Session 13 PD, Consumer Attitudes about LTC: Findings from the SOA REX Pool Study

Presenters: Vincent L. Bodnar, ASA, MAAA

Maria Ferrante-SchepisJohn O’Leary

SOA Antitrust Disclaimer SOA Presentation Disclaimer

2017 SOA Health Meeting

Presenters: John O’Leary, Vince Bodnar, MariaFerrante‐SchepisTitle: Consumer Attitudes Toward Two Innovative Long‐termCare Concepts‐ A New SOA REX Pool Study

DATE: June 12 2017

Agenda• Background and overview: John O’Leary

• The SOA LTC Think Tank • Brainstorming and related activities• Review and update progress to date: Three tracks 

• Data Driven Decision Support• Service Evolution and Expansion:• Paying for Care 

• From Think Tank to Do Tank: Vince Bodnar• Roadmap for Change• Regulatory Changes• The REX Pool Project• Concepts Selected for Testing

• Details of the Research Design‐Maria Ferrante‐Schepis• The Maddock‐Douglas approach to consumer research• Qualitative  • Quantitative• Demand modeling• Timeline

• How do we plan to apply key learnings‐ Group

2

Background and Overview

3

BackgroundOn October 19 and 20, 2015, the Society of Actuaries’ Long Term Care Think Tank met in Rosemont, Illinois, for a collaborative workshop to:

• Review previous work and examine what we have learned

• Hypothesize and describe how consumers’ needs may be changing

• Brainstorm how solution offerings could evolve to meet these needs in innovative new ways

4

You can’t read the label when you’re…

sittinginside the jar.

5

Objectives – Expand the problem space

“Fair Game” for the workshop included ideas that would potentially impact the following areas:

• Helping people pay for their care differently• Making care more accessible to everyone• Helping reduce the costs of care• Mitigating the need for care in the first place

6

Process and output

Day 1:  Brainstorm and Categorize

• Split into groups• Think big and outside of the box• No such thing as a bad idea• Explain concepts to entire group• Output:  85 ideas• Each idea received votes from all attendees• Ideas with enough votes were grouped into 15 sets of concepts 

7

Process and output

Day 2:  Flesh Out Leading Concepts

• 15 concept sets were grouped into three platforms:

• A team was assigned to each platform to further discuss and flesh out its respective concepts

Data DrivenDecision Support

ServiceEvolution and

Expansion

PayingFor Care

8

Data Driven Decision Support

This category addresses how data is used to drive more evidence-based decision-making. Ideas in this category aim to educate caregivers and care recipients, keep them informed of best practices, guide them in making decisions, improve the coordination of care, and obtain longitudinal data required to improve pricing and recommendations.

5 Finalist Concepts:

Healthy Longevity App

CarePortal

OpenKimono

Level thePlaying Field

Quality CareTraining &

Certification Council

9

Healthy longevity app

Headline: Incenting behaviors for healthy longevity

Description (What it is):An app to encourage users to lead healthier, more engaged and fulfilled lives. Focus on emotional, psychological and social engagement factors. The app could act as coach/companion.

Concept Details (What it does/How it works): • Incentives (via points for merchandise or premium credits)• Brain fitness activities• Exercise (steps, weight control, etc.)• Volunteering• Hiking/biking• Taking a class (dance, cooking, academic, etc.)• Sharing your health records with LTC insurer (ties into the

idea of accessing LTC insured’s health records for analytics and measurement)

• Pets, gardening• Meditation• Sleep hours• Social networking• Differentiated from health care focus on conditions

leading to acute medical claims

Customer Insight: Seniors are more fearful of cognitive decline/Alzheimer’s than any other chronic disease including cancer. The assumption is that there are behaviors that would mitigate cognitive decline and that consumers and especially seniors are interested in doing anything they can to avoid or lessen the impact of this condition.

10

LOOKING AT THE PRESENT:• Claims and reserves uncertainty • Extensive price hikes means limited new sales potential• Raises serious questions about the existing model• Insured block:

o 7.2 million policies o Approaching $2 trillion value if all used... o More likely estimate is $800 billion (Cohen, State of the

Industry NAIC) o Little contact with insureds prior to claims

11

LOOKING TO THE FUTURE:

