2001 Healthcare Conference Keeping Health on Track

1. abcd 2001 Healthcare Conference Keeping Health on Track 21-23 October 2001 Scarman House Long Term Care Monitoring

2. Experience Analysis in Long Term Care • Presented by Ian Sissons • Based on the work of Stephen Holland Long Term Care Monitoring

3. Experience Analysis in Long Term Care • Based on US experience • Longer experience • Greater depth of data • Lessons for the UK Long Term Care Monitoring

4. Extractedfromthepresentation: • An Introduction toLong Term Care Insurance in the USPolicy and Delivery Environment for Long Term Care in the US • Stephen K. Holland, M.D. • Senior Vice President & Medical Director • The Long Term Care Group, Inc. Long Term Care Monitoring

5. The Emerging Need forLong-Term Care Services & Insurance • Socioeconomic Trends in the US • More women working • Geographic dispersion of families • Increased elder spending power • Emphasis on self-reliance Long Term Care Monitoring

6. The Emerging Need forLong-Term Care Services & Insurance • Dwindling Feasibility of Public Programmes • Birth dearth creates workforce shortage • Future payment ability of government programmes • Political aspects to any new social programme Long Term Care Monitoring

7. The Emerging Need forLong-Term Care Services & Insurance • Lack of LTC Coverage • Medicare has only limited long-term care cover • Private medical insurance focuses on acute care • Medicaid as a LTC payer of last resort Long Term Care Monitoring

8. Changing Service Environment • Significant LTC cut-back in Medicare • State Medicaid cut-backs • Intensely regulated environment • Insolvency of nursing home and home health care providers • Service providers scrambling for staff • Lack of consumer knowledge of existing services Long Term Care Monitoring

9. The Long-Term Care Dilemma • Risk of Needing Care • Cost of Care • Who Pays • Impact on workplace productivity Long Term Care Monitoring

10. Risk of Needing Long-Term Care • 60% of the 65+ will require some type of long-term care • 43% of all people 65+ will spend time in a nursing home • Average nursing home stay for people 65+ is 2.6 years 34% 26% 19% 21% Nursing Home LOS Source: New England Journal of Medicine, 1991 Project Report Prepared for HIAA Long Term Care Monitoring

11. LTC Need can Occur at any Age Percent of Persons Who Need Long-Term Care by Age: 1997 Age 65+ 58% Age 18-64 38% Source: 1997 SIPP, 1997 Census, NUMH, University of Minnesota Age 0-17 4% Long Term Care Monitoring

12. LTC Costs can be Significant • Average Cost of Nursing Home in the United States is $45,000. . . And Rising! Near Average Below Average Above Average Sources: Health Insurance Association of America (HIAA), LTCG Survey, 1996 Long Term Care Monitoring

13. LTC Costs can be a Burden Nursing Home Costs • Average Nursing Home Costs: $125/day • One year stay: over $45,000 • Average Stay of 2.6 years: over $118,000 • 20% stay 5+ years: over $228,000 Assisted Living Facilities • Average in US: $75/day • Average yearly: $27,000 Sources: Center for Health & LTC Research, 2001 and NEJM, 1991 Long Term Care Monitoring

14. LTC Costs can be a Burden Home Care Average in the US • Skilled Nursing visit: $98 • Home Health Aide visit: $98 • Chore service and ADL assistance: $12 - $18/hour • Yearly home-based ADL assistance (36 hrs/wk): $25,000 • Average duration of home care: 2.5 years • Average cost of care: over $62,000 • Extended care needs: over $125,000 Long Term Care Monitoring Sources: Report Prepared for HIAA, 2000

15. Who Pays for LTC? Out-Of- Pocket 30% Other 6% Medicare 18% Private Insurance 7% Medicaid 39% Source: Department of Health and Human Services, 2000 Long Term Care Monitoring

16. Private Sector Response Long Term Care Monitoring

17. Private Sector Response • Managed Care Organizations’ Initiatives • Alternative Service Options • Continuing Care Communities • Assisted Living Facilities • Specialized Care Units (Alzheimer’s) • Home-care Focused Manpower Agencies Long Term Care Monitoring

