Drinker Biddle is pleased to present you with this recap—or “a slice” of the 2019 ILTCI Conference, Chicago, Illinois.
Year after year, the ILTCI Conference is jam-packed with opportunities to reconnect with and learn from our industry peers and friends. In fact, there is so much happening that it is nearly impossible to catch even a fraction of all of the valuable presentations and panel discussions throughout the conference. The long-term care industry is booming with new ideas, innovations, strategies, and tactics. The Conference affords attendees with the opportunity to explore the legal, actuarial, product-development, claims, underwriting, marketing, financing, regulatory, and other hot-off-the-press topics—but not all at once. For that reason, our attorneys have selected some of the sessions that we believe are extremely valuable for the industry as a whole. To the extent that you were not able to attend these sessions, we have provided highlights on what we learned and on why, exactly, they are so valuable to the future of long-term care. As always, if you would like to know more, please reach out to us.
Capital Markets and Risk Transfer Perspective on LTC
This session focused on the valuation of blocks of business from asset management, rating agency, and risk transfer points of view. From an asset management perspective, the primary factors to be considered are discounted cash flows and ROE. Other concerns are handling the public perception that long-term care blocks do not have equity backing and thus require cash to back the risk, as well as the need for a negative adjustment for younger blocks that will require more cash up-front. A Moody’s representative specifically addressed how rating agencies focus more heavily on attributes of the carrier itself, including distribution channels, investment diversification, equity and assets, profitability, and liquidity. With respect to long-term care-specific valuation, rating agencies compare long-term care to other business sectors, particularly when it comes to capital adequacy and profitability of the products. Finally, the panel discussed the evaluation process that goes into the consideration of a risk transfer on a closed block of business. The deals typically take a two-phase approach, by first considering information currently in existence and within the carrier’s possession, then moving toward a more nuanced due diligence process. During the second phase, factors such as historical and current pricing, interest rate and lapse assumptions underlying the product’s pricing, and overall value of the transaction are taken into consideration.
To TQ or Not TQ? That is the Question
Kicking off the Claims and Underwriting track was this hands-on, real-world application of Tax Qualified policy language to three classic examples that claims professionals regularly face. Three claims “experts”—Gina Besz of Penn Treaty, Alison Brown of Bankers Life, and Paula Johnson of LTCG, together with Sandy Jones, counsel at Drinker Biddle—focused on the potential pitfalls, risks, and dangers with administering TQ policies in conjunction with modern-day claims. The aim of the presenters was to hone in on some of the more difficult language that is universal to TQ policies and to show how that language could impact policyholders’ claims in real-life settings. Specifically, four common language issues were identified: (i) what does “substantial” mean?; (ii) what does “severe” mean?; (iii) how do we distinguish and reconcile “require,” “receive,” and “benefit from”?; and (iv) how to interpret retrospective versus prospective claims determinations. In answering these difficult questions, the panel spoke about take-away points and best practices. Some of these included (i) thorough investigations and follow-up questions to obtain all of the information needed to administer a claim; (ii) examining what is “normal” for both the insured and in our modern society (e.g., is it “normal” to bathe with a wet wipe?; is it “normal” to wear elastic-waist pants in public settings every day?); (iii) thinking outside the box and how an adverse claims determination might be twisted by a creative plaintiff’s lawyer; (iv) recognizing that not all cognitive impairments are the same, and that multiple words like “mild,” “moderate,” or “severe” might mean different things to different doctors and care providers; and (v) how undefined terms, such as “substantial” or “severe” need to be applied to the individual facts and circumstances surrounding administration of a claim for benefits, and not in a vacuum or by “dictionary” definitions alone. In sum, thinking like a plaintiff’s lawyer and viewing TQ claims in broad strokes will assist claims examiners and reviewers in administering difficult claims in our modern world.
Long Term Care Market Conduct Exams
This panel, featuring Allison Kusel of Genworth, Michele Jordan of John Hancock, and Stephanie Duchene of Mayer Brown gave a detailed description of best practices when dealing with Market Conduct Examinations by regulators. The panel discussed initial intake procedures and recommended proactive outreach to regulators to ensure that both sides have a common understanding of the scope of the examination and the points on which the regulators might want to focus. Panelists recommended identifying key resources for the regulators as the examination progresses and working to answer the questions posed by the regulators thoroughly and directly during the examination. The panel also recommended maintaining awareness throughout the examination to protect against an overreaching regulator and considering creative ways to memorialize the findings of the examination as it reaches its conclusion and to minimize future litigation risk. Finally, the panel discussed tips and tactics for handling enforcement actions, fines, and adverse rulings. At the end of the session, there was a helpful discussion of current trends in the world of market conduct examinations, including the use of contract examiners, multistate exams, the increased number of exams that are focused on long-term care insurance, examiners with limited long-term care insurance knowledge and expertise, and the increasingly limited resources available to Departments of Insurance and other regulatory agencies to conduct market conduct examinations.
