Long-Term Care Focus: Q1 2023

Important work happening at Milliman

• We provided some of our clients with their year-end reporting and appointed actuary work. In addition to Actuarial Guideline LI (AG51) filings, the regulatory filings landscape continues to evolve. We assisted clients with their inaugural Actuarial Guideline LIII (AG53) filings this year. Effective December 31, 2022, this Guideline requires companies in scope to add an AG53 section to the actuarial memorandum or create a standalone AG53 report. Depending on the mix of assets in the existing portfolio and in the anticipated reinvestment strategy, additional requirements for the AG53 report may include: (1) additional documentation predominantly around projected high net yield assets, fair value determination, modeling of non-publicly traded assets, and asset yield components, (2) attribution analysis to allocate excess spread over predefined benchmarks to appropriate risk factors, and/or (3) sensitivity tests with spread constraints on future investments and, in some cases, testing existing assets as well with calculated constraints.
• We continue to provide opinions, expert testimony, and advice on some of the important legal cases in the LTC industry.
• We continue to support clients in their rate increase filings. We're also supporting carriers and reinsurers with experience analyses, model validation, and assumption benchmarking.
• Thank you to all of the companies who have contributed data for the Milliman LTC Guidelines. We are busy working on the development of the 2023 Guidelines, which we anticipate will be complete in early 2024. As part of our analysis, we have been reviewing the impacts of the COVID-19 pandemic on industry experience. Watch for more info later this year.
• Using Milliman LARA™, we created bespoke predictive modeling solutions for LTC carriers. These solutions provided unique insights of in-force morbidity risk profiles and pre-claim benefit eligibility determination process. For carriers that have implemented wellness intervention programs, we recently assisted in measuring the effectiveness of these programs for on-claim populations. Through these studies, carriers and wellness vendors are better informed of the underlying drivers that, in turn, assist with outreach effort.

Upcoming studies

Combination Product Experience Study

Milliman LTC consultants are conducting the third Combination Product Experience Study. This study is the largest of its kind, collecting combination product (aka “hybrid” product) claims and summarizing them for use in assisting clients with assumption setting.

New to this study, our participating carriers include those with worksite-sold as well as individual business products. The experience study includes combination products that couple life or annuity products with LTC or chronic illness riders. We evaluate policyholder incidence rates, lapse rates, and overall insured population mortality.

The participating companies receive a free copy of the report summarizing our results.

If you’d like to know more, or if you’d like to participate, please contact [email protected] or Dan Nitz ([email protected]), Robert Eaton ([email protected]), or Alyssa Lu ([email protected]) .

Wellness Survey

As wellness and aging-in-place programs in the LTC industry gain traction, Milliman surveyed various market leaders on these programs. In general, LTC wellness aims to improve health outcomes and reduce the severity of future claims, thereby reducing overall LTC claim costs. Aging-in-place programs support adults living in their independent community homes rather than moving to residential facilities.

The survey focused on the goals and strategies companies have for developing these programs, as well as the foreseeable obstacles and potential risks. Additionally, the survey touched on how companies plan to implement their first policyholder outreach, and metrics that will be used to measure program success. While the survey results are not public at this time, we believe the insight from this survey will be a valuable resource to risk managers and other parties to understand the emerging wellness practices. The results will be made public in Q3 2023. We will be soliciting responses to a new survey in the spring or early summer. For ideas on questions you would like to see included in the survey, please email: [email protected].

Industry news

ILTCI in Denver, March 12-15, 2023

The Intercompany Long-Term Care Insurance (ILTCI) conference was held in Denver from March 12 through 15 in Denver. One of our associates, Anders Hendrickson, gives his impressions:

One of the most exciting parts of ILTCI is the wide variety of people involved: actuaries, producers, caregivers, consultants, regulators, and product developers, to name just a few. The exhibit hall and networking areas were full of food and activity, and the opportunity cost of any one session was the two or three other sessions, just as interesting, that were scheduled at the same time. One of the biggest topics was wellness initiatives, of course, driving home the actuarial challenges of measuring how well such programs improve policyholders’ health and reduce claims. Technology was another theme running through many sessions, whether it was modernizing the customer experience of purchasing and renewing LTC insurance, showcasing robotic innovations for aging in place, or using advanced analytics to expedite claim approval and identify members for outreach.

