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LONG TERM CAREMay 19, 2006

Catching the long term care

wave

Presenter:

Kim Adler, CLTC

Stephanie Hanson

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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

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Why sell group long term care insurance?

A fast growing product 1

Tax benefits for employers and employees

Affordable coverage that helps differentiate your client’s benefit plan

What employees are talking about now

Be the first to approach existing clients

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1 “U.S. Employer-Sponsored Group Long-Term Care Insurance Annual Survey,” LIMRA, 2004

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The need for LTC insurance - Fact vs. Fiction

40% of people who need long term care

today are working adults under the age of 65 1

FICTION:

FACT

Only the elderly need long term care.

1 Guide to Long-Term Care Insurance, America’s Health Insurance Plans (AHIP), 2003

Injuries and illnesses associated with LTC for younger people include:

• Car accidents

• Head trauma

• Stroke

• Neurological conditions such as ALS (Lou Gehrig’s Disease) or Multiple Sclerosis

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.

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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

FICTION:

FACT FACT FACT

Consumers can rely on Medicare, Medicaid, or other benefits to cover their long term care expenses.

Disability and medical insurance do not cover LTC expenses

Medical insurance:• Generally covers diagnostic and treatment costs• Not designed to pay for ongoing care

The need for LTC insurance - Fact vs. Fiction

1 Guide to Long-Term Care Insurance, America’s Health Insurance Plans (AHIP), 2003

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• 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 20032 AHIP, Guide to Long Term Care Insurance, May 20033 http://www.federalreserve.gov/boarddocs/hh/2005/february/testimony.htm, viewed September 6, 2005

Personal savings are at an all time low

• 2004 savings rate: 1% average

• Previous 30 years: nearly 7% average 3

Based on today’s costs, a $250K nest egg would last less than 5 years 1

Projection:

• Long term care costs will more than quadruple in the next 30 years

• Will far outpace the rate of inflation 1

FICTION:

FACT FACT FACT

The average consumer can save enough to cover LTC expenses.

The need for LTC insurance - Fact vs. Fiction

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

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

FICTION:

FACT FACT

Long Term Care Insurance is not affordable.

* 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

Number of Years Premiums Are Paid by a 40 Year Old

Adjusted Monthly Benefit*

Months of Benefits to Equal Total Premiums Paid

5 $5,105Less ThanOne

10 $6,516

20 $10,613

25 $13,545

The need for LTC insurance - Fact vs. Fiction

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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

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

The federal government and 22 state governments 2 offer LTC

insurance programs to their employeesto help prepare them for a

financially secure retirement

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Group long term care - today’s market

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.”

Sales

• 968 cases

• 120,349 participants

• $67.4M in premium

Inforce

• 7,288 cases

• 1.8M participants

• $1,078M in premium

How many employers are thinking about adding LTC? 2

2005 GLTC market results 1

Future interest in LTCalso 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

10-19

20-99

100-499

500-999

1,000-4,999

5,000+

Num

ber o

f em

ploy

ees 8%

9%

24%

34%

33%

51%

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Current LTC market trends

• LTC insurance gradually folding into the nation’s 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: America’s Health Insurance Plan (AHIP), Research Findings, Long Term Care Insurance in 2002, June 2004

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Claim trends

Trauma not Hip

9%

ALS, Park.

4%

CVA10%

Misc. 9%

OtherNeuro

2%Medical10%

Neoplasm18%

Hip Fx5% Cardio-

vascular7%

OA & Spine

7%

Dementia38%

1 Claims Distribution Query June 2004, UnumProvident inforce claims data2 Claims Distribution Query, December 2003, UnumProvident inforce claims data

Major causes of disability in LTC claims 1

Where long term care is received 2

Care at home by

professionals 57.2%

Care at home by informal caregivers

32.2%

Care in a nursing facility

10.7%

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Loss of Activities of Daily Living (ADLs)

Feeding

Continence

Toileting

Transferring

Dressing

Bathing

Toileting

Transferring

Dressing

BathingBathing

Dressing

Transferring

Bathing

Dressing

Least Impaired

Most Impaired

* Includes both Professional and Total Choice Home Care

Home Care* Nursing Home Care

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55%

77%

84%

55%

41%

22%

Bathing

Dressing

Transferring

Toileting

Continence

Eating

Frequency of ADLs Lost

Based on UnumProvident paid claims, 2005

14Source: Long Term Care Insurance Sales Strategies, Volume 4, Number , January/February 2002

What motivates employers to offer LTC insurance?

(% ranking as extremely/very important)

69%

70%

18%

27%

34%

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

Key motivators and common obstacles

• 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 employee’s responsibility

• Perception that LTC insurance is too new

• Still considering LTC/undecided

What are the barriers to employers offering LTC insurance?

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Helping meet your client’s 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

* typically covers care by professionals, may also cover care provided by informal caregivers

– Cash surrender

– Alternative care

– Shared/pooled benefits

– Survivorship waiver of premium

– Accelerated payment options

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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

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A winning approach to group LTC

When an employer funds a minimum level of coverage… 1

1 Typically $2,000, 3 year duration. Minimum coverage requirements may vary by state

Employer-paid base plan with employee-paid buy-up

2. Generally guarantees employer commitment to the enrollment strategy

1. Greatly increases employee interest in the plan

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Base/Buy-up case study

1 For illustrative purposes only. Rates based on GLTC Advantage product (Policy Forms GLTC04, RGLTC04)

1. Firm funds base plan ($2,000 monthly benefit, 3 year duration)

2. Broker stresses importance of education in driving employee participation

3. Comprehensive enrollment strategy

– Distribution of pre-communications

– Custom website

– Mandatory group meetings

Employer-paid base plan with employee-paid buy-upSample customer: 247 life law firm 1

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Base/Buy-up case study: 247 life law firm 1

1 For illustrative purposes only. Rates based on GLTC Advantage product (Policy Forms GLTC04, RGLTC04)

• 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

Results1. Firm funds base plan ($2,000 monthly benefit, 3 year duration)

2. Broker stresses importance of education in driving employee participation

3. Comprehensive enrollment strategy

– Distribution of pre-communications

– Custom website

– Mandatory group meetings

Employer-paid base plan with employee-paid buy-upSample customer: 247 life law firm 1

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Leading the industry

Source: “U.S. Employer-Sponsored Group Long-Term Care Insurance Annual Survey,” LIMRA 2004

Top Writers of Group LTC (2004)