• 7 in 10 people over 65 will need care • 5 in 10 will need care that would trigger LTC

benefits• Average cost of care for those using it is about

$260 K • For women, over $300 K• Ratio of people of caregiving age about 7:1 in

2010 • Same ratio projected to be only 3:1 in 2050

12

LOOKING TO THE FUTURE• Smart homes, biometrics &

sensor technologies• “The Quantified Self”

movement • & health tracking• Emerging evidence-based behavioral protocols• New research suggesting

behavioral changes could slow progression of chronic conditions, even dementia

13

An emerging Long‐term care paradigm

Emerging evidenced-basedhealth behavioral protocols

Emerging technologies that can support home based care

DATA

DATA

DATA

14

Promising Data Driven Initiatives 

• New Technologies: 2 sessions at ILTC conference• Robotics • Stay at Home technologies i.e. Philips Lifeline, Banker’s Life

• New medical Protocols • Harvard Medical School 

• Rudolf Tanzi‐ Super Brain; Super Gene’s• Alvero Pasqal‐Leone‐ Ctr. for Non‐invasive brain stimulation

• Northshore University Health System, • Dr. Jim Maraganore, Center for Brain Health

15

Service Evolution and Expansion

Address where, how or when claims dollars can be spent and how this impacts access to care

Increase the number of caregivers in the system

More efficiently match available care and resources to care recipient needs

Improve access to quality care

Delay the need for care in the first place

5 Finalist Concepts:

Ideas in this category:

Uberfication

CaregivingCorps

CareExchange

The LTCSherpa

CareWatch

16

17

NEW FORMS OF CONNECTEDNESS

17

• UBERFICATION• UBERFICATION OF HOME HEALTH CARE CREATES NEW VALUE & LOWERS COSTS!

Customer Insight (What does it solve?): Technology can be used to drive transparent markets, lower costs and increase supply of careDescription (What it is): An Uber-like platform to increase care service capacity and lower care service prices

Key Assumption: There are enough transactional caregiving tasks to “uberfy”, and enough consumers will participate as both care providers and recipients

Concept Details (What it does/How it works): • Lowers barriers to becoming a care provider

(time, money), allowing for purpose-driven, convenient and entrepreneurial ways to earn

• Increases access to relevant, on-demand care• Market transparency drives fair unit costs• P2P trust encourages low-cost HHC settings • Strict credentialing criteria, low-cost certification

and user reputation scores

Uberfication

18

Status‐ Service Evolution

• Robert Hanes volunteered to drive the Service Evolution Platform  

• Work has begun researching and having discussions with providers and other groups who are concerned with reforming service delivery 

• Conversations to date have included home care agencies and other groups include the National Association of Area Agencies on Aging.

• These conversations are producing additional  organizations to expand outreach

19

Paying for Care

Ideas in this category: Address the ways long term care costs are funded

Help the industry/consumers find additional ways of financing long term care

Help the industry/consumers more effectively pool their resources

Make receiving financial reimbursement for LTC services less onerous

5 Finalist Concepts:

Flex 401(k) Family LTCAccount

Health & LTSS Combination

MedicareLTC Benefit

Health CareLook-A-Like

20

ANOTHER LOOK AT PAYING FOR CARE CONCEPTS

LTC Savings Plan

Non-LevelPremiums

Public Partnership

Simplicity/ Familiarity

Funding of Immediate

Needs

Analysis of the relevant “Paying For Care” ideas revealed 5 core themes:

These combine to create a new financing approach that creates opportunities for private insurance.

21

A NEW FINANCING APPROACH

Age Point of Need

Savings Fund

Insurance ElementPayout

When assembled together, the 5 core themes create a new view of financing LTSS. It has a basic structure that can take on many variants:

Three basic components:1. Savings Fund: Consumer equity in financing plan2. Insurance Element: Pooling of risk of needing LTSS3. Payout: Options to access funds, like pooling of risk of longevity of LTSS

22

LOOKING TO THE FUTURE:• Better boxing of risks being pooled:

o Each year’s LTSS insurance element is priced as experience emerges

o Longevity risk of each payout cohort is priced as it begins

o Interest is credited according to experienceo No active life mortality or lapse risk

A NEW FINANCING APPROACH: CARRIER BENEFITS

23

LOOKING TO THE FUTURE:• Savings fund is owned by consumer• Change coverage levels midstream w/out losing investment• Contribute what you can, when you can• Options for how to receive the payout • More seamless claims and reimbursement process• Everyone can participate in Savings Fund/Payout pooling• Simple and familiar features

A NEW FINANCING APPROACH: CONSUMER BENEFITS

24

From Think Tank to Do Tank

25

TABLE OF CONTENTSA PRACTICAL ROADMAP FOR CHANGE

Each Working Group will work on three concurrent, interactive work-streams:1. Build and Launch Solutions 2. Collaborate 3. Seek Funding

A. Clarify. Continue to add details to key concepts. Consider additional concepts.

B. Validate. Conduct market landscape scanning, consumer testing and initial pricing.

C. Regulatory and public policy analyses. Identify changes required to enable key concepts.

D. Commercial development. Interested businesses leverage these efforts to develop and launch products.

Outreach to and collaboration with stake holders:• All three platform groups• Insurers• Providers• Consumer groups• Regulatory community• Public policymakers• Distribution channelsSome concepts already exist. Exposure to all stakeholders may have immediate impacts.

