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53–717 PDF 2009

S. HRG. 111–180 

BOON OR BANE? EXAMINING THE VALUE OF 

LONG-TERM CARE INSURANCE 

HEARING 

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

WASHINGTON, DC 

WEDNESDAY, JUNE 3, 2009 

Serial No. 111–7 

Printed for the use of the Special Committee on Aging 

( 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 

SPECIAL COMMITTEE ON AGING 

HERB KOHL, Wisconsin, Chairman 

RON WYDEN, Oregon 

BLANCHE L. LINCOLN, Arkansas 

EVAN BAYH, Indiana 

BILL NELSON, Florida 

ROBERT P. CASEY, Jr., Pennsylvania 

CLAIRE McCASKILL, Missouri 

SHELDON WHITEHOUSE, Rhode Island 

MARK UDALL, Colorado 

MICHAEL BENNET, Colorado 

KIRSTEN GILLIBRAND, New York 

ARLEN SPECTER, Pennsylvania 

MEL MARTINEZ, Florida 

RICHARD SHELBY, Alabama 

SUSAN COLLINS, Maine 

BOB CORKER, Tennessee 

ORRIN HATCH, Utah 

SAM BROWNBACK, Kansas 

LINDSEY GRAHAM, South Carolina 

DEBRA WHITMAN, Majority Staff Director 

MICHAEL BASSETT, Ranking Member Staff Director 

(II) 

C O N T E N T S 

Page 

Opening Statement of Senator Herb Kohl ............................................................. 1 

Opening Statement of Senator Mel Martinez ....................................................... 2 

PANEL I 

Statement of Diane Rowland, Sc.D., Executive Vice President, Henry J. Kaiser Family Foundation, Executive Director, Kaiser Commission on Medicaid 

and the Uninsured, Washington, DC ................................................................. 5 

Statement of Sean Dilweg, Insurance Commissioner, Wisconsin Insurance 

Commission, Madison, WI ................................................................................... 21 

Statement of Carol Cutter, Chief Deputy Commissioner, Health and Legislative Affairs, Indiana Department of Insurance, Indianapolis, IN .................... 43 

Statement of Thomas Stinson, President, Genworth Long-Term Care, 

Genworth Financial, Richmond, VA ................................................................... 48 

Statement of Bonnie Burns, Training and Policy Specialist, California Health 

Advocates, Scotts Valley, CA ............................................................................... 63 

APPENDIX 

Sean Dilweg Responses to Senator Mel Martinez Questions ............................... 99 

Carol Cutter Responses to Senator Mel Martinez Questions .............................. 101 

Letter from Genworth Financial ............................................................................ 103 

Letter from HCR Manor Care ................................................................................ 106 

(III) 

(1) 

BOON OR BANE EXAMINING THE VALUE OF 

LONG–TERM CARE INSURANCE 

WEDNESDAY, JUNE 3, 2009 

U.S. SENATE, 

SPECIAL COMMITTEE ON AGING, 

Washington, DC. 

The Committee met, pursuant to notice, at 2 p.m. in room SH– 

216, Hart Senate Office Building, Hon. Herb Kohl (chairman of the 

committee) presiding. 

Present: Senators Kohl [presiding], and Martinez. 

OPENING STATEMENT OF SENATOR HERB KOHL, CHAIRMAN 

The CHAIRMAN. Good afternoon, and we thank you all for being 

with us today. 

In March, this committee heard from experts, including Senator 

Kennedy, who all agree that reforming our long-term care system 

is a necessary part of reforming the entire healthcare system. 

With America aging at an unprecedented rate, and with the high 

and rising costs of caring for a loved one, the financing of long-term 

care must be addressed if we are going to get healthcare costs 

under control. 

Today we’re going to examine one way families can finance their 

long-term care costs, namely through long-term care insurance. We 

all know that long-term care is expensive, with the cost of an average nursing home now nearly $70,000 a year. 

However, according to the Congressional Research Service, most 

Americans do not realize that Medicare offers only limited home 

health services, and Medicaid will not cover long-term care costs 

unless household savings are nearly entirely depleted. 

States share the responsibility of providing Medicaid funding for 

long-term care with the Federal Government and are also looking 

for ways to reduce their expenses. As of today, 43 States are in the 

process of launching Partnership programs which provide incentives to consumers who purchase private long-term care insurance. 

But in the rush to ease the burden of long-term care costs on 

State budgets, we fear that some key concerns are being overlooked. We have a duty to make sure that these policies—which 

may span decades—are financially viable. Several long-term care 

insurance providers have applied for TARP funds in recent months, 

raising questions about their solvency. 

In addition, many insurance companies have been raising their 

policyholders’ monthly premiums, which can be devastating for 

older persons who are living on fixed incomes. 

2 

The committee is aware of instances in which Americans living 

on modest, or fixed, incomes who have held policies for many years, 

have seen premium rates double when a company encounters financial difficulties. For such consumers, the choices are stark, and 

very limited. They can either dig deeper, and pay the increased 

premiums, or let their policy lapse, leaving them with no coverage 

if they ever need care. 

Last year I was joined by several Senate and House colleagues 

in releasing a GAO report on whether adequate consumer protections are in place for those who purchase long-term care insurance. 

The report found that rate increases are common throughout the 

industry, and that consumer protections are not even. 

While some States have adopted requirements that keep rates 

relatively stable, some have not; leaving consumers—in many 

cases—unprotected. This afternoon, we will discuss how we can 

best protect these policyholders. We need to ensure that premium 

increases are kept to a minimum, insurance agents receive adequate training, and complaints and appeals are addressed in a 

timely manner. 

We should also make it easier for consumers to accurately compare policies from different insurance carriers, particularly with regard to what benefits are covered, and whether the plan offers inflation protection. States should also have to approve materials 

used to market Partnership policies. 

Today I will introduce, with Senator Wyden, the Confidence in 

Long-Term Care Insurance Act of 2009, which calls for many of 

these improvements. It’s estimated that two out of three Americans 

who reach the age of 65 will need some long-term care services and 

support at some point to assist with day-to-day activities, and 

which can enable them to maintain a high-quality and independent 

life. 

Long-term care insurance is an appropriate product for many 

who wish to plan for a secure retirement. But until we can guarantee that consumers have adequate information and protections, 

and ensure that premiums will not skyrocket down the road, longterm care insurance is not ready to be a major part of the 

healthcare reform solution. 

So, we thank all of today’s witnesses to being here. 

We look forward to your testimony, and we now turn to the ranking member for his comments. 

Senator Martinez. 

OPENING STATEMENT OF SENATOR MEL MARTINEZ, RANKING 

MEMBER 

Senator MARTINEZ. Mr. Chairman, thank you very much, and 

good afternoon to you, and I want to thank all of the panel members for being here with us today. 

Of many factors that Americans consider when planning their 

personal and financial future—their income, health, housing security, leisure time and emergencies—the one factor that’s often overlooked is the plan for long-term care. 

Currently the number of seniors requiring long-term care is on 

the rise. The Department of Health and Human Services estimates 

that today about 9 million men and women over the age of 65 are 

3 

in need of long-term care. By 2020, that number will be close to 

12 million, underscoring the need for more personal and public resources dedicated to providing seniors with long-term care options. 

The common barrier is cost. In Florida, for example, a private 

room in a nursing home costs more than $70,000 per year, and a 

home health aide costs more than $40,000 per year. These expenses could cause a person to quickly deplete their finances, and 

become dependent on Medicaid. 

Many seniors rely on family for their care. Oftentimes these caregivers are baby boomers, including those with children, who have 

been hit hard by recession. As a result, it has become increasingly 

difficult for them to afford the expenses associated with providing 

care. 

Many are surprised to learn that Medicare only pays for very 

limited long-term care services. Medicaid is the largest source of 

public financing for long-term care. But with family and public 

funding sources stretched, due to the economic downturn, Congress 

must look to other options. 

Personal planning, like purchasing long-term care insurance policies, offers a viable way to save seniors’ assets and reduce the burden on States and the Federal Government. 

Presently, only about 10 percent of seniors have chosen to purchase this kind of financial backstop. To encourage more Americans 

to purchase long-term care insurance, the Federal Government—in 

1996—joined States in the Long-Term Planning Partnership Program. The program offers enhanced long-term care insurance products in conjunction with Medicaid as a form of re-insurance. This 

approach offers protection for consumers, while also saving the 

State money. This model is promising, and may become an integral 

part of building our nation’s long-term care system. 

But the Partnership Program in long-term care insurance, in 

general, is a relatively recent innovation, and it’s still virtually unknown to most Americans. 

But as this industry continues to evolve, States should determine 

whether private long-term care insurance is sufficient to help each 

individual afford long-term care. State insurance commissioners 

are in an important position to protect policyholders, and make 

sure premiums are fair, and will translate into future benefits. In 

my view, this is an issue that should continue to be addressed at 

the State level. 

Today we’ll be hearing from our panelists on the benefits and 

challenges facing long-term care insurance policyholders, and providers. 

So, I look forward to hearing the testimony from all of the witnesses, Mr. Chairman. I thank you for calling this hearing and 

very timely issue. 

