LONG TERM CARE May 19, 2006

1
LONG TERM CAREMay 19, 2006
Catching the long term care wave Presenter Kim
Adler, CLTC Stephanie Hanson
2
Agenda

• Catching the long term care wave
• Helping employees understand the need for
  coverage and how Long Term Care can help protect
  their financial futures
• Why sell LTC insurance?
• The need and the opportunity for LTC coverage
• Helping your clients design a LTC plan that
  meets their needs

3
Why sell group long term care insurance?
1

• A fast growing product 1
• Tax benefits for employers and employees
• Affordable coverage that helps differentiate
  your clients benefit plan
• What employees are talking about now
• Be the first to
  approach existing clients

2
3
4
1 U.S. Employer-Sponsored Group Long-Term Care
Insurance Annual Survey, LIMRA, 2004
4
The need for LTC insurance - Fact vs. Fiction
FICTION
Only the elderly need long term care.
FACT

• Injuries and illnesses associated with LTC for
  younger people include
• Car accidents
• Head trauma
• Stroke
• Neurological conditions such as ALS (Lou
  Gehrigs Disease) or Multiple Sclerosis

• 40 of people who need long term care today are
  working adults under the age of 65 1

The need for long term care services can be
experienced by
anyone, at any time. Workplace the perfect
setting to offer long term care insurance.
1 Guide to Long-Term Care Insurance, Americas
Health Insurance Plans (AHIP), 2003
5
The need for LTC insurance - Fact vs. Fiction
FICTION
Consumers can rely on Medicare, Medicaid, or
other benefits to cover their long term care
expenses.

FACT
FACT
FACT

• Disability and medical insurance do not cover LTC
  expenses
• Medical insurance
• Generally covers diagnostic and
• treatment costs
• Not designed to pay for ongoing care

• Medicare pays
• 12 1 of nursing home costs
• Even less for home care
• Limited amounts
• for a limited time
• for skilled care after
• a hospital stay of
• at least 3 days

• Medicaid only pays after personal assets have
  been depleted to the poverty level 1
• Assists only those in financial need
• Limited choice in where/by whom care is
  provided

1 Guide to Long-Term Care Insurance, Americas
Health Insurance Plans (AHIP), 2003
6
The need for LTC insurance - Fact vs. Fiction
FICTION
The average consumer can save enough to cover LTC
expenses.

FACT
FACT
FACT
Based on todays costs, a 250K nest egg
would last less than 5 years 1

• Personal savings are at an all time low
• 2004 savings rate 1 average
• Previous 30 years nearly 7 average 3

• Projection
• Long term care costs will more than quadruple in
  the next 30 years
• Will far outpace the rate of inflation 1

• Home health aide 1,000 per month 2
• Nursing home care 50,000 per year 2

1 Awareness of LTC Insurance Value Growing ACLI
Report, National Underwriter, May 2003 2 AHIP,
Guide to Long Term Care Insurance, May 2003 3
http//www.federalreserve.gov/boarddocs/hh/2005/fe
bruary/testimony.htm, viewed September 6, 2005
7
The need for LTC insurance - Fact vs. Fiction
FICTION
Long Term Care Insurance is not affordable.

FACT
FACT
Once benefits begin, total premium paid typically
can be recovered in only a few months As shown
in the table, the math tells a different story.
The younger you are when you purchase LTC
insurance, the lower the premium will be

• Rates are level for the life of the policy, and
  may only increase on a class basis.

Illustrative. Based on UnumProvident Group
LTC rates for 4,000 monthly benefit (2,000
employer-paid, 2,000 employee-paid), 100
Professional Home Care, 3 year duration, 5
compound annual inflation. Monthly benefit
adjusted for 5 compound inflation and rounded
to the nearest 100
8
Tax advantages for your clients and their
employees 1

• Federal
• Employer-paid premiums deductible by businesses
• Employee premiums not considered imputed income
• Employee benefits received not considered part of
  gross income
• State
• 28 states offer tax credits or deductions for LTC
  premiums

The federal government and 22 state governments
2 offer LTCinsurance programs to their
employeesto help prepare them for afinancially
secure retirement
1 Rules and Regulations, Department of Treasury,
Internal Revenue Service, 26 CFR Part 1 RIN
1545-AV56, Qualified Long Term Care Insurance
Contracts, December 1998, last updated November
2004 Health Insurance Portability and
Accountability Act of 1996 (Public Law 104-191,
110 Stat. 1936, 2054 and 2063 (HIPAA) added
section 7702B to the Internal Revenue Code of
1986 (the Code)) 2 The American Council of Life
Insurers, Passing the Trust to Private Long-Term
Care Insurance, January 2003
9
Group long term care - todays market

• Sales
• 968 cases
• 120,349 participants
• 67.4M in premium

• Inforce
• 7,288 cases
• 1.8M participants
• 1,078M in premium

2005 GLTC market results 1

• How many employers are thinking about adding LTC?
  2

Future interest in LTC also informed by
projected rise in retiree population more
than 45 million by 2020 3


