It is a tough time to try to sell long-term care insurance. The private market was stunned on Nov. 11 when MetLife, one of the nation's biggest carriers with insurance on 600,000 lives, announced it would stop selling new policies. At the same time, surveys by two of the nation's most respected long-term care researchers suggest why it will continue to be very difficult both for private companies to sell coverage and for the federal government to succeed in its new national long-term care insurance program--the CLASS Act.
CLASS is the national, voluntary, government-sponsored long-term care insurance program that was passed as part of health reform. It would provide people who need personal assistance with an average minimum daily cash benefit of $50 for life.
At a conference on Tuesday, Josh Weiner of the research firm RTI International reported that a new survey of potential consumers showed very little interest in a CLASS-like product. The survey, taken in Hawaii last summer, found that 60 percent of respondents said they favored the public insurance program. But only one-fifth thought they'd buy coverage. A quarter said they would not, and more than half didn't know--not surprising for a product that was so new and unfamiliar.
But Josh also asked how much people were willing to pay for coverage. And those responses were far more ominous for the future of the program. Twenty-three percent said they would not enroll. Nearly 60 percent said they'd pay no more than $40 a month, and 17 percent said they'd pay no more than $80. Only 1.5 percent said they'd pay between $80 and $120, and the same number would be willing to spend more than $120.
This is very bad news since most independent analysts figure CLASS premiums will average at least $120-a-month. It does not mean that only 1.5 percent of potential buyers will purchase, but it shows what a tough selling job the government will have to convince people to buy--a marketing campaign that private insurance has so far failed to pull off for its own long-term care products.
Btw, Josh also asked what people thought of mandating private long-term care insurance--an idea I strongly support. One quarter agreed, 20 percent didn't know, and almost 60 percent opposed the idea. Honestly, I thought it would be worse.
The second survey was done by Marc Cohen of the consulting firm Lifeplans on behalf of the insurance industry. This national survey asked about long-term care insurance in general, not just CLASS
While Marc found that price matters, he also learned that attitudes may be just as important. He concluded that buyers shared several key attributes that non-buyers did not. They were more likely to believe they'd need care at some point in their lives, had a much better idea what it would cost, realized they or their family would have to pay these costs, and were "planners" who felt the need to prepare for future care needs. His conclusion: People are willing to buy, but only if they perceive value.
His survey then asked working people over 30 how much they'd be willing to pay for CLASS insurance. And Marc's results were very similar to Josh's--only about 4 percent were willing to pay $120 or more per month. An additional 3.4 percent said they'd buy if the premiums were between $100 and $119. Marc figures that only about 2 percent of working people share all those personal attributes he feels make a likely buyer and would be willing to pay more than $100-a-month for insurance.
CLASS may yet succeed. I hope it does. But it will be a very hard sell.