I also should let you know that I have a second hearing that’s 

started in about—or will start—in a few minutes, so I may have 

to excuse myself at some point, but it’s very good to see all of you, 

and thank you for being here. 

The CHAIRMAN. Thank you very much, Senator Martinez. 

I will introduce our witnesses today. First we will be hearing 

from Dr. Diane Rowland. She’s the Executive Vice President of the 

4 

Kaiser Family Foundation, and the Executive Director of the Kaiser Commission on Medicaid and the Uninsured. 

Dr. Rowland is also an adjunct professor in the Department of 

Health Policy and Management at Johns Hopkins University’s 

School of Public Health. She is a noted authority on health policy, 

Medicare and Medicaid, and health care for poor and disadvantaged populations. 

Next we will be hearing from Sean Dilweg, the Insurance Commissioner for the State of Wisconsin. 

Commissioner Dilweg is also an active member of the National 

Association of Insurance Commissioners, where he is chair of their 

Consumer Affairs Committee, and Senior Issues Task Force. 

Prior to this appointment as Insurance Commissioner, Mr. 

Dilweg served as the Executive Assistant to the Secretary of the 

Wisconsin Department of Administration. We welcome you here 

today, sir. 

Our third witness will be Carol Cutter, the Chief Deputy Commissioner of the Indiana Insurance Department. 

In that role, she oversees the Indiana Long Term Care Partnership Program, the Indiana CHP program for Medicare recipients, 

the Indiana small employer voluntary reinsurance pool program, 

the mandate benefit task force. Prior to joining the Indiana Insurance Department, Ms. Cutter spent 30 years in the insurance industry. 

Our fourth witness today will be Thomas Stinson, the President 

of the Insurance Products Retirement and Protection for Genworth, 

the nation’s largest provider of long-term care insurance policies. 

He is responsible for product development and the management of 

Genworth’s life, long-term care, and annuity products. 

Mr. Stinson previously served as President of Genworth’s longterm care business, and as President of GE Financial’s Personal Financial Services organization. He currently serves on the Board of 

America’s Health Insurance Plans, and the National Commission 

for Quality Long-Term Care. 

Finally, we’ll be hearing from Bonnie Burns, the training and 

policy specialist for California Health Advocates. She has more 

than 25 years of experience in Medicare, Medicaid Supplement Insurance, and long-term care insurance. She has served as a consumer representative with the National Association of Insurance 

Commissioners. In addition, Ms. Burns has served on Advisory 

Committees of the California Department of Aging, Department of 

Insurance, as well as the several advocacy organizations that address long-term care insurance issues. We welcome you here today. 

We’ll delighted to take your testimony, and we’ll start with you, 

Diane Rowland. 

5 

STATEMENT OF DIANE ROWLAND, SC.D., EXECUTIVE VICE 

PRESIDENT, HENRY J. KAISER FAMILY FOUNDATION, EXECUTIVE DIRECTOR, KAISER COMMISSION ON MEDICAID AND 

THE UNINSURED, WASHINGTON, DC 

Dr. ROWLAND. Thank you, Chairman Kohl, and Senator Martinez, for this opportunity to be with you today to participate in 

this hearing on long-term care. My testimony today will focus on 

how our nation currently finances long-term care services, and the 

key challenges to building a broader role for private health insurance in that market. 

I think it’s particularly important to note that over 10 million 

Americans, or almost 5 percent of our adult population, need longterm care services and supports to assist them in their daily activities. 

Although the majority of the individuals who receive long-term 

care services are aged 65 and above—and I know that is the focus 

of this Special Committee on Aging—42 percent of the individuals 

needing long-term care are people with disabilities and chronic illness under age 65. I think we need to bear that in mind as we look 

for solutions, since they are so much as part of our long-term care 

challenge. 

Many people who need long-term care rely primarily on unpaid 

help from family and friends in the community, but paying for 

long-term care services is expensive, and can quickly exhaust lifetime savings, especially if institutional care is required. With nursing home care averaging $70,000 a year, assisted living facilities 

averaging $36,000 per year, and home health services averaging 

$29 per hour, very few people can afford these services for very 

long. The cost of these services often exceeds individuals’ ability to 

pay for their care. 

While most long-term care services and support, including extended stays in nursing home, are not covered—as you’ve noted— 

by Medicare, few people have private health insurance to help pay 

for their nursing home stays. 

Medicare does, in fact, help to fill the gaps for many of the elderly and people with disabilities who need long-term care, but as we 

all know, to qualify for assistance, individuals must have limited 

income, and meet stringent assets tests. 

Unlike insurance for healthcare services, private insurance for 

long-term care is still a very limited option for financing care. Private long-term care insurance is primarily offered through the individual market, and has been offered only as a limited part of employer-sponsored insurance. When it has been offered by employees, the take-up rates have been exceedingly low. 

Insurance carriers say they have sold about 10 million long-term 

care insurance policies since 1987. Of the 6 to 7 million of these 

that remain current, the industry sold about 4 million through individual agents, and slightly more than 2 million through employers or group coverage—quite a different picture than that within 

our healthcare system. 

In assessing the potential, therefore, for broader application of 

private long-term care insurance in the financing mix for long-term 

care, it is important to highlight questions such as, how adequate 

is the coverage from these policies? How well does the market 

6 

work? What protections are in place for consumers, and what 

transparency is offered? 

We have reviewed many of these questions and challenges 

around coverage and financing of long-term care in a report which 

we released today, and have included with our testimony, called 

Closing the Long-Term Care Funding Gap, the Challenge of Private Long-Term Care Insurance, and we’ve submitted that for the 

record. 

Our principal findings in this report continue to focus on key 

challenges as we move forward to try and broaden this market. 

One, cost is a significant barrier for expanding the role of private 

long term care insurance. Many who will ultimately need long-term 

care insurance don’t have the resources to pay the premiums, especially over a lifetime. 

Health risks can deny consumers the coverage that they need. 

Before purchasing insurance, most consumers must undergo a detailed health screening and evaluation to determine their insurability and risk rating. For people with disabilities, this makes this 

coverage out of the question. 

Buyers also face very complex product design issues that are 

very difficult for them to fathom and to make realistic judgments 

about where they ought to be getting their care, or how. So, broader transparency and more help in figuring out the differences between policies and the pros and cons for individuals are required. 

A significant problem is the time lag between the purchase and 

use of benefits, and the kind of coverage that people are picking 

when they would be signing up for the coverage. So, we really need 

to look at how to make good decisions 20 to 30 years before the 

purchased insurance product is used. 

Finally, we don’t have much of an employer-based market, here, 

although that offers promise. As we look at employer-based coverage for health insurance being scaled back and as we look at the 

erosion of retiree benefits, we have some real challenges in trying 

to build more of such coverage into the employer-based market. 

So, as the Nation faces a growing elderly population, the potential for substantial increase in people in need of assistance with 

long-term care, it is important that we move now to address how 

to structure and pay for the long-term care services that will be required. 

If long-term care insurance is to become more available and utilized, the limitations of the current private long-term care insurance market should be examined and addressed as part of creating 

a broader market. 

Many of the concerns that have led to the current health reform 

efforts, focusing on the need for regulation and changes in the individual health insurance market, apply equally to the current longterm care insurance market—most notably its high administrative 

costs, unaffordable premiums, exclusions based on health status, 

its complexity and lack of comparability across plans. 

With revisions to these plans, private long-term care insurance 

could play a broader role in the long-term care financing mix. However, given the substantial role already played by Medicaid, and 

the limited applicability of long-term care insurance for the non-elderly disability population, the potential for private long-term care 

7 

insurance, even reformed, to finance our future long-term care 

needs should not be overstated. 

Thank you very much for your time and your consideration. 

[The prepared statement of Dr. Rowland follows:] 


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The CHAIRMAN. Thank you so much. 

Now, we’ll hear from Sean Dilweg. 

STATEMENT OF SEAN DILWEG, INSURANCE COMMISSIONER, 

WISCONSIN INSURANCE COMMISSION, MADISON, WI 

Mr. DILWEG. Thank you, Chairman Kohl and Ranking Member 

Martinez. Thank you for the opportunity to testify concerning the 

regulation of long-term care insurance. I appreciate you holding 

this hearing today in an effort to highlight the long-term care insurance and the complex issues related to it. 

Long-term care insurance has proven to be a very challenging 

product to regulate. Setting this product apart from other lines of 

insurance is the span between the purchase of long-term care insurance and when that person actually needs coverage for the services. 

Products currently for sale will provide coverage for services in 

most cases 10 to 15 years down the road. Regulators are in the 

unique position of reacting to decisions consumers and industry 

made 15 years ago, while also facing the challenge of ensuring policies purchased today provide meaningful coverage in the next 15 

years. 

State regulators have three main priorities in regulating these 

products. First, ensuring the solvency of the companies offering the 

long-term care policies so that companies can pay the claims for 

the policies they have sold. 

Second, ensuring that sufficient consumer protections are in 

place so that the premiums are relatively stable over the life of the 

policy, and consumers receive the benefits promised to them in a 

timely manner. 

Third, ensuring that all long-term care insurance sales are done 

in an appropriate and suitable manner. 