18. Private Sector Response • Private Long Term Care Insurance • Specialized LTC products • Annuities-based service products • Reverse Mortgages • Private Care Management Long Term Care Monitoring

19. Supplemental Medicare Insurance The Evolution ofLong Term Care Insurance 1970’s Long Term Care Monitoring

20. Supplemental Medicare Insurance Nursing Home Coverage The Evolution ofLong Term Care Insurance 1980’s Long Term Care Monitoring

21. Comprehensive Long-Term Care Coverage Supplemental Medicare Insurance Nursing Home Coverage The Evolution ofLong Term Care Insurance 1990’s Long Term Care Monitoring

22. Long Term Care Insurance Pay Claim Claimed Event Acceptance Care Management, Full Spectrum of Care Settings, Respite Care, Support Groups, Targeted Benefit Reassessment, Extensive Data Collection 3rd Generation Underwriting Evidence-Based Criteria, Rapid UW – Less Reliance on APS Improved Phone and Assessment of Function and Cognition, ADL & Cognitive Triggers, Complex Medical Enhanced Marketing, Comprehensive Products, Tax Advantages, Care Managed Products Network with Fee Schedule Quality Control Long Term Care Monitoring

23. Private Long Term Care Insurance • Private insurance coverage to protect against the potentially catastrophic costs of LTC. • Group and Individual LTC insurance • Underwritten. Guaranteed issue for employees (GI) Long Term Care Monitoring

24. Private Long Term Care Insurance • Benefit Trigger: • ADL Dependency or Cognitive Impairment • Benefits: • Custodial Care: NH, ALF, HHC, Adult Day Care, Board & Care • Independent Provider, Respite Care, Care Giver Support, Safety Equipment • Indemnity Payment after a Deductible Period to a maximum • Care Management • Many other bells and whistles Long Term Care Monitoring

25. Growth ofLong Term Care Insurance Policies Long Term Care Monitoring Source – HIAA 2000

26. Companies SellingLong Term Care Insurance Long Term Care Monitoring

27. Leading U.S. LTC Insurers Conseco 678,000 General Electric Capital Assurance 454,000 Aegon 230,000 C.N.A. 228,000 Penn Treaty 212,000 IDS 168,000 Long Term Care Monitoring

28. Private Long Term Care Insurance • Average Age at Purchase: 67 years of age • Married: 70% • Education: 47% College graduate and above • Income: 42% over $50,000 • Assets: 71% over $100,000 Long Term Care Monitoring

29. Private Long Term Care Insurance • Average Annual Premium: $1,677 • Policy types: 77% Comprehensive • Average Daily Benefit: $109 • Inflation Protection: 41% • Reason Purchased: Insure Adequate Care & Preserve Assets Long Term Care Monitoring

30. Why People BuyLong Term Care Insurance Source: Department of Health and Human Services, 2000 Long Term Care Monitoring

31. LTCG UnderwritingExperience Long Term Care Monitoring

32. LTCG Underwriting Experience Carrier A • 150,000+ members covered for 6+ years • 59% female, 41% male • 71% married, 29% single • Average rated age: 55.4 years • Average covered months: 38.3 months • Average annual premium: $1250 • Cumulative acceptance rate: >84% Long Term Care Monitoring

33. Recent Actuarial Study:LTCG Underwriting Results Actual Claims Experience • 0.197 claims per 1000 covered months • 45% of expected for program • 33% of SOA Study experience • Disability rates < 25% predicted • Extremely favorable Loss Ratios Based upon over more than 6 years of experience Long Term Care Monitoring

34. Recent Actuarial Study:LTCG Underwriting Results Actual Claims Experience • Lower than expected cognitive claims • Lower than expected nursing home and home care claims • Higher than expected ALF claims • Acceptable underwriting decision rates Long Term Care Monitoring Based upon over more than 6 years of experience

35. LTCG Underwriting Findings • Most early claims are unpredictable • Experience to date is extremely favorable in comparison to predicted utilization • LTCG Underwriting Criteria work well • Underwriting process is reasonable