Advanced Analytics in LTC: Mission Impossible?
This breakout session featured a slide presentation and discussion led by panelists John Kiley, Data Analytics Senior Consultant at CNA; Philip Sabo, VP of Data & Analytics at New York Life; and Julie Slezak, EVP of Clinical Analytics & Client Services at GNS Healthcare. Mr. Kiley provided an overview of four potential applications for the use of advanced analytics in connection with an long-term care insurance block: (1) granular analysis of block characteristics; (2) the use of analytics to perform risk segmentation; (3) identifying fraud, waste, and abuse; and (4) identifying and supporting individuals who could potentially benefit from preventive care. Mr. Sabo presented the results from a case study that New York Life had recently conducted in which NYL used data and analytics to forecast sales results, reduce sales turnaround times, and modernize agent tools. Ms. Slezak described a case study of “solving the matching problem,” in which big data and analytics were employed to better understand when one or more conditions become serious enough that general health and functioning decline, and treatments begin to lose their impact. The program was well attended, mostly by actuaries. The sometimes complex and difficult legal and regulatory issues that can arise when insurers implement big data and analytics programs were not addressed.
Automation Leading Straight Through Claims Processing
This session addressed improvements and issues with automating claims processing. It was led by panelists Peter Burke from John Hancock, Adam Warner from New York Life, Rob Frederick from LTCG, and Chad Bellin of LTCG. Before addressing some of the attempts to automate long-term care insurance block claims, the presenters noted that long-term care insurance block is behind most other insurance in automated claims processing. The presenters noted several reasons for this lag; most notably, with so many closed blocks of policies, carriers have been reluctant to invest in administration. With respect to some of the advancements that were discussed, John Hancock has created an online portal for policyholders to engage with the company and to help administer claims. This portal allows John Hancock to communicate with policyholders preclaim and to handle claim paperwork online and allows third parties (e.g., family members) to be granted access to the portal. New York Life is evaluating ways to electronically process benefit eligibility; exploring different ways of measuring ADL dependence and cognitive impairment; and working on ways to verify that covered care is being provided in the home. The presenters also discussed some of the challenges with moving to automated processing. For example, even when the company or its TPA has the ability to electronically process certain claim paperwork, establishing synergy with home health agencies and other larger providers can be difficult because these entities are more likely to have their own systems for generating invoices. In conclusion, all of the presenters recognized that there are challenges to moving toward electronic claims processing, but each presenter and his affiliated company are collecting a tremendous amount of data to help identify ways to move forward and to become more efficient.
Medicare Advantage Plans Expansion into LTSS: What’s It All About?
The session addressed new federal guidelines that apply to Medicare Advantage plans and that allow such plans to offer expanded supplemental benefits (e.g., adult day care, in-home support services, support for caregivers, home-delivered meals, and home modification) to members with chronic conditions. Specifically, the presenters discussed industry uncertainty regarding how and when the expanded supplemental benefits will be provided, and whether there are opportunities for long-term care insurers to develop new products that account for the ability of insureds to obtain long-term care services through Medicare Advantage plans. Because the federal guidelines at issue were only recently implemented, much of the discussion was hypothetical. The general consensus was that, given the uncertainties surrounding the new guidelines and Medicare as a whole, long-term care insurers are best left to look at the new guidelines and the benefits that may be provided under them as a potential means of reducing insureds’ costs of coverage through the coordination of care with Medicare Advantage plans.
2019 Legislative Trends Leading to Litigation
This breakout session featured a slide presentation and discussion led by moderator Nolan Tully, partner at Drinker Biddle, and panelists Jane Brue, Vice President of Compliance at LTCG, and Steven Brogan, associate at Drinker Biddle. Ms. Brue opened with a discussion of the key factors driving the cost of compliance, the value proposition for investing in compliance resources, and the importance and advantages of creating collaborative partnerships across an organization. Ms. Brue continued with a discussion of trends in market conduct examination topics, among other discrete compliance issues. Mr. Brogan discussed legislative and regulatory trends surrounding lapse and reinstatement, e-commerce, and data privacy and security, with a particular focus on the California Consumer Privacy Act of 2018 (including pending amendments to clarify the scope of the landmark privacy law and forthcoming rules from the California AG’s office).