The first, solvency, is one of the most important responsibilities 

of the State insurance regulator; it’s to ensure the solvency of the 

company that is doing business in the market. Over many years, 

State insurance regulation has developed a solvency regulatory system grounded in each of the States, and coordinated through the 

National Association of Insurance Commissioners. This has served 

insurance consumers well. 

It is my responsibility, as the insurance regulator of Wisconsin, 

to ensure insurance consumers are protected from poor business 

decisions made by those few companies so that obligations under 

their insurance contracts are fulfilled. This preventative approach 

to regulation—early detection of potential financial difficulty—is by 

far the best way to achieve this goal. 

So, to that end, State insurance regulators have developed a very 

sophisticated financial analysis system, along with an insurance 

company financial database that is second to none. 

Many of the problems we see today are the result of older longterm care policies sold when there were insufficient regulations in 

place to address these problems. Today, the regulatory structure of 

long-term care insurance has evolved, and the market seems to 

have stabilized. The newer long-term care policies are sold at a 

more realistic, and thereby more suitable, price. 

22 

In identifying the stabilization of premium, some insurers in the 

nineties priced primarily for market share, and offered the least expensive policies available. However, when claims started to come in 

beyond what they priced for, these insurers had to raise their 

prices to cover the claims. 

In some instances, significant price increases were imposed. In 

fact, some insurers dropped out of the market entirely by selling 

their business to other long-term care insurers, while others simply 

stopped issuing new policies. Finally, a few companies became financially hazardous, and more drastic regulatory action was taken 

to protect the policyholders. 

Recognizing the problem of underpricing early on, State insurance regulators, working through the NAIC, developed rate stability standards and protections against premium increases. Examples include requiring insurers to actuarially certify that the rates 

they file will not—under moderate conditions—increase over the 

life of an insurance policy. If premiums rise above a given level 

based on the age of policyholders, for a majority of policyholders, 

the company is required to file a plan for improving the administration and claims processing. 

If an insurance commissioner believes that a rising rate spiral 

exists, he or she may require a company to offer policyholders affected by the premium increase the option to replace their existing 

policies with comparable ones being sold. 

As a last resort, the Commissioner can determine that a company has persistently filed inadequate initial premium rates and 

may ban the company from the long-term care insurance marketplace for up to five years. 

The question of suitability has always been an issue with these 

products. In response to suitability concerns, many States in the 

NAIC developed suitability standards, and processes, to minimize 

unsuitable sales of long-term care insurance policies. In the State 

of Wisconsin and with many other States, we always emphasize 

never to buy long-term care insurance in a vacuum. It should be 

part of a much larger look at your retirement needs. 

As we move forward, State regulators will continue to carefully 

monitor the market. Just last year, the Senior Issues Task Force 

at NAIC did a data call of 83 percent of the market, which included 

23 of the largest individual long-term care insurers. This survey indicated that the long-term care insurance market has shown some 

growth, especially with regard to comprehensive coverage products 

that provide insurance for both institutional and non-institutionally 

based care. 

The data also showed that claims handling problems—although 

increasing in absolute numbers—currently do not appear to be statistically significant. We did convene a subgroup that is working on 

an independent review model that would provide the consumer 

with a very good tool—when they face claim problems—that triggers an independent review of the claim before them. 

As we look at the other issues surrounding long-term care insurance, we feel—I feel—that the Federal Government can play a role. 

You have control over the tax-qualified long-term care insurance 

policies, and there is also the Long-Term Care Insurance Partnership Program. 

23 

As I look at the bill that you’ve introduced today, I think it’s appropriate that the Secretary of Treasury, and the Secretary of the 

Department of Health and Human Services review all subsequent 

amendments to the NAIC long-term care insurance models to determine whether they should be required for tax-qualified and partnership policies. I appreciate that your bill sets forth a process for 

accomplishing a number of these goals. 

You also recognize the value of State regulatory authority over 

long-term care insurance as well as the significant impact of NAIC 

models developed in collaboration with all of the interested parties. 

I know the NAIC will look forward to reviewing your proposal 

much more closely as it moves forward. Thank you for the time. 

[The prepared statement of Mr. Dilweg follows:] 

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The CHAIRMAN. Thank you very much, Mr. Dilweg. We’d like to 

hear now from Ms. Cutter. 

STATEMENT OF CAROL CUTTER, CHIEF DEPUTY COMMISSIONER, HEALTH AND LEGISLATIVE AFFAIRS, INDIANA DEPARTMENT OF INSURANCE, INDIANAPOLIS, IN 

Ms. CUTTER. Thank you, Chairman Kohl and Ranking Member 

Martinez. I appreciate the opportunity to speak today about regulation of long-term care insurance in terms of what Indiana’s experience has been. 

As you know, Indiana was one of the original four Partnership 

States that were established back in the early nineties to allow 

folks to buy long-term care policies and protect their assets from 

Medicaid recovery if they did exhaust the benefits of their policies. 

That was implemented under then-Governor Evan Bayh who, I 

understand, is a member of your committee. Obviously, there was 

a need for some self-responsibility for those persons who could afford to take care of their own expenses for either long-term care at 

home, or in an assisted living facility, or in a facility of some sort. 

I believe that’s why we had that program implemented, was to 

encourage folks to do that, knowing that those who can’t afford to 

protect themselves against those sorts of expenses are the ones who 

should have access to the Medicaid funding that the Federal Government does provide. 

In Indiana, our Partnership experience has been very good. During the 16 years that we’ve sold these policies, we’ve written over 

45,000 of them. We’ve only had about 72 complaints during that 16 

years, either on a rate increase, or on a claim issue of some sort. 

I’m sure there’s all types of anecdotal information out that you’ve 

already heard about problems that folks have had with claims with 

long-term care. But I want to assure you, at least in Indiana, our 

long-term care claims are not as serious in terms of consumer complaints, as many of the other types of insurance products that we 

sell in the State, like auto insurance or homeowners’ insurance. 

So, we believe that relative to the marketplace there, we’re doing 

a really good job. Obviously we would like to encourage self-responsibility in Indiana. We’re going to conduct a massive marketing 

campaign this fall for consumer awareness, because we believe that 

private insurance is a tremendous option to have in terms of allowing people to protect themselves from these—they can be very terrible—expenses to which you’ve already alluded. 

In general, Indiana supports the long-term care model regulation 

that the NAIC has developed. There are multiple features of that 

model that we believe would be helpful in terms of disclosure requirements, possible standardization, standards for marketing, that 

sort of thing. 

But there is a concern that we have about the rate stabilization 

piece that comes from our health actuary, who has had multiple 

years of experience with health insurance products of all types, actually worked here at the Federal level back in the seventies for 

what was then called the Health care Financing Administration, 

and is now at CMS. He was the director of the division for actuarial creation of Part A and Part B of Medicare. 

44 

He served in several other departments of insurance, and he’s 

worked for private consulting firms like Deloitte, so I value his expertise and his counsel on this particular piece of the model as it 

concerns rate stabilization. 

Currently, in Indiana—as in most States that follow any sort of 

standards that have been established by the NAIC—we have what 

is called a 60 percent loss ratio standard. 

This means that before an insurer, such as Genworth, can come 

to us and ask for a rate increase, they have to prove to us that they 

have spent 60 cents, or more, out of every dollar that they’ve collected in premium for claims over the lifetime period of that policy, 

however many years that policy form itself has been sold. Until 

they do that, they can’t even ask for a rate increase. 

A lot of the actuarial information that we’re getting from carriers 

now is what we call very highly assumptive driven. For instance, 

they could say, ‘‘We’ve had this particular policy on the marketplace for the last 12 years. We are now at a 79 percent loss ratio, 

which means we qualify to ask for a rate increase, because we’re 

over the 60 percent threshold. Based upon that 79 percent loss 

ratio, we predict that over the next 20 years, or the next 10 years, 

or the next 15 years, we’re going to have similar loss ratios, because of that same percentage increase in terms of claims that 

we’re going to pay out. Therefore, we deserve to have a larger rate 

increase.’’ 

Our concern is, that under NAIC’s rate stabilization model, Indiana’s ability to control that would be taken away. There is an exceptional increase provision in here that says if I, as an insurer, 

can actuarially prove to you, the Department of Insurance, that we 

have a 70 percent loss ratio, then with those certain attestations, 

I’m automatically going to be allowed to have that. 

We very carefully scrutinize our rates that come into our Department—for all of our products—but particularly for long-term care. 

We hold carriers—if they have been sitting for four or five years 

and have had incurred claims that put them into a deficit ratio on 

their dollars, then our question to them is, why didn’t you do something about it sooner? We don’t allow them, necessarily, to have the 

40 or—well, we never approved a 40 percent increase, we just don’t 

do it—because we believe the consumer needs to be protected so 

that they can continue to have the protection of that product, and 

we’re not going to benefit the company because of any mismanagement or poor decisions on their part in terms of pricing. 

It’s our opinion that, under this model, we would lose the ability 

to behave that way, and that concerns us. 

Thank you, Senator. 

[The prepared statement of Ms. Cutter follows:] 

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The CHAIRMAN. Thank you so much, Ms. Cutter. 

Mr. Stinson. 