The Think Tank is a volunteer effort. The Working Groups will push their tasks as far and as fast as is practical.

Heavy lifting and timely progress will require funding and resources.

26

Define the problem we are trying to solve.  Develop goals for the subgroup.

COLLECTIDEAS

CONVERGEIDEAS

Solicit ideas and proposals developed by others.  Leverage work already done.

Review and categorize ideas collected. Converge key features into core solutions.

EXECUTION

Execute the  action plan that emerges from the vision.

CREATEA VISION

Create a vision for enabling core solutions.  Identify steps required to enable them.

START

END

MISSIONSTATEMENT

NAIC LTC INNOVATION SUBGROUPEXECUTION ROADMAP

27

LONG TERM CARE IS A WICKED PROBLEM*

*A wicked problem is a problem that is difficult orimpossible to solve because of incomplete, contradictory,and changing requirements that are often difficult torecognize. The use of the term "wicked" here has come todenote resistance to resolution, rather than evil. Moreover,because of complex interdependencies, the effort to solveone aspect of a wicked problem may reveal or create otherproblems”. – Source: Wikipedia

Takeaway:  There is no one solution, we must identify the issues we can impact.

LTC insurance, as we know it, has not completely solved the problem.

MISSIONSTATEMENT

28

PROPOSALS HAVE MANY COMMON FEATURES

Takeaway:  The most frequent common features give input for a new vision. 

The Subgroup received solution concepts from 18 proponents over an 8 month period.

Common features:- Tax incentives (11)- Non-level premiums (8)- Cash values / savings (6)- Simplicity (5)- Transitional benefits (4)- Modular coverage (4)- Worksite distribution (4)

Common messages:- Viable alternative

products already exist- Distribution reform- Public policy reform- Consumer awareness

COLLECTIDEAS

CONVERGEIDEAS

29

WICKED PROBLEMS REQUIRE ISOLATIONOF UNDERLYING ISSUES

Lessons Learned:- Bankrupt Pension Plans- Pensioners Receiving Reduced Benefits- Corporations Eliminating Pension Plans- Lack of Personal Savings - Lack of Financial Literacy

Takeaway:  Identify the corollaries in Long Term Care and create new offerings.

The Critical Issue Is Very Similar to That of Retirement Financing: Unsustainable DB Pension PlansDefined Benefit Pension Plan Does It All Savings Mentality

TO

CREATEA VISION

30

LONG TERM CARE REQUIRESA SIMILAR APPROACH

Lessons Learned In Insurance:- Traditional long term care insurance tried to do too

much, resulting in “toxic” blocks of business.- New products have become unaffordable.- Consumer behavior changes when there is more

skin in the game (e.g. major medical and high deductible plans).

Takeaway:  We can use our power to impact consumer, agent and carrier behavior.

We Need to Shift From An “Insurance Does It All” to a Savings Mentality

Insurance Does It All Savings Mentality

TO

“The only source of knowledge is experience” – Albert Einstein

CREATEA VISION

ABILITY TO WORK

THE SYSTEM

31

THE ASK

Three work streams can start on each of the immediate change efforts and possibly yield results in the short term.Longer term efforts can get started in parallel or can wait until traction is made on the immediate efforts.

Takeaway:  We will stimulate more activity and innovation, and also unearth the next set of challenges.

Support and help to make change in the short and longer term in key areas.

Change:  New section that enables and pertains only to Savings Mentality products.  Other changes to better accommodate hybrid solutions.

Change: Advocate for federal tax incentives for long term care to encourage Savings Mentality and broaden participation.

Change: Help increase the awareness of existing products that support Savings Mentality  (Hybrids,  SPIAs, Life Settlements)

CREATEA VISION

32

TABLE OF CONTENTSA PRACTICAL ROADMAP FOR CHANGE

Each Working Group will work on three concurrent, interactive work-streams:1. Build and Launch Solutions 2. Collaborate 3. Seek Funding

A. Clarify. Continue to add details to key concepts. Consider additional concepts.

B. Validate. Conduct market landscape scanning, consumer testing and initial pricing.

C. Regulatory and public policy analyses. Identify changes required to enable key concepts.

D. Commercial development. Interested businesses leverage these efforts to develop and launch products.

Outreach to and collaboration with stake holders:• All three platform groups• Insurers• Providers• Consumer groups• Regulatory community• Public policymakers• Distribution channelsSome concepts already exist. Exposure to all stakeholders may have immediate impacts.

