Social Security Getting Less Secure

start coming out of their paychecks? Will people be upset over it? How will the program take shape? ere are anywhere from seven to 17 other states that have initiatives to address long-term care. I’ve been around long enough to know that with every politician, the easiest way to kick the can down the road is to put together an initiative or a committee, but they never really see the light of day. People in the long-term care insurance industry are all excited about this.

California is studying this initiative. I don’t believe you’ll ever see another tax imposed in California. But Washington state is the one to watch in 2022. e other thing to watch is the federal government.

I always say long-term care is the problem. Long-term care insurance is only a very small solution and only one part of the potential solution to the problem. ere are a number of initiatives from the Biden administration and the infrastructure bill and all of these bills, where they’re throwing hundreds of billions of dollars against this problem. ey’re addressing Medicare and Medicaid. Ultimately, that’s the thing to watch.

Both in the short term and in the long term, I believe that while it’s nice to advocate for a private solution, for most people the public solution is going to address it.

One more thing is what I call shortterm care. ose products probably have the best potential to address consumer needs. Agents have clients who are too old or too unhealthy to get traditional coverage or who can’t afford the traditional solutions. ere are only one or two carriers offering these products. I keep hearing from time to time about others that are thinking about it. I’m not sure why others have not entered this marketplace. In my opinion, you will see some of those products that will supplement government programs and address the needs of people who want something but they just can’t afford anything more.

For long-term care, I won’t say that the years ahead are going to be rosy. But I’m certainly not predicting doom and gloom.

FELDMAN: For most people, will short-term care be where it’s at?

How Washington State Is Addressing The LTC Crisis

Starting on Jan. 1, 2022, all W-2 employees in Washington state will be assessed a 0.58% premium assessment based on their wages. The employer must collect this premium assessment through a payroll deduction and remit the proceeds into a state trust account that will be used in the future to pay for people who are in a health crisis and need long-term care. Self-employed and federal employees are exempt from the mandate.

The state WA Cares Fund is a trust account created to hold the funds. When an individual meets the thresholds and eligibility, the fund will pay out a maximum of $36,500 over two years and will be adjusted through the years to the consumer price index. The plan will require an inability to perform three out of 10 activities of daily living to qualify for the benefit payout as compared with two out of six required by normal qualified long-term care plans under Internal Revenue Code Section 7702b. But if the employee leaves the state, they will not receive any long-term care benefits from the state nor will the taxes taken from their income be returned.

The state has opened a window of time until Nov. 1, 2021, for anyone to opt out

of the state-mandated system by securing a privately owned plan or a group

plan through their employers. They have until December 2022 to provide proof of coverage.

From “Washington State LTC Law Provides Opportunity For Agents” by Val Mikesell, InsuranceNewsNet.com, June 28, 2021

SLOME: e long-term care insurance industry suffers from a lot of well-meaning effort. I’m a marketing person and, in hindsight, we created this situation. We — meaning the industry, the agents, the brokers, the whole environment of asking people, “Where’s your million dollars if you need care?” ey say, “Look at someone like Christopher Reeve, and you could need a lifetime’s worth of care.”

And indeed, you always could. But when you actually look at the data and how people are using these long-term care plans, most people use their coverage for a year, two years, three years.

For so long, so many of these studies positioned this product as nursing home insurance. It started as nursing home insurance and then changed to include home care. Now the vast majority of claims are for home care. But the mindset is so stuck on those products, that it’s hard for producers to change. It’s hard for consumers to change.

When year after year, companies come out with studies that tell people what nursing homes cost, it’s understandable why consumers associate long-term care insurance with nursing home coverage.

When carriers raise rates year after year, it’s understandable why consumers are upset.

FELDMAN: How does someone get started in the Medicare market?

SLOME: Your best bet is to partner with somebody who already is in the marketplace, who will guide you and say, “I will help you with X number of sales and work out some sort of financial arrangement.” It’s not that difficult, once you go through the training and the other things; you can really learn it. e FMOs do a really good job of training. I always tell agents and brokers, don’t expect that you’re going to wake up and start selling this product and make $100,000 in your first year. But if you really focus on it, you can do quite well. It’s an ideal business for people who are committed.

It is interesting and amazing to me how

few women agents there are in this market, especially because there are more women than men in the 65-and-older demographic. I think for women, the nice thing about being in the Medicare business is that you have far more flexibility. Some people just work around the open enrollment season, some work yearround. I’d say to women, I believe it’s a really good opportunity for you.