STATEMENT OF THOMAS STINSON, PRESIDENT, GENWORTH 

LONG-TERM CARE, GENWORTH FINANCIAL, RICHMOND, VA 

Mr. STINSON. Thank you, Chairman Kohl and Senator Martinez, 

for giving me the opportunity to testify today on behalf of 

Genworth Financial. 

Genworth provides retirement income, life, long-term care, and 

mortgage insurance coverage to over 15 million customers in 25 

countries. As one of the pioneers of long-term care insurance, we 

have become a leader in the industry, providing services to over 1.3 

million policy holders. 

Today, I’d like to speak to you on the following four topics of interest to the committee. Our insurance offerings, including the 

State Long Term Care Partnership Program; our framework for financial stability; Genworth’s views on the intersection of 

healthcare reform and long-term care financing; and last, some 

brief comments on our support the legislation proposed by the 

Chairman. 

Long-term care insurance is important for several reasons. It 

generally provides peace of mind to policyholders and their families. For many Americans, it also represents a critical part of a 

sound retirement plan, providing quality care and care coordination 

services, and preserving funding sources for future family needs. 

The public/private State partnerships for long-term care are a 

joint solution, positioning private insurance as the primary payer 

of long-term care expenses. This program is helping consumers receive needed care, and at the same time allowing States to achieve 

cost savings to alleviate the already strained Medicaid system. 

In fact, the fundamental premise of the Partnership Program 

works—2009 data indicate that only 1 in 1,000 Partnership-qualified policyholders exhausted the full benefits of their insurance policy, and accessed Medicaid. That means private insurance can be 

used to preserve and protect the viability of Medicaid. 

As these Partnership Programs have now expanded to 30 additional States, we know that most purchasers are from middle-income families. This portion of the population is unlikely to have the 

considerable assets necessary to self-finance their long-term care 

needs, but wants to maintain a modest level of assets while receiving quality services. 

In addition to the State Partnership Programs, we are proud to 

participate in the ‘‘Own Your Future’’ public awareness campaign. 

The campaign helps to educate millions of Americans about the importance of advance planning for their own long-term care needs. 

We strongly encourage this committee to continue the support of 

this very important public education and awareness campaign. 

Next I would like to discuss the risk management framework 

that Genworth uses to maintain our financial viability. As the largest and oldest long-term care insurer in America, we take seriously 

our responsibility to remain strong financially, and to fulfill our 

commitment to our policyholders. We do so by managing our company within a responsible risk management framework. 

49 

In fact, it has allowed us to pay out over $6.5 billion in long-term 

care claims for care in nursing homes, assisted living facilities, and 

in the home. Genworth pays over 95 percent of all of the long-term 

care insurance claims submitted. 

Turning to the intersection of healthcare reform and long-term 

care financing we believe it is essential that we differentiate acute 

care from long-term care. Studies show that every American will 

need acute care during their lifetime, while only half of Americans 

will need some form of long-term care. So, in exploring policy solutions, a universal solution may be appropriate for acute care, while 

we believe a more targeted approach would be more prudent for 

long-term care. 

For example, wealthy and many middle-class Americans can either self-finance or purchase private long-term care insurance. 

Meanwhile, the most vulnerable will be protected by Medicaid. 

This leaves a fourth, or tip-over portion of the population; they are 

the segment of the population that has limited income, and thus 

generally can not include long-term care planning in their overall 

retirement strategy. 

But they can be reached by a targeted program similar to the 

State Partnership Program, helping them avoid spending down 

their assets and tipping into Medicaid. 

Finally, Mr. Chairman, we commend you on proposing the ‘‘Confidence in Long Term Care Act of 2009,’’ legislation that supports 

consistency of oversight, transparency of information, and ensures 

the protection of our senior population will provide greater confidence and encourage families to proactively plan for their longterm care needs. 

We stand ready to work with you as it moves forward in Committee. Thank you very much. 

[The prepared statement of Mr. Stinson follows:] 

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The CHAIRMAN. Thank you very much, Mr. Stinson. 

Finally, Bonnie Burns. 

STATEMENT OF BONNIE BURNS, TRAINING AND POLICY SPECIALIST, CALIFORNIA HEALTH ADVOCATES, SCOTTS VALLEY, CA 

Ms. BURNS. Thank you, Chairman Kohl, and thank you, Ranking 

Member Martinez, for giving me the opportunity to testify at this 

hearing today. We appreciate the committee’s interest in protecting 

consumers, and increasing the quality of long-term care insurance 

products. 

As you noted, Senator Kohl, long-term care is unpredictable, expensive, uncoordinated, and not integrated with the healthcare system. As part of health care reform we would like to recommend 

that seniors, elders and people with disabilities, should have a 

seamless transition to long-term care services, coordination with 

medical care, and a support system to help them find and access 

the services that are best suited to their needs. 

Long-term care insurance pays for a very expensive kind of care 

that over half of all people 65 and older may need at some point 

during their lifetime. So, it’s not unreasonable to expect that insurance coverage for this kind of care would be expensive as well. 

However, competition for this product often depends more on the 

size of a premium than on the actual benefits, because these products are so difficult to compare with each other. Many policymakers 

believe that if long-term care insurance were more widely spread, 

it would result in substantial Medicaid savings, but we won’t know 

if that’s true for many years. In the meantime, Medicaid savings 

will be part of every marketing effort to sell this type of product. 

Long-term care insurance is a niche product; poor people can’t afford it, and don’t need it, while higher income people can afford to 

transfer their risk to an insurance company if they are in good 

health. But the middle class is most at risk for spending down to 

Medicaid, and those individuals may pay more in total premiums 

than they have in non-housing assets, or than the benefits that 

they will receive. They may buy insufficient benefits and build into 

a policy a larger co-payment amount than they expect as the cost 

of care increases. 

Failing to buy inflation protection will compound this problem, 

leaving a consumer with only a small amount of their future care 

covered by an insurance payment. Buying an insufficient benefit, 

and failing to buy inflation protection, are decisions that are made 

when the policy is purchased, and often trades off the cost of those 

benefits for an affordable premium. 

Whether a policy will perform as expected decades later, depends 

on the quality of the product purchased, whether the policy benefits 

can keep up with inflation, or lose value each year, whether the 

premiums consumers initially agreed to pay remain stable over 

several decades, and whether the individual still has those benefits 

decades later when care is needed. If the goal is to have more people buy a commercial product to pay for long-term care and relieve 

pressure on State Medicaid programs, then the benefits must cover 

a substantial amount of the cost of care when it’s needed. 

64 

A long-term care insurance policy is not without its own risks. 

Recently a flurry of rate increases have been imposed, including a 

pending rate increase for the long-term care insurance program for 

the Federal family, and even by companies that had never imposed 

one before. 

Here are two examples: Mr. B.’s premium jumped from $1,874 annually, to $4,050. He has paid just short of $31,000 in premiums 

during the last 11 years and he’s now 80 years old. 

Mrs. C. is also 80. She saw her annual premium jump to $7,453.56. She has paid the company $47,309 in premiums during 

the last 11 years. It remains to be seen whether the NAIC’s rate 

stability requirements will result in less premium volatility in the 

future for consumers buying these products today. 

In the meantime, long-term care insurance policies will continue 

to be marketed as level-premium products, with agents telling consumers that their premiums can’t be increased based on their own 

age or health. While this is true, this misleads consumers about 

the potential for future rate increases when a company’s claims experience is worse than expected, or their investment goals are not 

met. 

A Partnership program, in theory, allows consumers to shelter 

certain amounts of their personal assets from the State Medicaid 

program by buying a long-term care insurance policy that protects 

one dollar of assets for each dollar of insurance benefits paid out. 

A 2007 report found that Partnership policies were mostly purchased by upper-middle income and higher-income people who were 

less likely to qualify for Medicaid. The majority of those purchasers 

had assets greater than $350,000 and annual incomes of $60,000 

or more. 

Insurance companies and their sales agents clearly have a compelling and valuable marketing advantage with the Partnership 

program. An insurance policy endorsed by the State makes it instantly both more attractive and credible. Sales opportunities for 

these products begin immediately while the effect, if any, on State 

Medicaid programs will not be known for many years. 

Substantial numbers of older consumers can not qualify for coverage because of their health, or they can’t afford long-term care 

insurance. Convinced that the high premium cost is the greatest 

barrier to buying long-term care insurance, companies often offer 

less expensive base policies to working-age consumers in the group 

market with the cost of inflation protection pushed out into future 

years through a guaranteed future purchase option. 

Seventy-two percent of group purchasers select a future purchase 

option, an option that provides guaranteed insurability to exercise 

this option later at higher attained-age rates. This is also a limited 

option that can only be rejected a few times before the offer expires 

completely. 

Alarmingly, only 37 percent of the future purchase options that 

were extended in 2008 to people with group coverage were accepted, yet this option leaves consumers at risk of steadily building an 

unaffordable co-payment liability that will come due when they 

need care. 

