors on fixed incomes are forced to cancel policies as they grow older and their premiums increase. The insurance is meant for people who have assets that they want to protect -- not for those who will retire on fixed incomes. Says Rich Robleto with the Florida Department of Insurance: "There are horror stories about people who did take advantage of what they were told -- buy a policy when you're young and it's affordable -- and it turned out the price increases made it absolutely unaffordable in their old age."
Meanwhile, the product itself is still unproven and unstable, according to the task force, which cites uncertainty about how long-term care policies may evolve and how they'll be priced. The Florida Department of Insurance plans a stepped-up public awareness campaign that will encourage coverage for more Floridians while educating consumers about what they need to consider when shopping.
The department also is asking lawmakers for rule changes to protect those who buy the insurance. The first, designed to ensure rates are set appropriately from the beginning, would limit rate increases allowed for insurance companies' expenses -- 85% of any increase would have to be tied directly to benefits. The second would guarantee that those who had been paying for long-term care but got priced out later would get benefits equal to the premiums they paid, and wouldn't lose those benefits altogether. The third would require that companies disclose to all new customers their rate-increase history for the past 10 years.
Advocates support those changes but say the state should go further. Polivka says Florida should consider a state-sponsored long-term care insurance product for government employees, as well as public-private partnerships such as those offered in New York, Connecticut, Indiana and California. The partnerships focus on policies to protect consumers against impoverishment when they need long-term care -- and to discourage middle-class dependence on Medicaid.
Ultimately, however, the private sector cannot solve all the public's elder-care problems, say Polivka and groups such as AARP. "We have to remember that private insurance companies are not in business to solve the elder healthcare problems," says Lipscomb. "They are in business to make money."
The Buyer
What sort of 40-something Floridian is buying into long-term care insurance?
Typical consumers have been through the trauma of long-term care with their parents. Linda Rutland, 49, of Sarasota, has been through it with both her mom, who died of cancer in 1988, and her daughter, who she's been caring for since a car accident five years ago. When Blue Cross Blue Shield of Florida, her health insurer, offered a long-term care policy through her workplace, it was a "no-brainer,'' Rutland says. The network coordinator for Protocol Communications in Fruitville, Rutland found the insurance affordable and liked the options such as home healthcare. Rutland is divorced and has two kids in their 20s. "When the time comes for me," she says, "I just don't want either of my children to have to go through it."
The Seller
Insurers plan to target Baby Boomers with long-term policies that offer more choices, including home healthcare and adult daycare.
The demographics are in the insurance companies' favor:
-- The number of residents over age 85 will increase 50% by 2010.
-- By 2025, more than one of every four Floridians will be 65 or older.
-- Sales of individual long-term care policies have been growing at more than 20% a year for the past decade.
Meanwhile, the Florida Department of Insurance is planning an awareness campaign of its own that will encourage coverage while also educating consumers about what they need to consider when shopping.
Long-term Care Insurance
The Market
Companies licensed to sell long-term care insurance in Florida: 70
Sales growth rate in Florida: Individual policies -- 21% annually,
Group policies -- 40% annually
Market penetration in the state: 14%
Total number of policies in the U.S.: 4.1 million
Total number of policies in Florida: 296,500
Source: Florida Task Force on the Availability and Affordability of Long-Term Care