Senate Finance Committee Advances EARN Act in Effort to Expand Retirement

On Wednesday, June 22, the Senate Finance Committee advanced the Enhancing American Retirement Now (EARN) Act, including an amendment containing retiring Sen. Pat Toomey’s Long-Term Care Affordability Act. The Amendment would allow people to use up to $2,000 per year in 401(k) assets to pay for their LTCi premiums. The Amendment aims to promote a more viable LTCi marketplace by increasing participation, as the use of 401(k) funds would expand the asset pool available to pay premiums. The bill would apply to “eligible retirement plans,” defined as a qualified retirement plan that is a defined contribution plan, a section 403(a) annuity plan, a section 403(b) plan, a governmental section 457(b) plan, or an IRA. The qualifying coverage may be for the individual or the individual’s spouse or dependent. Distributions for the purpose of LTCi premiums would be exempt from the additional 10% tax on the amount of the distribution.

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Possible $2.5 billion CalPERS Settlement Agreement Falls Through

A possible settlement agreement has fallen through in a suit between CalPERS and a group of policyholders over a 2013 proposed 85 percent rate hike. The agreement would have covered approximately 60,000 policyholders.

The suit was filed by California policyholders that elected to pay for inflation protection benefits in their long-term care insurance (LTCi) policies, ranging from policies purchased in the 1990s through 2004. The Plaintiffs alleged that CalPERS proposed rate hike violated their policy agreements. They contended that CalPERS marketing materials promised that the policies’ optional benefit would not increase their premiums, while CalPERS asserted that it had the authority to raise rates to keep plans funded.

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The Amount and Novelty of Wellness Programs in LTC Continues to Proliferate

As aging in place continues to be a focal point in the long-term care (LTC) industry, providers and insurers are exploring and developing cutting-edge wellness programs aimed at helping improve the health of insureds, keeping insureds home longer, and hopefully reducing the number, severity and duration of LTC insurance (LTCi) claims.

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Long Term Care Discussion Group Meeting Highlights Retirement Risk Surveys

In a recent presentation hosted by the Long Term Care Discussion Group, retirement policy consultant Anna Rappaport and Barbara Hogg of Aon’s Retirement Practice discussed two recent surveys focusing on different aspects of retirement planning: the 2021 Retirement Risk Survey (focused on the different perceived retirement planning challenges between retirees and pre-retirees age 45 or older), and the Generations Survey (comparing financial management across generations across a broad range of financial issues, including financial fragility).

A common theme in both surveys was the COVID-19 pandemic’s dramatic effect on circumstances and perceptions about planning for and thriving in retirement. For example, the Retirement Risk Survey showed that 1 in 10 pre-retirees plan to retire later because of the pandemic, and more than 3 in 10 pre-retirees who experienced negative financial impacts from COVID-19 plan to retire either somewhat later or much later than they previously planned. Pre-retirees were also more likely than retirees to consider changing their lifestyle, working longer, and changing care arrangements for family. For those with a higher degree of financial fragility, the survey showed those individuals feel less financially secure as a result of the pandemic, prioritizing short-term goals over retirement planning. Fifty-eight percent of financially fragile individuals responded that the pandemic has created “major financial challenges” for them, compared to only 11% of low fragility individuals.

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Challenges of Long-Term Care

The Biden administration recently proposed $400 billion (reduced to $150 billion) in new funding to support home-care workers as part of the Build Back Better plan. But in a recent article in National Affairs, “The Long-Term Care Challenge,” Professor Robert Saldin* argues that this proposal does not go far enough to meet the burgeoning need for long-term care (LTC). Saldin asserts that Americans’ “woeful ignorance” of their own eventual need for LTC insurance, together with worsening demographic trends, has created a need for a “universal national program to mitigate the catastrophic [LTC] costs that drain state budgets and impoverish middle-class Americans.”

Saldin begins by outlining the well-known demographic trends that are exacerbating the already grim state of LTCi in America. About 60 percent of those who require LTC are over the age of 65, and those individuals receive 80 percent of national LTC spending. These trends are set to worsen over time, he says, requiring systemic reform to avoid “significant constraints on America’s dynamism and vitality.” For example, Saldin notes that some estimates suggest that by 2030 24 million people will required LTC, up from 14 million now.

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Many Long-Term Care Insurance Claims Begin Later in Life, New AALTCI Data Shows

It comes as no surprise that as Americans live longer, long-term care and long-term care insurance needs are increasing.

The American Association for Long-Term Care Insurance (AALTCI) recently released data  surveying the landscape of who needs long-term care insurance (LTCi), when they need it and how their claims end in different care settings.  AALTCI published its findings in its “2022 Long-Term Care Insurance Information” survey.*

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Senior Living 2021 Claims Benchmarking Study

Senior Living owners and operators have seen­­—and will likely continue to see—growing liability costs as the COVID-19 pandemic persists, a new survey from Willis Towers Watson shows. The study aimed to estimate loss costs, defined as loss cost per unit of exposure, over a 10-year period to measure how the frequency and severity of claims brought against long-term care (LTC) facilities’ owners and operators has changed over time.

The survey included 38 senior living owners and operators. Those owners and operators reported more than 14,000 claims and almost $2 billion in incurred losses from 2009 to 2019. The survey also found that the number of claims against LTC operators for more than $1 million rose over the course of the 10-year period. Similarly, the average cost of claims is higher since 2016 than from 2009 to 2016. Prior to 2016, the value of an average claim rose by 4% annually. Between 2016 and 2019, claim value grew at a rate of 11.56% per year.  States with tort reform generally saw less severe claims, and thus lower loss costs, whereas states without senior living tort reform generally saw higher, increasing costs.

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