The Federal Government established a regulatory floor of standards and consumer protections, first with HIPPA, and then in the 

65 

Deficit Reduction Act (DRA) for the Partnership policies. Federal 

law could go further by requiring NAIC to periodically review and 

incorporate the strongest standards and consumer protections that 

are found in any State. Federal law could establish a working 

group composed of regulators, industry and consumer groups to incorporate those standards into the NAIC models, and require a 

periodic Federal review to decide when recent the NAIC standards 

should be incorporated into Federal law. Such a process would capture the best of State laws and enhance Federal law. I understand 

you’ve done some of that in the bill that you’re introducing today. 

It’s important to remember that long-term care insurance is an 

investment not just in the product, but in the company selling it. 

Making sure that adequate consumer protections are in place will 

help ensure that insurance companies and their products live up to 

their promises in the future. 

Thank you for the opportunity to testify today on this important 

topic. 

[The prepared statement of Ms. Burns follows:] 

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The CHAIRMAN. Thank you very much, Ms. Burns. 

Dr. Rowland, what guarantee do consumers have that a longterm care insurance policy purchased today will indeed deliver the 

benefits for them 20 or 30 years from now? 

Dr. ROWLAND. Well, I think you hit on, perhaps, the most serious 

question in someone’s decision to buy a long-term care policy—and 

the ability to deliver on those benefits. The guarantees of what our 

healthcare system—what our long-term care system are going to 

look like in 20 or 30 years—are not there. We don’t know what 

kind of technologies will be available, and what kind of other options individuals may want to use, for their long-term care benefits. 

So, I think one of the challenges, here, is really this time lag between when you decide to purchase a long-term care policy, and 

when you might use it. I think the guarantees are extremely limited, and that’s where consumer protection is going to be very important. 

The CHAIRMAN. So, I hear you saying that there really are no 

concrete guarantees that— 

Dr. ROWLAND. Well, no guarantees that the policies purchased 

today will meet your needs when you need them, 20 to 30 years 

down the road. 

Especially, there are problems if individuals can’t continue to pay 

their premiums. They may pay premiums for 10 or 12 years, and 

then have income limits and other problems that prevent them 

from continuing, so that by the time they need long-term care services, that policy may no longer be guaranteeing them anything. 

The CHAIRMAN. Do—anybody on the panel disagree with that? I 

mean, it’s a pretty basic question and we hear Dr. Rowland with 

a very skeptical kind of an answer. What about you, Mr. Dilweg? 

Mr. DILWEG. I think it raises the major point, as Dr. Rowland 

said. The issue, though, is, are there abilities to look at new benefits throughout the life of the policy? The problem that we’re having with some of the older policies is that they primarily were just 

locked into nursing home care, and as we know, that has changed 

significantly. So, are those options there? How do the various cost 

factors factor in? 

But, I do think it shows, really, the shortcoming of the product; 

we continually emphasize that you should not make this decision 

in a vacuum. You might be better off, not necessarily in the past 

four months, with a mutual fund, with money in savings, or some 

other investment vehicles that may treat you better in the future. 

So, do not make this decision in a vacuum, and we continually emphasize that. 

The CHAIRMAN. Mr. Stinson? 

Mr. STINSON. Yeah, just a couple of other points I’d like to add 

to the commentary. 

One is, obviously, I have a contractual obligation to the policyholder to fulfill all of the benefits that are in that contract. As Mr. 

Dilweg pointed out, the policies that we sell today provide significantly more flexibility in terms of how the benefits can be paid and 

where they can be paid. Policies I sold from the mid-seventies to 

the mid-eighties were nursing home-only policies. As the care environment has evolved, that’s where you’ve got some of the friction 

from the older policy owners. But the policies I sell today have treVerDate Nov 24 2008 11:24 Dec 08, 2009 Jkt 000000 PO 00000 Frm 00093 Fmt 6633 Sfmt 6633 H:\DOCS\53717.TXT SAG PsN: JOYCE
90 

mendous flexibility in terms of how those benefits can be applied 

to the consumer. 

One of the other things that I’d like to point out is the fact that 

our persistency on this product is incredibly high, meaning the 

number of policyholders that retain the policy and don’t voluntarily 

lapse it, compared to life insurance or annuity contracts is about 

1 percent, so the persistency is 99 percent of the people on the annual basis retain this coverage and pay it until, either they die, or 

they need benefits. 

The CHAIRMAN. So you—to be pretty stark about it, or to be pretty optimistic about it—you don’t entirely agree with Dr. Rowland? 

Mr. STINSON. I do not, with regard to the policies that we’re selling today. Again, I have a contractual obligation to the policyholders. I think the training that’s provided today to our agents 

that are selling the contracts, is well explained. We have NAIC obligations to provide disclosures on what the policies do and don’t 

cover, and in terms of my responsibilities, again, tremendous flexibility within the contracts to allow the consumer—as the care environment develops over the next 20, 30 years, to be able to use that 

policy within that context. 

The CHAIRMAN. So you regard the long-term care insurance policies that you’re selling today as a reasonable, pretty good buy for 

the people who are buying them? 

Mr. STINSON. I do. 

The CHAIRMAN. Well, what about it, folks? The man looks like a 

man of integrity. 

Ms. BURNS. Senator Kohl, if I might? 

Mr. STINSON. My mother owns a policy. 

The CHAIRMAN. All right, Ms. Burns, do you want to make a 

comment? 

Ms. BURNS. I did. Part of the problem with this product is the 

difficulty with definitions, and in looking forward and trying to figure out how a policy would adapt to future changes, is one of those 

issues. 

For instance, some companies sell something called an Alternate 

Plan of Care, which is totally undefined in a policy and yet leaves 

the impression with consumers that they’ll be able to bargain with 

the company for various benefits, later that are not covered in the 

policy. 

We’ve had a number, of cases in our state involving that particular benefit, and the inability to use it. It’s completely within the 

discretion of the company to decide what that benefit is, and 

whether or not they’re going to allow it to be used. 

I think standardized definitions of many of the features of a policy might go a long way to helping consumers get the benefits that 

they need. But it is a difficult prospect to think about how to make 

one of these policies adapt to future needs and future technology. 

The CHAIRMAN. Is that a fair statement, Mr. Stinson? 

Mr. STINSON. Yeah, I would add that—the flexibility that was 

provided in this alternative plan of care—if the policyholder presents their claim in any one of the defined terms within the contract, I’m obligated to pay that claim. 

We added these alternative plans of care, because the evolving 

care environment. There was no such thing as a, you know, resiVerDate Nov 24 2008 11:24 Dec 08, 2009 Jkt 000000 PO 00000 Frm 00094 Fmt 6633 Sfmt 6633 H:\DOCS\53717.TXT SAG PsN: JOYCE
91 

dential care facility 20, 30 years ago. That’s some of the problems 

that we ran into. 

So, I have specific definitions of where I must apply the benefits 

of the policy. Nursing home definition, assisted living facilities, and 

the care that I can provide in the home. 

As I look forward 20 to 30 years from now, those things that I 

can think of in defining the contract, I can’t necessarily predict everything, so the insurance companies have provided this flexibility 

of an ‘‘alternative plan of care’’ that says, if something is on the horizon that I can’t define today, we want the insured to have the 

ability to get access to the benefits of the policy. 

Ms. BURNS. I wouldn’t disagree with that, but I do think that 

this is company specific. There are some companies who are better 

at doing what they do than other companies. I think part of this 

is a problem between the various ways that companies look at this 

product and these benefits. In addition state regulators have some 

effect on this issue. 

The industry is not homogeneous. They don’t, all of them, do the 

same thing in the same way. Some companies are better than others, some companies are worse than others. 

The CHAIRMAN. OK. 

Mr. Dilweg. 

Mr. DILWEG. I think it raises another point where this really, has 

become more of an individual product. It’s a very complicated product, and the key is making sure the agents are educated. I think 

standardizing language also helps the individual navigate between 

the various companies and would be a good step. 

So, just the delivery of the product as it runs through the agents 

where you have the individual trying to make the decision on their 

own and may want to look outside of the agent. It’s important to 

recognize how it is delivered. 

The CHAIRMAN. Ms. Cutter. 

Ms. CUTTER. Thank you, Senator. A couple of comments. There 

are things in these contracts, and to Mr. Stinson’s point, an insurance policy is a legal contract. That company is bound by law to 

provide the benefits that are stipulated within that contract. What 

happens if—to Commissioner Dilweg’s point earlier, when he 

talked about financial solvency—it’s each State’s responsibility to 

monitor, very closely, and scrutinize financial solvency of each of 

the domestic companies that are within their borders. 

We have had a couple of situations—not in Indiana, although the 

holding company was in Indiana, but the actual base company was 

in Pennsylvania—that sold a lot of long-term care coverage and 

didn’t price it well. 

One of the things that Bonnie referred to earlier that I, as an 

agent, absolutely object to is a particular company that’s been so 

problematic and sold what are called ‘‘five-year rate guarantee’’ 

policies. They went in and told consumers, ‘‘Your rates aren’t going 

to change for five years,’’ and they didn’t. They held to that promise. 

The problem is, I’ve spoken to thousands of people over the years 

and I can tell you, if you say ‘‘guarantee’’ to an individual, that’s 

all that stays in their head. They aren’t going to remember that 

five years from now that’s going to change. So, when the change 

92 

occurs, they believe they’ve been wronged or harmed, because they 

believed that it was guaranteed forever. 

