When Will The California Partnership For Long-Term Care Change?
The California Partnership for Long-Term Care appears about to die, but change is on the way. The question is, when? It’s no secret that the Partnership has had a huge decrease in the number of policies placed, actually a whopping 95 % decrease from its peak. The Partnership statistics for the last fiscal year available, the four quarters ending in the second quarter of 2014, show that a mere 614 policies were placed.
Until now, the Partnership has mandated a 5 % compound inflation rider for those under age 70 with a current daily minimum of $ 180/day. This has made its policies unaffordable for those it is trying to help, people with moderate income and assets. This will be even truer in the light of Genworth’s rate refresh effective September 14th, which makes their 5 % compound inflation structure unsaleable to virtually anyone because it is such a bad value for the prospective buyer.
What is not widely known is that Raul Moreno, the Partnership’s Research Director, has proposed four new options, all with a choice of a 3 % compound inflation in the structure, as follows:
- Age based inflation beginning at 5 % compound and reducing as one ages to 3 % compound by age 70;
- A choice of 3 %, 4 % or 5 % compound inflation at any age;
- A hybrid-linked life insurance policy with a choice or 3 % or 5 % compound inflation;
- A reduced daily minimum of 50 % of the daily private pay rate, currently $ 260, with a choice of 3 % or 5 % compound inflation but without covering nursing facilities.
I believe that Department of Health Care Services approval of these proposals would be a very important first step towards reviving the Partnership, and strongly support them. Far more needs to be done, however, including bringing more carriers into the Partnership and increasing educational outreach to California’s citizens. I believe that Raul’s proposals will be adopted, but DHCS is a huge bureaucracy, and lord knows how long the approval and then the implementation process is going to take…it could easily take several years.
I have spoken and met with Raul and with Brenda Bufford, the Partnership Director. I also requested and finally obtained a meeting with their superiors in Sacramento, Joseph Billingsley, Rebecca Schupp, and Hannah Katch. They listened to me very briefly, but have since been unwilling to engage in further conversations. My next step is to engage with key legislators in order to goad the DHCS into action.
Almost every other state has adopted the flexibility of the Deficit Reduction Act, which permits most any type of inflation clause in a Partnership product. The state of Minnesota is about to approve a 1 % compound inflation rate, as my friend Debra Newman has successfully argued that home health care is inflating at only 1 %. Even now, 78 % of policies sold in Minnesota are Partnership policies; about 25 % in the other three original Partnership states, but less than 5 % in California.
What’s at stake? Hundreds of millions of dollars of Medi-Cal expense over the next twenty-five years, maybe even billions, if DHCS fail to install a viable long term care insurance program.
I would welcome any of you California agents who want to join me in an effort to give Californians a plan that would help them and also help the State. Please give me a call, and together, maybe we can make things happen. Together, we can help revive the California Partnership for Long Term Care.
Louis H. Brownstone is the Chairman of Northstar Network Insurance Agency, Inc. and is a certified Long Term Care specialist. Louis is recognized as an industry leader, with articles appearing frequently in California Broker Magazine and other industry publications and events.