The Wall Street Journal article, "Buying a Security Blanket - Revisited,"

by Kelly Greene, WSJ Online, June 9, 2003,
http://online.wsj.com/article_print/0,,SB105466466550788400,00.html

(Commentary by Eileen Tell, SVP, Long Term Care Group)

The recent Wall Street Journal article, "Buying a Security Blanket - Revisited," does a better job of asking and answering some key questions about long term care insurance than previous treatments of the subject, both by this publication and by others. It is encouraging to see a media outlet seeking out answers from knowledgable experts in the field and willing to carefully explore various aspects of this topic, rather than trying to grab readers' attention with "bad news," whether it is accurate or not.

First the good news. The article points out the hazards of self-insuring, the comprehensive and flexible nature of today's policies, the importance of planning ahead to address inflation in the cost of care, and some tips for how consumers can shop carefully for a sound and appropriate product. The article addresses concerns with rate stability, prudent underwriting, strong financial ratings and insurer commitment and experience. These topics are addressed clearly and accurately. The article raises important issues for people to think about without using "scare" tactics to raise the reader's anxiety level about either needing long term care or considering insurance.

There are only a few areas where the information in the article falls short. In "What are the Odds," the reader is presented with what sound like contradictory statistics on the risk of needing nursing home care and, more importantly, is given the impression that "there are no good industry data" on this risk. The figure cited in the article, that a person who reaches age 65 faces a 43% chance of needing care in a nursing home is accurate and is supported by independent research not, as implied in the article, a figure simply derived from an insurance industry trade group. The article goes on to quote United Seniors Health Council saying that someone age 65 has only a 23% chance of living in a nursing home for more than a year. While that is a true statement IF one takes into account the people that will never need nursing home care, it may confuse the reader since these two statistics are using different frames of reference; one statistic uses "all persons age 65" while the other uses "all persons age 65 who need nursing home care." The problem with the latter frame of reference is that most of us don't know today which of those two cohorts we will fall into. If I'm one of the people in the 43% of those who will need nursing home care, then I want to know what my "exposure" might be. The important statistic there is that more than half of all people who need nursing home care will spend a year or more there, and 19% will spend 5 years or more in a nursing home.The article does include the very important point that looking at the risk of needing nursing home care is only one part of the equation; one must also consider the additional possibility of needing care at home or in an assisted living facility.

The article indicates that "preferred provider" discounts are not currently available to policyholders with long term care insurance, but that is not an accurate statement. Some insurance companies have negotiated discounted rates with providers and make those discounts available to their insureds. Even insurers that do not have negotiated, pre-set discount arrangements may have experienced, local care coordinators who, at no cost, will help identify lower cost appropriate providers of care for insureds and even help them arrange and schedule services. These are important advantages of having private insurance.

The article also cautions against policies that pay "prevailing" charges instead of actual expenses. Very few policies ever used the "prevailing charges" concept, and most, if not all policies that we are aware of pay actual expenses up to a pre-set benefit amount that the insured can select. So raising this as a concern for consumers is really not relevant.

And finally, for those who remain uncertain about whether or not they should buy long term care insurance, after reading this or any other articles, the advice quoted from Nancy Morith about insuring part of the risk and self-insuring a portion, is a sensible and creative alternative to the "either/or" proposition that most articles pose. We're glad to see this option presented. And glad to have only a handful of clarifications to make on the article.

Eileen J. Tell is Senior Vice President for Product Development with Long Term Care Group Inc. (LTCG), a full-service third-party administrator and outsource partner for long term care insurers. Ms. Tell is responsible for product design, compliance, market trends, competitive and regulatory analysis.