Earlier this week, I participated in a panel with Connie Garner, the Senate staffer who was a key architect of the CLASS Act, the national long-term care insurance program that is included in the new health reform law. Garner challenged the audience, which included several private long-term care insurance company execs, to work with her to help turn CLASS into workable insurance.
Garner knows that the law, as passed, includes several flaws that may restrict the government’s ability to offer a successful insurance program. Many of these problems are caused by Congress’ effort to balance its desire to cover as many people as possible with a probable consequence of that effort: Wide-open enrollment may drive many already-disabled buyers into the program and force up premium prices, thus discouraging young and healthy buyers from participating.
Garner and the Obama Administration are working to try to repair these problems and she says she’d like the help of insurance companies, long-term care providers, and advocacy groups.
Private insurers were divided over CLASS during the congressional debate over the idea. Most large carriers, led by Genworth, opposed it. A few smaller companies backed it. Now, if the new insurance is going to succeed, private companies will have to cooperate in two ways.
First, they need to work in good faith with the White House to help it design a marketable product. Second, they have to be willing to sell private insurance that can supplement the government policies.
Why would private insurers help the government sell a product that competes with their own? Many won’t. But there are two reasons why some may. First, a broad government marketing campaign could increase public awareness of the need to plan for long-term care. Such a public campaign would generate interest in private as well as public insurance, while saving carriers millions of dollars in advertising costs. Second, a successful government program could jumpstart what has been a moribund private insurance market by creating demand for policies that wrap around CLASS insurance, much like Medigap health insurance supplements Medicare.
That will take cooperation between private carriers and government. I hope both parties can find a way to work together.
If insurance companies are happy only selling policies to 7% of American adults, then there’s no reason for them to cooperate. My sense, however, is that they’d like to sell into a much higher percentage. I for one, would buy a supplemental private insurance plan to wrap around the CLASS Act. Otherwise, I’ll simply self-insure and roll the dice. I don’t have faith that a private LTC policy will be there when I get into my 80s (I’m 40 now). Based on polling I’ve seen, many Americans feel the same way in not trusting private insurance to be there. Time to move beyond this and achieve a win-win. I think we’ll get there because to fall short would fail America.
I think the CLASS program will increase sales of private long-term care insurance, not as a supplement to CLASS, but as medically-underwritten “instead of”. People that can’t get private coverage due to health conditions will gravitate towards the CLASS plan.
However, if the CLASS plan does become either heavily subsidized or mandatory, a supplement market will form similar to medicare supplements.
Hopefully the end result is that more people will be covered with either type of program.