THE SACRAMENTO LTCI PROPOSAL
It’s no secret that the long term care insurance industry in California has had its ups and downs. Led by Bonnie Burns, many laws were passed in the early 1990s that shaped the design of long term care insurance (LTCI) policies in California. These laws were designed to protect an aging consumer against ethical malpractice by insurance carriers, brokers and agents. California was a leader in long term care insurance and one of the four original Partnership states. Its statutes were widely copied elsewhere, and are still very relevant today.
However, in addition to their problems elsewhere, the insurance carriers have had a hard time being successful here, both in terms of administration and profitability. This has resulted in a limitation of products available for sale in our State, which has depressed sales.
There are a number of reasons for this, but two stand out. First, our Department of Insurance is one of the most zealous in the country in scrutinizing filings. These filings must be in compliance with California law, which has its differences from the other states. The result is that whereas filings normally take three to five months to get approved in other states, they take two to three years to get approved in California. That’s way too long.
This has (1) discouraged carriers from filing policies in California at all, (2) forced carriers to suspend sales of their LTCI policies in California, sometimes for years, and (3) forced Californians to pay more than comparable policies in other states as the carriers try to recover the cost involved in the filing delays.
Second, the California Partnership for Long Term Care has failed to keep pace with the industry and is now essentially on life support, as its sales have plummeted. This is mainly because carrier rate increases have made the current Partnership minimum requirements unaffordable for its target, the middle class. The Partnership has lacked the budget it needs to be effective, and has not accepted new carriers. Three of the original seven carriers have ceased to sell California Partnership policies despite being active in the Partnerships of many other states.
Long term care costs will grow at its current rate from about one-ninth of the entire State budget to one-sixth. California cannot afford to absorb this cost and must seek to mitigate it now. Hundreds of millions of dollars of Medi-Cal costs would drain funds from a myriad other public needs…education, infrastructure, law enforcement, prisons, not to mention other health care needs…if long term care insurance does not become viable in California.
I have organized a series of meetings and conference calls with some twenty-two stakeholders to create a Proposal to clean up this mess and make long term care insurance viable once again in California. The reaction has been far greater than I had anticipated. It has been extraordinary that so many have lent their time and experience to this effort. This was not because I became frustrated and wanted change. It was because ALL were frustrated, saw the problems similarly, and wanted to fix them.
I’m continuing to engage with many of the stakeholders. I have also let some legislators know what I am doing. The Proposal is now in final draft form, but may well undergo significant change before it is finalized. I will continue to move forward, and hope that some positive changes will occur.
Louis Brownstone- Chairman