The Think Tank is a volunteer effort. The Working Groups will push their tasks as far and as fast as is practical.

Heavy lifting and timely progress will require funding and resources.

33

Introducing Retirement Plus™

Long-term care is something you might need in the future, but paying out of your pocket for long-term care insurance right now doesn't seem like a smart use of your money. Wouldn’t it be nice if there was a tax-beneficial way you could put money aside for long-term care should you need it.

Introducing Retirement Plus — A flexible, tax-beneficial type of retirement vehicle with expanded limits on how much money you can contribute, fewer limits on how you use the money and a long-term care insurance option built right in. This allows you to simultaneously save tax-deferred money for retirement and tax-advantaged money for long-term care. In the event you need long-term care, the insurance component kicks in and pays a portion of your long-term care expenses.

Enroll and make your retirement selections just like you would for a typical retirement account by indicating how much money/what percentage of your income you would like to set aside until retirement. Employers can also provide matching. Once you reach retirement age, the funds can be used for whatever you want (living expenses, a new home, vacations, etc.). This is tax-deferred money, meaning you pay taxes at the time you use the money.

In the event you need long-term care, your account funds can be used to cover those expenses. This is tax-advantaged money, meaning you can spend the money you put in your Retirement Plus account on long-term care without paying taxes on the money as you spend it. The insurance also kicks in at this point and pays a portion of your long term care bills.

Based on your selections, your Retirement Plus account will be funded automatically from either your paycheck or your bank account and a small monthly fee will be deducted to pay for the long-term care insurance coverage.

Retirement Pus – Retirement + Long Term Care

Tax-Beneficial Savings for Your Retirement and Long-Term Care

Once you retire you can use the funds however you want.

The insurance kicks in and pays a portion of the bills.

Retirement Plus is a new type of retirement savings vehicle with long-term care insurance built right in.

Enroll just like you would for a typical retirement account.

If you need long-term care, you can use your funds to pay the bills, tax-free.

You paya portion

RetirementPlus InsurancePays a portion

Retirement Plus

Introducing LifeStage Protection™

You know life insurance is important as it financially protects your family should something happen to you during your working years. But long-term care is something you may not envision needing until you get much older (if ever) so long-term care insurance doesn't seem like something you need to think about right now. But the reality is, in the future nearly half of all people aged 65 and older will need a significant amount of long-term care (significant to the point that it would trigger most long-term care insurance policies). While in many cases people will be able to receive the care they need in their home, this care will cost more than they might think and more than most people have panned for.

Introducing LifeStage Protection — An insurance policy that starts with a life insurance benefit during your working years (up to age 65) and then switches to a long-term care benefit during your retirement (from age 65 on). This provides you and your family with the financial protection that you need when you need it most, all without you having to think about it.

To apply, contact your employer, go to your employee benefits website or if you are self-employed or your employer does not offer it go to www.lifestageprotection.com. Select one of three life insurance benefit levels ($100,000, $150,000 or $200,000) and apply for coverage. Once approved, you make your payments for this insurance like you would for a standard life insurance policy. When you reach age 65, continue to pay the same monthly amount, but the life insurance ends and the long-term care benefit begins. Then if you require long-term care (e.g., in home care, assisted living, etc.) your expenses will be reimbursed up to the amount of the benefit level you selected (e.g. $150,000).

Prices vary depending on the benefit level chosen, age and gender. Prices for a 45 year old are roughly $60 per month for $100,000 of coverage. This is approximately 30% less expensive than if you were to purchase term life insurance and long term care insurance separately.

LifeStage Protection – Transforming Insurance

Financial Protection That You Need When You Need It Most

Select one of three life insurance benefit levels and apply for coverage.

If you require long-term care after age 65, that is covered until your benefit level

runs out.

LifeStage Protection is an insurance policy that starts with a life insurance benefit and then switches to a long-term care

benefit providing the financial protection that you need when you need it most.

To apply go through your employer or go to www.lifestageprotection.com.

Once approved, you make your payments for this insurance like you would for a standard

life insurance policy.