There is no insurance product in the marketplace—no car insurance, no homeowners’ insurance, no term life insurance, no health 

insurance—that can say to you it’s not ever going to go up. They 

can’t say that. So, consequently, long-term care is no different in 

that regard, and that’s why I think the ability for States to really 

scrutinize these rate increases, or the initial rates, that are submitted by companies is just a critical, critical step in terms of trying to force them to be more responsible in their initial submission 

of rates, in terms of them being adequate. 

One of the things that our actuary says to me all the time is, ‘‘A 

long-term care policy is what is known as an indemnity policy, 

which means as an insurance company, I’m going to pay you this 

when this happens.’’ So, if you go into a facility, or you need care— 

and my husband and I are covered under a long-term care policy 

that I bought 10 years ago, it’s $200 a month, it’s not expensive, 

and it covers us for three years, and it’s got an inflation-protection 

rider on it, and we started out at $150 a day. Well, right now, in 

Indiana, the average nursing home cost is $110 dollars a day. So, 

I’m already ahead of the game, thank goodness, because of the way 

these products are designed. 

But the point being that, as I go forward into the future, with 

the inflation protection in that product, I know that I’m going to 

be able to keep up with—and I hate to admit it, but it’s not a Partnership product, so I don’t have asset protection—but I know that 

I have the ability, at least, for two or three years—because it is a 

three-year payout—to protect us and be independent in our decisions about what kind of care we’re going to receive, and where 

we’re going to receive it. I think that’s critical as a part of the insurance world, in terms of how consumers can help make these decisions for themselves, and not always look to you folks to be handing out dollars for them, because they haven’t maybe been quite as 

responsible for themselves as they should have been. 

The CHAIRMAN. Well, that brings up the next question to the 

panel, do you believe that long-term care is fundamentally an insurable kind of a product, an activity, or do you believe it is more 

appropriate to cover these services through a societal program, like 

Social Security or Medicare? 

Mr. Stinson. 

Mr. STINSON. I believe it is an insurable event that insurance 

companies can predict. Our actuaries are basically looking at two 

variables, here, instead of just mortality on life insurance contracts—they are tracking mortality and morbidity. We believe that 

the morbidity patterns are insurable. We can pool the risk, and 

have an efficient insurance model that ultimately, everyone is paying premiums in. 

Again, about half the people that buy our products ultimately 

will use the products, but we believe it is an insurable event and 

there are actuarial models that can predict the morbidity trends, 

as well as the mortality trends. 

The CHAIRMAN. Yes, Dr. Rowland? 

Dr. ROWLAND. Well, I certainly believe that there is a role for private insurance, and for trying to provide that for individuals. 

93 

But, I think—and maybe I studied the health insurance side of 

our health care system too long—that there are always going to be 

individuals for whom this kind of an option is not affordable, and 

not available. 

So, I think that the partnership that now exists between Medicaid and private insurance is probably more appropriately a partnership that could exist between Medicare and private insurance 

where, at least, some basic benefits were provided. Individuals 

would have that protection through the social insurance mode, and 

then could supplement that, or add to it with private insurance. 

That may be a more appropriate model for how to go. 

The CHAIRMAN. Mr. Dilweg. 

Mr. DILWEG. I would agree that there’s definitely an insurable 

interest, an insurable event that you can define, triggers that can 

be defined. In the end, I think, by having some sort of partnership, 

you have a more efficient use of money, and a spreading of the risk, 

by treating part of long-term care as insurable. 

The CHAIRMAN. Ms. Burns. 

Ms. BURNS. I agree that there’s a role for long-term care insurance. I’m not sure we know how big that role is yet. There are a 

number of issues involved around this topic. One is, the benefits 

people buy when they first buy coverage, and whether or not 

they’re trading off the cost for benefits that are not going to be sufficient later. 

This is particularly crucial in the group market, for working-aged 

people who buy a future purchase that allows them to buy option 

inflation later, at an increased cost. As time goes on, that cost becomes greater and greater, and they may then not take exercise 

that option, and then eventually lose it. 

So, it’s an issue of, not just about what people purchase, initially 

but whether it’s suitable for them, or not, and whether it will do 

what they expect it to do, years or decades later. It’s everything 

that happens between purchase and use. 

As I said before, companies are not homogeneous, they do different things, and they do them in different ways. So, someone may 

buy a product that was a perfectly affordable for them when they 

were 60 years old, and when they are 75, it may not be. They may, 

then, be forced to drop it. 

So, there are a number of things that happen along the way, 

making it a complex topic. I think that there are a lot of these 

pieces we don’t quite know, yet, and that there’s still a lot of work 

to be done. 

But helping people compare these products—apples to apples, 

and not apples to peaches—would certainly help by standardizing 

some of the language within the policy, so that people have a better 

grasp of what they’re buying, and they’re not buying just based on 

price. 

We buy based on price for almost everything else we purchase. 

So, it’s not unreasonable to think that people would do that with 

long-term care insurance. Buying the lowest priced policy—at least 

in the recent past—has been buying a rate increase later that some 

people couldn’t afford to pay. 

The CHAIRMAN. All right, which leads us, maybe, to the next 

question. 

94 

Mr. Dilweg, how did policies sold during the eighties and nineties 

differ from policies sold today? Why did they price their policies so 

low at that time? Do you see any danger in underpricing today in 

the group market? 

Mr. DILWEG. I think Mr. Stinson addressed this, as well, I think 

we both spoke to it. There really were problems, in a sense, insurers were trying to buy up the market and under pricing the product. Some were locked into just nursing home care, you did not 

have a lot of the changes that have been made at the NAIC as far 

as how products should look—the flexibility, the attempt to try and 

get stability. 

I do think it’s important that a lot of changes we’ve made since 

2000 be reflected in the Partnership plans through Health and 

Human services. Really, what your bill is attempting to do, I think, 

is a very good step to making sure that that flows through both 

Medicaid and the tax-qualified entities, as well. 

So, I think there’s been a lot of progress, and I think you’re going 

to see just as much progress 10 years from now, in the regulation 

of these products. 

The CHAIRMAN. Mr. Dilweg, what are some of the high-priced 

sales tactics that occur in selling long-term care insurance? 

Mr. DILWEG. I think what we saw—and, it almost reminds me 

of our conversations on Medicare Advantage, Senator—as you introduce a new product, you have the agents—and this goes back a 

ways—but you have the agent really wanting the person to sign on 

the dotted line before they leave the house, not properly identifying 

what a guarantee is, things like that which may come back to 

haunt the individual. 

I think we’ve tried to spend a lot of time on agent education. 

These are very complicated products, and we need to continue to 

do that. But one suggestion here today, really, a standardization of 

definitions, I think, would be very helpful. Then someone can compare Genworth to Prudential, to whomever else. 

When you think about long-term care, you think about 

healthcare, but it’s not typically healthcare companies who sell 

these. It’s typically life insurance companies that sell these. So, it’s 

really a—when you think of the companies that sell these, it’s a 

unique product in how it’s lodged in the corporate structure, as 

well. 

Mr. STINSON. Just a couple of remarks on the— 

The CHAIRMAN. Mr. Stinson. 

Mr. STINSON [continuing]. On the—you’d asked the question on 

the rates of yesteryear and what the insurance companies are 

doing today. 

Two perspectives, one is, when the companies were filing the 

products, say, 15, 20 years ago, there was generally, I think, at the 

State level, the sensitivity to overcharging seniors for protection 

products. That has changed. Today when we’re working with the 

State Departments, there’s much more focus, State by State, on 

rate stability. Meaning, make sure you’re charging appropriate 

rates for this type of coverage over the long term. Commissioner 

Dilweg, I think, addressed the rate stability component of that. 

The training requirements, and one of the things that’s suggested in the bill, which we support, again, expansion of the NAIC 

95 

model regulations, as well as the Partnership plans. Partnership 

plans, typically, at the State level, come with additional training 

requirements for our agents. 

So, when we introduce a Partnership plan into a State, the 

agents typically have another 4 to 8 hours of training, and they understand, then that training requires them to understand the intersection of Medicaid, Medicare, and long-term care in the private 

market. 

So, again, the expansion of those training programs, we think, is 

a good thing, as well as the adoption of the model regulation and 

the Partnership Program. Again, from a rate stability perspective, 

our focus today, very much, is on future rate stability. 

The increases, perhaps, that Bonnie mentioned—one of the 

things that I’d like to point out is from an insurance company’s 

perspective, if I’m forced to raise rates 30, 40, 50 percent, it’s very 

difficult for me to stay in the market. I think you’ll find that most 

of the insurers that are selling products today are not in that category of doubling rates on their insured block. 

This is a relatively young product, it’s only been around for 35 

years. There was a sorting out, a number of carriers have left the 

market. Those who are actively selling a product today are not interested in raising rates on their consumers. 

The CHAIRMAN. Ms. Burns. 

Ms. BURNS. I wanted to speak to the issue of the Partnership for 

a moment, because we had our experience with that program in 

California early on, as one of the four original States, and we saw 

a lot of marketing issues around that product until we imposed 

some pretty serious training requirements. 