Ask the Regulators (Regulator Roundtable)
The ACLI’s Chuck Piacentini moderated a Q&A session with Pennsylvania Commissioner Jessica Altman, Nebraska Chief Actuary Rhonda Ahrens, Minnesota Chief Life Actuary Fred Andersen, and Connecticut Life and Health Division Director Paul Lombardo. It was an active discussion, much of which concerned rate and solvency issues. Ms. Ahrens relayed some negative experiences with companies approaching her state seeking disproportionate rate increases. She said that, when Nebraska is approached by an insurer proposing a rate increase, it wants to know that Nebraska consumers are not being overcharged to compensate for other states where rate increases have not been accepted or will not even be proposed. Mr. Lombardo discussed Connecticut’s unique rule that, in assessing whether a rate increase is justified, Connecticut regulators will look only to Connecticut experience. Mr. Anderson provided his view on companies that seek to separate failing blocks of business. He suggested that he is more likely to recommend approval of such a restructuring when the company as a whole is not well capitalized and thus is likely to fail unless the problematic block is segregated. When an otherwise healthy insurer could allocate resources to help a failing block of business, however, he thinks that the consumer would be better served if the company were not permitted to jettison the failing block.
State Initiatives for LTC Financing Reform
In the summer of 2019, the National Academy of Social Insurance will release the findings of its comprehensive study aimed at guiding state social insurance initiatives for long-term care finance reform. During the presentation, members of the research team previewed the findings of the study, which sought to provide a roadmap to state policymakers considering different formats that a social insurance program for long-term care could take. The study does not recommend one approach over another, but instead looks at the tradeoffs of three models: first dollar/front-end coverage, catastrophic coverage, and comprehensive coverage. The study includes consideration of financing sources, payment and delivery systems, implementation challenges, and actuarial analysis.
Surviving Pitfalls in Product Development
This session discussed various provisions of long-term care policies that have presented issues for long-term care providers and provided suggestions of how to avoid facing the same problems in the future.
First, the original intent of the In-Home Care Provider provision of policies was to offer coverage for professional care at home, which is customer centric. However, insurers often faced disputes regarding what it means to be a licensed or certified provider. The vagueness of the policy language raises issues such as whether a 20-hour course in caregiving constitutes a “certified caregiver” or whether nonhuman care such as a robot that provides care would meet policy requirements. The lessons learned from this provision is that claim examiner training is necessary and that insurers should consider formally addressing futuristic caregiver scenarios.
The original intent of the Alternative Plan of Care (APOC) provision was to allow contract flexibility to provide coverage as the care delivery system evolved. However, disputes over the meaning of what falls under alternative plan of care has created issues for long-term care providers. Therefore, the lesson learned from disputes over this provision is that it is important to use clear policy language that indicates what is or what may be covered, with an eye toward advances in healthcare delivery. Such language should also address robotics and should include what will not be covered by the provision. Further, when agreeing to an APOC, it is important to (1) get APOC agreements in writing, (2) be specific as to the scope of the coverage and the exclusions, (3) make agreements for a finite period of time, (4) be clear about the right of the company to revoke or not renew the APOC agreement, and (5) make sure that the agreement is signed by the insured and insurer.
The original intent of the Rights to Reduction in Benefits provision was to clarify that the customer always has a choice to reduce benefits without underwriting. However, the primary issue raised by this provision is that states are increasingly asking for elaborate benefit reductions and are asking for customers to retain current accrued benefits but reduce or eliminate future increases. Such approaches lead to pricing challenges. There are similarly significant administrative system concerns. The lesson learned from these challenges is that policy language should specify the right to benefit reduction. Rate increase notices should state that not all benefit reductions are actuarially equivalent. Insurers should consider filing more benefit options than the insurer initially markets.
Companies have not traditionally constructed policy language for the specific purpose of avoiding fraud. However, unscrupulous policyholders have found loopholes and other ways to make fraud harder to detect by insurers. The conduct of persons or entities other than policyholders has gone unchecked—i.e., providers, family members, doctors, and other record custodians. The lesson is that insurers need to be aware of multiple and diverse sources of fraud. Insurers should not assume that their elderly clients are honest. The remedy is to strengthen proofs of loss, include duty-of-cooperation provisions, seek recovery of overpayments, and provide benefits for services rendered to and actually paid by the insured.
Finally, the Restoration of Benefits provision of policies was originally intended to allow an insured to fully restore benefits for later use if he or she has an early claim event and experiences a full, treatment-free recovery. However, the lesson learned from use of this provision is that six months is not long enough. Many people find a way to get by with friends or family members for six months. Therefore, policy language should focus on the care that is required, not the care that is received, because the care that is received is easily manipulated. As a mitigation strategy, insurers should think about contacting the insured to discuss how the benefit period is defined and the restoration criteria.