FELDMAN: In the Medicare supplement market, what kind of things are happening and what kind of changes can we expect?

SLOME: e changes in this market are seismically different from those in the long-term care insurance market. e Medicare market is exploding. at’s not surprising, when you have 62 million people who are on Medicare and 11,000 new people joining every day. I mean, think of a product for which you have 11,000 prospects daily, who basically have to make some sort of decision, and in a program that’s enormously confusing.

It’s exploding, and the explosion is only going to get bigger. You’re seeing some seismic changes that impact both distribution and consumer.

From the distribution side, you’re seeing a couple of major companies that have capital behind them and that are aggregating the industry. ey are buying every distributor — large and small — across the country. e question is, what will they do with them? In the short term, it makes a smart play and it could be business as usual.

In Medicare, nobody is going to survive if it’s business as usual. Because at the same time, while you have that distributor channel, you have these other channels, which is what I’ll call the direct to consumer. You know, if I watch afternoon television, I can’t miss all the commercials with Joe Namath or Jimmie Walker pitching Medicare Advantage plans. You can’t avoid seeing these ads, which are directly soliciting consumers with business. And, to a degree, I won’t say they’re unregulated, but they’re questionable. People are saying, “Gee, you know, when they’re running an ad saying you could be entitled to free dental care or free something else, it sounds so good.” So who wouldn’t check it out?

ey are generating such massive numbers, and converting them into sales, that it gives them an explosive competitive advantage against those distributors. e distributors are going to have to figure out what they are going to do to stay in business. So, like I said, the explosions are only going to get bigger.

I’m not a gambler. And I’m not a predictor. But I think the logical thing that we will see is the lowering of the Medicare age. I think it depends on whether the Democrats hold Congress in 2022, but I think the chances are very likely. I just saw another proposal to open Medicare to everyone on a voluntary basis. I don’t think this one will take hold.

None of this is new. When Sen. Ted Kennedy was alive, he proposed expanding Medicare down to those age 50.

I don’t think Congress will open Medicare to everybody, but I do think they will approve dropping the eligibility age by five years. Just think how many millions of Americans are between the ages of 60 and 65. When that works, and you have much more electoral support, it makes sense that five, 10 years from now you’ll see it optional for everyone.

Medicare will continue to explode. And there’s so much money in it. Today, there are venture capital companies that are looking at this market that will bring hundreds of millions of dollars into it. So Medicare is definitely the place to be.

FELDMAN: How do agents compete with these venture capitalists and direct writers that are well capitalized?

SLOME: ey compete in a couple of ways. e American Association for Medicare Supplement Insurance has the only national directory where consumers can find local agents. Agents list themselves; they pay us a nominal fee. We don’t have a membership, but they pay a fee.

Consumers definitely find Medicare extremely confusing, and a significant number of them make mistakes. Some mistakes are changeable, some mistakes are irreversible. We created the directory because we were being inundated by consumers saying, “I want to talk to somebody locally. I don’t want to call a call center.”

Medicare is very local. e plans that you’re offered basically come down to your locality, often to your ZIP code.

How do brokers and agents compete? e first thing is they have to go up against those call centers. e agents’ competitive advantage will be saying to consumers, “Talk to all the call centers you want. But let me compare and tell you what’s going on locally.”

FELDMAN: What are some keys to being successful in these markets?

SLOME: I think the key for an agent or broker to be successful is they must do something they have not done in the past. You could say, “As long as I’m getting leads, as long as I’m making sales, I’m going to be successful and profitable today.” I don’t think that’s the case anymore because change is coming so rapidly.

You must think like a businessperson in a couple of specific areas. One, you had better be focused on technology. Not just the technology that you’re getting today, but learning about where the people who are giving you that technology are taking it down the road in the next three, four years. Because change is happening so fast. It took Amazon 20 years to go from selling books to where they are today, doing more sales than Walmart. But it’s not going to take another 20 years for whatever the next change is. And it’s not going to take 20 years for the changes in insurance.

You also must understand that it is all about marketing. e companies that are advertising on television, there will be only so many of them that survive. But clearly, they have mega-millions of dollars behind them, and the average agent does not.

So, to be successful, the average agent will need to be strategic about how they market themselves, how they build their brand. ey have to be really committed to doing that. Otherwise, you’ll wake up in three years and find you need to change what you’re doing. at’s what’s going to differentiate those who are going to be here in three years from those who will not.

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