LTC Reform Update

Another area of focus at the 2023 ILTCI conference was LTC reform. We offer the following update on reform happenings in the United States by state:

• California: California established the Long-Term Care Insurance Task Force to explore the feasibility of developing and implementing a long-term services and supports (LTSS) program. At the end of 2022 the Task Force recommended several options for a program design, published in a feasibility report. Work to quantify the design options outlined in the Task Force’s feasibility report are ongoing. Work that Milliman performed in 2020 quantifies similar plan designs and is being taken into consideration as part of the ongoing feasibility work by the Task Force.
• Washington: Washington continues to be the only state with legislation passed supporting a public LTC program. The WA Cares Fund will begin collecting a premium assessment from Washington workers on July 1, 2023 (of 0.58%), and the first program benefits will be paid starting July 2026. As the program nears implementation, the LTSS Trust Commission continues to explore program modifications related to topics such as portability, recertification of private LTC insurance exemption, and supplemental private long-term care insurance. Milliman continues to conduct actuarial analysis to support the LTSS Trust Commission as it evaluates policy changes and program solvency (published here).
• Other: Several states have performed or are currently performing detailed LTC financing feasibility studies (e.g., Illinois, Michigan, and Minnesota). New York and Pennsylvania both have proposed legislation related to introducing state-based public LTC programs. Other states considering LTC funding legislation include Alaska, Colorado, Hawaii, Missouri, New Mexico, North Carolina, Oregon, and Utah.

LTC @ ReFocus

The American Council of Life Insurers (ACLI) and Society of Actuaries (SOA) jointly hosted the ReFocus Conference from February 26 through March 1 in Las Vegas. ReFocus is an annual global conference for life insurance and reinsurance professionals. Attendees were able to hear directly from company executives through various sessions, including both one-on-one and panel discussions.

Although few deals involving LTC blocks have been completed in recent years, interest in shopping and acquiring blocks of LTC liabilities still exists. Private equity firms have continued interest in longer-tail liabilities. And companies with legacy LTC blocks remain interested in transferring LTC risk to better manage their overall risk profiles, strategies, and appetites. The increased interest rate environment may open up more opportunities for transactions to be examined and potentially completed with long-tail liabilities, such as LTC. The ReFocus Conference provides ample networking opportunities for interested parties to initiate further discussions on potential transactions.

Milliman publications and news

Evaluating LTC population health programs

The case for proactively managing current and future LTC insurance (LTCI) claims is stronger than ever. While insurers have anticipated these claims within their reserves, LTCI claims are accelerating, and companies are looking for additional methods to manage their LTC blocks and serve their policyholders.

We see LTC insurers in the market acting accordingly, implementing programs to improve the lives of their policyholders before and during a claim. Because reserves already include an actuarial expectation of future claim levels, business managers look to improve mutual policyholder and company value to justify the cost of these programs.

This article was published in the February 2023 issue of Long-Term Care News.

Insuring long-term care

This new book illuminates the risks of long-term care benefits in the United States in their many forms. The goal of the text is to improve the understanding of LTC risks among practitioners, with the hope of fostering new generations of LTC risk management and products. The book addresses the topics of experience studies, regulation, public programs, in-force management, mergers and acquisitions, valuation, claim administration, fraud, and more. Learn more about the book here.

Informal caregiving – the unseen obligations and opportunity

It is estimated that there are 53 million informal, unpaid caregivers in the United States. For employers thinking about how to effectively manage benefits and provide support for their employees, it’s prudent to consider how informal caregiving may impact employee wellness and productivity. This white paper discusses the challenges that exist today for informal caregivers and explores different solutions for the caregiving population that may have a meaningful impact on improving the caregiving experience for all parties involved.

Making the leap

Since 2017, an increasing number of nursing homes and assisted living facilities (ALFs) have started Medicare Advantage organizations (MAOs) and created institutional special needs plans (I-SNPs) in an effort to enhance revenue and enable better management of their residents’ healthcare needs. This paper identifies key advantages of starting an MAO and characteristics of successful organizations, as well as some challenges and risks new MAOs should be prepared to address.

Rethinking LTC benefit design evaluation

How much will it cost? A simple question on the surface that is often considered first when planning for and designing insurance plans and programs to address the financial impact of long-term care (LTC). But is this the right question to ask? LTC needs are complex and individuals’ experiences receiving LTC can vary greatly, making it difficult to compare programs or policies. In this article, we propose a new metric to assist in evaluating or designing a program's benefit structure: LTC Actuarial Value.

Fostering innovation: A guide for the actuarial profession

The SOA recently engaged Milliman to conduct in-depth interviews and focus groups with select actuaries who have demonstrated innovative skills, in order to derive key behaviors and characteristics that encourage innovation.

Milliman in the community

UNDP and Milliman join forces to build actuarial capacity in developing countries and boost inclusive development

The United Nations Development Programme (UNDP) and Milliman Inc. join forces to build actuarial capacity in developing countries and boost inclusive development. Read more about the partnership here.