36. Industry-wide ExperienceActual to Expected Loss Ratios TIAA-CREFF 23.4% Travelers (now GE Capital) 67.8% Conseco 95.3% IDS 98.1% FORTIS (now John Hancock) 126.7% Aegon 131.5% Conning 1997 Long Term Care Monitoring

37. LTCG Claims andCare ManagementExperience Long Term Care Monitoring

38. LTCG Claims Experience • Over 150,000 members covered for over 6 years • 59% female, 41% male • 71% married, 29% single • Average rated age: 55.4 years • Average covered months: 38.3 months • Approximately 1,850 claimed episodes • 67% female, 33% male • 50% married, 50% single • Average rated age: 70.2 years • Average covered months: 49.2 months Long Term Care Monitoring

39. LTCG Claims Experience Carrier A – Comprehensive Policies • Approximately 1,110 claimed episodes • 638 paid LTC claims • 461 currently in benefit and deductible • 101 closed after recovery • 76 closed by death • 378 non-paid claims • 264 closed after recovery • 114 closed by death • 85% in payment and 15% in deductible Long Term Care Monitoring

40. LTCG Claims Experience • Approximately $1,050,000 in monthly benefits • 52% Home Health Care and Personal Care • 24% Assisted Living Facility • 16% Nursing Home • 8% Alternative Benefits • Benefit Eligibility Determination: Av. 2.2 days • Care Plan Completed: Av. 2.5 days • Approximately 8.5% of benefit requests did not qualify for benefits Long Term Care Monitoring

41. LTCG Care Management Philosophy • Proactive Management of Care • Provide Options and Choice • Promote Independence and Dignity • Improve Coordination with Acute Care Provider(s) • Support Caregivers • Lower Claims Costs Long Term Care Monitoring

42. Long Term Care Group Claims and Care Management Disabling Event and Claims Initiation Care Plan Developed Care Plan Implemented Care Delivered Coordinate w/ Acute Care • Caring & compassionate intake • Claim Initiated by LTCG • In-person Assessment • Preliminary Care Plan • Immediate Response • Claim Adjudicated • POA Obtained • Quality of Providers Assessed • Deductible Days Documented • Coordination with Medicare Monitoring, Management & Refinement of Care Plan Care Plan Shared with Claimant & Family - Care Plan Sign-off DYNAMIC LTCG CARE PLAN Claim Paid

43. Care Management Impact Severe Cognitive Impairment - Setting of Care ADLS Deficits:0-12-334+ Assisted Living 212 211 441 30 Home Care 176 - 145 160 Nursing Home 59 - 145 129 4+ ADLs: 40% NH, 9% ALF, 50% HHC Overall: 19% NH, 52% ALF, 28% HHC LTCG Claims Study after 5 years of experience

44. Care Management Impact4+ ADL Deficits + Mod-Severe Cognitive Impairment LTCG Claims Study after 5 years of experience

45. Independent Provider Impacton Care Management4+ ADL Deficits with no Cognitive Impairment 72% of In-Home Care provided by Independent Provider LTCG Claims Study after 5 years of experience

46. Care Management ImpactHome Care: Paid versus Maximum Daily Benefit Paid Not used Daily Benefit Maximum LTCG Claims Study after 5 years of experience

47. Public Sector Response Long Term Care Monitoring

48. Public Sector Response • HIPPA – State and Federal Tax Policy • State Employee Sponsored LTC Insurance • Federal Employee Sponsored LTC Insurance • State Partnership LTC Insurance Programs • Social HMO and PACE • Dual Eligible Programs Long Term Care Monitoring

49. Long-Term Care Challenges in the U.S. • Custodial Care needs span all age groups • Custodial Care is mostly unfunded & uncoordinated • Disabled and cognitive impaired individuals use a disproportionate amount of Acute Care Services • Retrenchment of Medicare and Medicaid from LTC Long Term Care Monitoring

50. Long-Term Care Challenges in the U.S. • Public attitudes and denial • Staffing crisis for LTC providers • Lack of acute care and LTC integration • Federal and State barriers to integration Long Term Care Monitoring