The NAIC model training requirements are half of what we require in California. We require an 8-hour training on long-term 

care first, and another 8 hours for Partnership, because we think 

that the combination of a private commercial product with a State’s 

public benefits program is a pretty serious issue, and needs to be 

carefully explained to consumers. The documents that agents use 

need to be drafted by the States’ Medicaid program and not documents that agents and companies design themselves. 

That is one of my concerns about the expansion of the Partnership Program across the States. There’s not a lot of consistency between the States about how information about the State Medicaid 

Program is being handled. I think that promises are being made 

in the Partnership States that are never going to be kept, because 

the agents themselves don’t understand the integration between a 

commercial product and the State Medicaid program. They don’t 

understand, how those programs work, so they’re not able to explain them well to the people that they’re selling insurance to. 

Another issue is people who live in an area that borders another 

State. Agents may be selling in both States with a Medicaid program that is different in each States. As you know, Medicaid is not 

consistent across the country, it’s different in every single State. 

Our concern is how that’s being explained to consumers and what 

they will know about how Medicaid works in their own State, and 

what they will know if they move to another State, where Medicaid 

may be different. 

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Having asset protection through a Partnership Program does not 

mean that you will not have to meet the eligibility requirements 

in the State that you live in when you apply for Medicaid. 

Many people are misled about how the eligibility for a State 

Medicaid program interacts with asset protection. 

The CHAIRMAN. Yes, anybody else on that issue? 

Yes, Ms. Cutter? 

Ms. CUTTER. Yes, Senator. I would just like to reinforce a little 

bit of what Bonnie had said about training. I think you’ll find that 

in the four original Partnership States, we have been extremely serious in terms of agent training. We have, first of all, you have to 

go to 40 hours of classroom training in Indiana in order to get an 

insurance license, at all, to sell accident and health products. 

In addition to that, we have an 8-hour requirement for long-term 

care, an additional seven hours for Partnership, specifically. Every 

two years, that individual has to have five hours for Partnership 

long-term care, specifically. We don’t authorize agents out of State 

to sell Partnership products to anybody in Indiana. You have to 

live in Indiana and come to Indiana and be a resident of Indiana 

to sell Partnership products in Indiana. 

I would assert that our agent training in that regard, and the 

communication that those agents take very seriously with their 

consumers—if the DRA, Deficit Reduction Act—which is expanding 

the Partnership products in the other States. 

As long as they maintain similar standards, I think, to the original four states, I think those communication issues—to Bonnie’s 

point—you know, when there some disclosure processes that are 

standardized, would be helpful. 

We do not allow any agent to deliver any long-term care advertising material that we haven’t approved at our Department of Insurance. 

The CHAIRMAN. Another question for you, Ms. Burns. 

In your testimony you said that no specific roadmap exists to 

help patients and caregivers navigate the challenges of long-term 

care insurance. In your judgment, would a website that provided 

comprehensive information abut policies and their features be useful to consumers and organizations like yours? 

Ms. BURNS. I think such a website would, help people navigate 

the long-term care system in a State, as well as help them to sort 

out some of the differences between long-term care insurance products. 

The CHAIRMAN. OK. 

Any other comments on this subject? It’s been very illuminating 

hearing, you all have provided a lot of information. Mr. Stinson, go 

ahead? 

Mr. STINSON. Yes, Senator, just building on your ‘‘Compare’’ 

website, the idea in the bill, which I think is great. You know, 

Bonnie mentioned, some companies do it right, some companies 

may not. We wholeheartedly endorse transparency. I think putting 

information out there about claims-paying ability, and our claims 

history, and rate stability and those things, I think, is a good thing 

for consumers. I think it would give them an air of confidence, I 

think it would instill more of a practiced approach to thinking 

about senior planning, as opposed to just wading in, and having a 

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lot of the anecdotal information that you find in the press, and 

then scaring people away from even thinking about it. 

So, I think the suggestions in the bill, and the proposals, are 

very solid, in terms of having that transparency available for consumers. 

The CHAIRMAN. Yes, Dr. Rowland? 

Dr. ROWLAND. Senator, I would also say that I know Senator 

Wyden was very involved in helping to get the standards set for 

Medigap policies, and for the marketing of Medigap policies. I 

think one of the instructive ways one could look at this is to look 

at, the standardization of some of the choices one has around 

Medigap now, and the way in which that has worked to help consumers to make more informed choice based on things other than 

just price. Medigap regulation’s would be a good example to continue to look at, especially, in developing a website. 

The CHAIRMAN. Thank you, yes. I agree with that. 

Well, thank you all for being here today, you’d shed a lot of light 

on a very important topic, and thank you for your time in imparting your knowledge to us. 

Thank you so much. 

[Whereupon, at 3:12 p.m., the hearing was adjourned.] 

(99) 

A P P E N D I X 

SEAN DILWEG RESPONSES TO SENATOR MEL MARTINEZ QUESTIONS

Question 1. What percentage of seniors in your state would need to have longterm care insurance to make a substantial impact on state long-term care financing? 

Do you support increasing the number of seniors with long-term care insurance? If 

so, how do you propose increasing the number of seniors with long-term care insurance to reach that threshold? 

Answer. We could not find an analysis of the number of long-term care insurance 

policies that would be needed in Wisconsin in order to have a substantial impact 

on state long-term care financing. 

I am not opposed in an increasing number of long-term care insurance policyholders in Wisconsin so long as the policies are sold in a proper manner and are 

suitable, affordable and meet the needs of the individuals who purchased them. As 

I stated in my testimony, long-term care insurance should only be purchased as part 

of an overall financial plan where the person’s financial situation is thoroughly assessed and all options in funding a person’s long-term care needs are considered. 

Question 2. What does Wisconsin see as the primary barriers to seniors for purchasing long-term care insurance? 

Answer. The cost for long-term care insurance can be substantial, especially if it 

is purchased at older ages. 

Question 3. The Kaiser Family Foundation report on long-term care insurance 

found that premium cost is the biggest obstacle to purchasing long-term care insurance, how do you propose lowering the cost of premiums so that more people buy 

long-term care insurance? 

Answer. I do not see an insurance regulator’s role as lowering premium, if the 

premium accurately reflects the expected cost and especially if the lowered premium 

result in unsuitable sale and adverse solvency issues for the market. The premiums 

charged with any insurance product should reflect the risk that is being assumed 

by the insurer. The greater and higher cost of the risk, the greater the premium 

to the policyholders to spread that risk and cost. People who cannot afford to pay 

the cost of long-term care insurance premiums should not purchase the coverage in 

the first place. A properly rated long-term care insurance product has what I believe 

to be a built-in suitability standard; the cost of the premium. The problem comes 

when an under priced product is sold that needs a substantial rate increase after 

it is sold. There will likely be many people who bought the product at its initial 

price who can no longer afford the policy at its new price. The current NAIC model 

attempts to address this problem by requiring the insurance company’s actuary to 

certify that the rates have been developed so that they will not increase over the 

life of policy under moderately adverse conditions. 

Question 4. Has the state of Wisconsin adopted the National Association of Insurance Commissioners (NAIC) most recent model law and all updates? Are there any 

NAIC recommendations, provisions, updates, rules, models, or other language that 

the state of Wisconsin has declined or failed to adopt? If so, why? 

Answer. Yes. We have incorporated all of the NAIC’s long-term care insurance 

model provisions in our regulations. We have made a few changes to the NAIC provisions in our law that we believe have resulted in stronger consumer protections. 

Question 5. Is there empirical evidence to show that the NAIC long-term care insurance Model, which has been adopted by several states, has actually held longterm care insurance rates down or leveled them off? 

Answer. I am not aware of any such data or study. It is important to note that 

most of the premium rate increases we are experiencing today are from policies that 

were issued prior to any rate stability provisions in the NAIC model. 

Question 6. Does this Model allow states to continue with their own actuarial reviews using the current 60% loss ratio standard? 

100 

Answer. Since the rate stability provisions contained in the current model are 

only advisory, states are free to use any standard in performing their rate reviews. 

The NAIC model contemplates no loss ratio at the initial filing. However, if rates 

are increased and the increase is not an exceptional increase, then the premiums 

collected prior to the rate increase must meet a 58% loss ratio test and any premium collected under the increased rates must meet an 85% loss ratio test. 

Question 7. Does the NAIC know that each and every state currently conducts an 

actuarial review of all long-term care insurance rates before approval? 

Answer. I am not aware that the NAIC has information that indicates all states 

conduct actuarial reviews of all long-term insurance rates before approval. 

Question 8. Does this long-term care insurance Model regulation allow states to 

examine long-term care insurance rates for future assumptive driven actuarial data? 

Answer. I am not familiar with the term ‘‘future assumptive driven actuarial 

data.’’ In any event, the Model does not prohibit a state from reviewing any data 

in connection with a long-term care insurance rate filing. 

Question 9. If so, does the regulation allow states to disregard those assumptions? 

Answer. Not applicable. 

Question 10. How does the ‘‘exceptional’’ increase standard protect consumers 

from future rate increases? 