1 U.S. Employer-Sponsored Group Long-Term Care
Insurance Annual Survey, LIMRA, 2005
2 The Changing Group Insurance and Health Care
Marketplace, Overview 2003 LIMRA, 2003 3 Walker
2002. Data from the Bureau of the Census,
Projection of the Total Resident Population by
5-year Age Groups and Sex with Special Age
Categories Middle Series.
10
Current LTC market trends

• LTC insurance gradually folding into the nations
  extensive private health insurance system
• Strong and steady growth, sustained in part by
  significant increases in employer-sponsored plans
• Consistent improvement in product design
• High persistency rates underscore the value of
  LTC insurance to those who purchase
• Continued evolution toward more consumer driven
  products with increased choice in care settings
  and levels of service

Source Americas Health Insurance Plan (AHIP),
Research Findings, Long Term Care Insurance in
2002, June 2004
11
Claim trends
Major causes of disability in LTC claims 1
Where long term care is received 2
Care in a nursing facility10.7
Care at home by professionals 57.2
Care at home by informal caregivers32.2
1 Claims Distribution Query June 2004,
UnumProvident inforce claims data 2 Claims
Distribution Query, December 2003, UnumProvident
inforce claims data
12
Loss of Activities of Daily Living (ADLs)
Home Care Nursing Home Care
Feeding
Continence
Toileting
Toileting
Transferring
Transferring
Transferring
Dressing
Dressing
Dressing
Dressing
Bathing
Bathing
Bathing
Bathing
Least Impaired
Most Impaired
Includes both Professional and Total Choice
Home Care
13
Frequency of ADLs Lost
Based on UnumProvident paid claims, 2005
14
Key motivators and common obstacles
What motivates employers to offer LTC insurance?
( ranking as extremely/very important)
What are the barriers to employers offering LTC
insurance?

• Lack of awareness of the need
• Perception that cost would be too high
• Have not heard of LTC insurance, lacking
  knowledge
• Company not interested in adding benefits now
• Feeling that LTC planning should be the
  employees responsibility
• Perception that LTC insurance is too new
• Still considering LTC/undecided

Desire to offer a leading edge benefit
Low cost to the employer
Good fit for the workforce
Employees/retirees have asked for it
Senior management wants it
Source Long Term Care Insurance Sales
Strategies, Volume 4, Number , January/February
2002
15
Helping meet your clients needs through plan
design
LTC Product Features

• Types of LTC Indemnity Vs. Reimbursement
• Level of care
• LTC facility
• LTC facility with home care
• Duration of care (number of years)
• Elimination period
• Benefit amount (may be expressed daily, weekly or
  monthly)
• Optional enhancements typically include
• Inflation protection
• Benefit increase options
• Non-forfeiture benefit
• Return of premium at death
• Restoration of benefits

• Cash surrender
• Alternative care
• Shared/pooled benefits
• Survivorship waiver of premium
• Accelerated payment options

typically covers care by professionals, may
also cover care provided by informal caregivers
16
Strategies to Increase Group LTC Sales

• Target the right company
• Consider average age of employee population and
  average income
• Determine the real decision maker
• Key players may include HR leadership, benefits
  managers, purchasing managers or the CFO
• Execute a comprehensive enrollment strategy
• Maximize participation results by securing
  management support, communicating the education
  and enrollment process in detail, and focusing on
  employee education
• Ask your client to fund a base plan

Source Life Insurance Selling, The Pie in the
Sky Targeting the Group LTC Client, Christine
McCullugh, July 2004
17
A winning approach to group LTC
Employer-paid base plan with employee-paid buy-up

• Greatly increases employee interest in the plan

• When an employer funds a minimum level of
  coverage 1

• Generally guarantees employer commitment to the
  enrollment strategy

1 Typically 2,000, 3 year duration. Minimum
coverage requirements may vary by state
18
Base/Buy-up case study
Sample customer 247 life law firm 1
Employer-paid base plan with employee-paid buy-up

• Firm funds base plan (2,000 monthly benefit, 3
  year duration)
• Broker stresses importance of education in
  driving employee participation
• Comprehensive enrollment strategy
• Distribution of pre-communications
• Custom website
• Mandatory group meetings

1 For illustrative purposes only. Rates based on
GLTC Advantage product (Policy Forms GLTC04,
RGLTC04)
19
Base/Buy-up case study 247 life law firm 1
Sample customer 247 life law firm 1
Employer-paid base plan with employee-paid buy-up
Results

• Firm funds base plan (2,000 monthly benefit, 3
  year duration)
• Broker stresses importance of education in
  driving employee participation
• Comprehensive enrollment strategy
• Distribution of pre-communications
• Custom website
• Mandatory group meetings

• Base plan generates 36,000
• 76 employees buy coverage in addition to the base
  plan
• Buy-ups generate an additional 55,000 in premium
• Total premium 91,000

1 For illustrative purposes only. Rates based on
GLTC Advantage product (Policy Forms GLTC04,
RGLTC04)
20
Leading the industry
Top Writers of Group LTC (2004)
Source U.S. Employer-Sponsored Group Long-Term
Care Insurance Annual Survey, LIMRA 2004