Details of Research Design

36

Approach – three phases

• “Express” The Concepts • Trial Them With A Small Group, Refine (Qualitative)• Survey A Statistically Significant Sample (Quantitative)

37

ACTUARIAL MODELING & CONCEPT DEVELOPMENTPHASE 1

APPROACH:

1. Develop pricing feasibility models for two concepts.

2. Refine copy and visuals for two concepts. This is to get the concept in “testable” form for consumers to understand.

3. Multiple check-in points with SOA stakeholders to confirm direction and collaborate on refinements.

ACTIONS:

1. Actuarial Modeling2. Write concept grids3. Create black & white drafts4. Create color drafts

38

QUALITATIVE RESEARCHPHASE 2

APPROACH:

1. Four in-person focus group discussions to screen copy and visuals and refine language for two concepts

2. N = 20–28 total consumers (four groups, separating current and likely future decision-makers for LTC insurance and services)

3. Incorporation of pre-group “homework” exercises to understand relevant attitudes, behaviors and needs

4. Refinement of concepts prior based on consumer feedback

ACTIONS:

1. Recruit participants2. Draft guide3. Conduct groups4. Analyze data and summarize findings5. Refinement of concepts prior to

quantitative study

39

QUANTITATIVE RESEARCHPHASE 3

APPROACH:

1. Two refined concepts tested2. In-depth quantitative research will be

conducted online and be 20 minutes in length

3. N = 600 consumers who are financial decision-makers for their households, mix of demographics, mix of current and likely future decision-makers for LTC insurance and services

ACTIONS:

1. Draft questionnaire2. Program survey3. Conduct online survey interviews4. Process and analyze data5. Build forecast model6. Develop and present report of findings

40

Evaluating a concept▪ When evaluating concepts, it is important to consider a number of diagnostic

measures beyond purchase intent (or trial).

▪ We examine each concept in terms of:

» Overall impression

» Filling of a need

» Believability

» Clarity

» Uniqueness

» Value

» Open-ended responses of likes and dislikes

41

Is there a difference?

42

Concept test purchase intent (adjusted trial)▪ Respondents were asked about their purchase/usage intent using an 11-point scale

in three separate ways

▪ Self-reported purchase intent was then adjusted to reflect real-world behavior —

based on more than 20 years of normative forecasting data

Certain (that is, 99 chances in 100)

Almost certain (90 chances in 100)

Very probable (80 chances in 100)

Probably (70 chances in 100)

Good possibility (60 chances in 100)

Fairly good possibility (50 chances in 100)

Fair possibility (40 chances in 100)

Some possibility (30 chances in 100)

Slight possibility (20 chances in 100)

Very slight possibility (10 chances in 100)

No chance (0 chances in 100)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%10%20%30%40%50%60%70%80%90%100%

ILLUSTRATIVE

43

Intent to buy (adjusted)

AMONG TOTAL RESPONDENTSConcept #1 Concept #2

Self-Reported Intent to Buy 39% 36%

Adjusted Intent to Buy 15% 14%

44

Total U.S. Households: 122,459,000(Census 2011)

Project Universe: 66,700,000

Market sizing (Illustrative starting point)

45

AMONG TOTAL RESPONDENTS Concept #1 Concept #2

Market sizing (potential users)

66,700,000 Households*

x Access 100% 89%*

x Year 1 Awareness .05% .05%

x Adjusted Usage 15% 14%

= Year 1 Estimated Prospect Users

x Year 2 Retention Rate 80% 80%

+ Year 2 New Prospects

= Year 2 Estimated Total Prospect Users

46

14.2

20.3

13.0

21.2

Year 1 Year 2

NUMBER OF USERS (THOUSANDS)

Cashback Select

Coverage Creator

Access 100% 100%

Awareness 0.05%, 5%* 0.1%, 10%*

Retention n/a 80%

Two year forecast (total projected users)

Concept 1

Concept 2

47

Key concept diagnostics

AMONG TOTAL RESPONDENTS Concept #1 Concept #2

% Top 2 Box % %

Intent to Use 15 20

Overall Impression 70 60

Fills a Need 42 34

Clarity 75 66

Believability 73 68

Uniqueness 50 53

Value 56 47

48

Key milestones, deliverables and timing

1. Actuarial Modeling (Complete)2. Concept Refinement for Qualitative Testing (Complete)3. Qualitative Testing (June 28, Schaumburg, IL)4. Concept Refinement Based on Findings (Mid July)5. Quantitative Testing (Early August – Mid September)6. Readout of Findings, Market Forecasts, Buyer Profiles, Federal

Tax Impacts, Demand Analysis (Late September/Early October)

49

49

How do we apply key learnings?

50

50