Answer. The theory behind the current premium rate stabilization standards contained in the NAIC model is putting the company on record through an actuarial 

certification that the premium rates were developed so that there would not be a 

need for a rate increase over the life of the policy under moderately adverse conditions. This certification process was designed so that long-term care insurers would 

properly price their products at their introduction. Unless the company can demonstrate that a rate increase is needed as result of exceptional circumstances, a 

state can take punitive action on that company for the rate increase filing as outlined in the model. 

Question 11. What changes need to be made to this long-term care insurance 

Model to better provide consumer protections for both policy contract requirements 

and rates? 

Answer. I think we need to closely monitor the effect of the current rate stabilization provisions on rate filings. If we get a high number of rate filings under these 

provisions, they will need to be modified in order to achieve the stability in longterm care premium costs that we all want to see. We also need to determine whether minimum, best practice standards need to be developed for claims handling. 

Long-term care insurers are becoming increasingly more active in developing, implementing and monitoring a plan of care for their policyholders on claim. Insurers assist their policyholders in finding long-term care services and making sure that their 

claims are being properly handled. This results in an inherent conflict between 

claim levels and profits. We need to monitor the evolution of these practices and 

be prepared to codify minimum standards in order to protect those claimants from 

unscrupulous claim handling activity. 

Question 12. How do you see the increased group market for long-term care insurance affecting consumers? 

Answer. The group long-term care insurance market segment is the fastest growing segment of the market. This is primarily in the employer group market where 

the employer offers long-term care insurance coverage to its employees, dependents 

and, in some cases, family members such as parents. In most of these circumstances, it is my understanding that the employer does not contribute to the 

premium for long-term care insurance, it merely provides a facility for employees 

to purchase the coverage. I see this positively. Employers will usually screen coverage they are making available to their employees quite closely to ensure that it 

is meaningful coverage from a reputable carrier. In addition, there may be a premium break in group policies on premise that administration costs are lower for the 

insurer, thus reducing the premium to the customer. 

Question 13. Over the next 20 years, the number of Americans over 65 years old 

with Alzheimer’s will increase by more than 50 percent. Because Alzheimer’s is one 

of the few diseases requiring 24 hour care, how do you see the increased prevalence 

of this disease affecting long-term care insurance companies? 

Answer. Long-term care insurance policies are currently prohibited from excluding 

Alzheimer’s disease from coverage. I assume that insurers have access to the same 

information we all do concerning the expected prevalence of the disease into the future and would include this as a factor in setting their premium rates. For those 

companies who fail to account for a factor such as this may run into financial trouble if they underestimated the cost in rate setting. Premium costs to policyholders 

could likely go up. 

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Question 14. How does the state of Wisconsin coordinate the state Medicaid office 

and state insurance commissioner’s office with the long-term care insurance company when a Partnership policyholder exhausts his policy’s benefits? 

Answer. We do not coordinate with the State Medicaid office when a Partnership 

policyholder exhausts his policy’s benefits. We have coordinated and will continue 

to coordinate with the State Medicaid office with respect to Partnership policy form 

approval and agent training standards and implementation. When a Partnership 

policyholder exhausts the benefits under the policy, the long-term care insurer is required to provide the policyholder with a statement indicating the amount of claim 

payments made under the policy as proof of asset protection when the person applies for Medicaid eligibility. That is a transaction between the person and the State 

Medicaid office. My office does not have a role in that transaction except if the consumer is having difficulty securing the statement from the insurer verifying the 

amount of claims paid under the policy. 

CAROL CUTTER RESPONSES TO SENATOR MEL MARTINEZ QUESTIONS

Question 1. Has the state of Indiana adopted the National Association of Insurance Commissioners (NAIC) most recent model law and any updates? Are there any 

NAIC recommendations, provisions, updates, rules, models, or other language that 

the state of Indiana has declined or failed to adopt? If so, why? 

Answer. Indiana has not adopted the most recent model law for LTC that was 

updated in 2006. Indiana’s primary concern with that model is the ‘rate stabilization 

requirement contained in that update. It is the considered opinion of our actuaries 

that the language in this model prohibits the Department from applying the same 

scrutiny and control over requested rate increases that we currently have. 

Question 2. Is there empirical evidence to show that the NAIC long-term care insurance Model, which has been adopted by several states, has actually held longterm care insurance rates down or leveled them off? 

Answer. Not that has been presented to our satisfaction. Actually we have comments from several other states’ actuaries questioning the effectiveness of the rate 

stabilization feature of the model that those states have adopted. 

Question 3. Does this Model allow states to continue with their own actuarial reviews using the current 60% loss ratio standard? 

Answer. There is a difference of opinion among the states who have adopted this 

model, on this issue. Some actuaries have said ‘no, the state cannot’, and other have 

said ‘we’re not sure, but we intend to continue with the 60% until advised to the 

contrary’. Indiana’s opinion is that we cannot until the loss ratio meets or exceeds 

the 70% ‘exceptional’ level as described in the model. 

Question 4 . Does the NAIC know that each and every state currently conducts 

an actuarial review of all long-term care insurance rates before approval? 

Answer. We don’t believe that the NAIC can answer with any certainty whether 

each and every state does conduct an actuarial review. Many states don’t require 

filing of rates and forms at all, so our conclusion is that there must be numerous 

states that don’t or can’t conduct an actuarial review. 

Question 5. Does this long-term care insurance Model regulation allow states to 

examine long-term care insurance rates for future assumptive driven actuarial data? 

Answer. Not in our opinion. From the language in the model, it appears that all 

the insurer must do, once reaching the 70% exceptional loss ratio, is to attest that 

they have met the requirements of the model and are applying rate increases as allowed under that provision. 

Question 6. If so, does the regulation allow states to disregard those assumptions? 

Answer. We cannot find any language allowing states to disregard those assumptions. 

Question 7. How does the ‘exceptional’ increase standard protect consumers from 

future rate increases? 

Answer. In our opinion it does not protect consumers from future rate increases. 

Question 8. What changes need to be made to this long-term care insurance Model 

to better provide consumer protections for both policy contract requirements and 

rates? 

Answer. For contract forms, some type of standardization might be acceptable. 

Tighter standards for rate increases based on non-assumptive actuarial presentations, with some at least annual percentage cap that the carrier could impose— 

say 40% as an example, in any one year. 

Question 9. What sort of federal requirements do you recommend to help state insurance commissioners negotiate the best rates for policyholders? 

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Answer. Since insurers predicate their rate structures on their own in-force blocks 

of business, the experience of those blocks as well as the market place for LTC in 

general, it would be difficult to suggest any federal laws or regulations that would 

not handcuff the insurers and ultimately eliminate the LTC market altogether. 

Question 10. What percentage of seniors in your state would need to have longterm care insurance to make a substantial impact on state long-term care financing? 

Do you support increasing the number of seniors with long-term care insurance? If 

so, how do you propose increasing the number of seniors with long-term care insurance to reach that threshold? 

Answer. Even 40% would make a difference of millions of dollars in protecting our 

citizens from self-imposed impoverishment and Medicaid funds that need to be 

available for the truly poor population of our state. We do support increasing the 

number of seniors with LTC protection and are preparing a massive awareness campaign that begins this fall, to initiate that awareness. 

Question 11. What does Wisconsin see as the primary barriers to seniors for purchasing long-term care insurance? 

Answer. Indiana can’t speak for Wisconsin. 

Question 12. The Kaiser Family Foundation report on long-term care insurance 

found that premium cost is the biggest obstacle to purchasing long-term care insurance, how do you propose lowering the cost of premiums so that more people buy 

long-term care insurance? 

Answer. Cost can be addressed through more flexible benefit designs, shorter benefit durations (one year versus lifetime), and other coverage-based improvements. 

Group plans will also be more affordable than individual plans. 

Question 13. How do you see the increased group market for long-term care insurance affecting consumers? 

Answer. The group market will help tremendously in improving LTC coverage, because it will be offered through the employer market and typically be sold on a 

‘guarantee issue’ basis rather than having to meet a variety of medical questions 

for approval. It also allows employees to cover parents and/or grandparents who are 

currently insured, all at group rates. 

Question 14. Over the next 20 years, the number of Americans over 65 years old 

with Alzheimer’s will increase by more than 50 percent. Because Alzheimer’s is one 

of the few diseases requiring 24 hour care, how do you see the increased prevalence 

of this disease affecting long-term care insurance companies? 

Answer. This is where the assisted-living and home care benefits can be most 

helpful. Most Alzheimer’s patients that I’ve been in personal contact with are mobile, able to bathe, toilet, and generally feed themselves with some reminders or assistance. This means total 24 hour facility care, especially with some of the pharmaceutical advances in treating this disease, will be less necessary. 

Question 15. How does the state of Indiana coordinate the state Medicaid office 

and state insurance commissioner’s office with the long-term care insurance company when a Partnership policyholder exhausts his policy’s benefits? 

Answer. Indiana’s Medicaid office has a designated recovery agent that works 

with our Partnership division even before the policy has completely exhausted, so 

that there is already a plan in place for the policyholder once exhaustion occurs. 

Question 16. Why should or shouldn’t Congress enact more federal requirements 

for the long-term care partnership program? 

Answer. The most likely are that Congress can affect in LTC policies that would 

be beneficial to potential purchasers, agents, and companies alike would be to 

‘standardize’ the benefit plans as has been done with Medicare Supplements. 

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