Morbidity vs. Mortality

UnderstandingLong Term Care Insurance UnderwritingBetty Doll, MBA, CLTCDoll & Associates Long Term Care Insurance Serviceswww.BettyDollLTC.com

Regardless of the type of insurance being discussed, insurance underwriting is essentially calculating the risks.

Mortality: Measures the risk that a person is going to die earlier than the average life expectancy for someone of that age Most important risk when writing life insurance Morbidity: Measures the risk that a person will live with a debilitating condition that can impact their ability to function independently Most important risk to consider when writing long term care insurance Morbidity vs. Mortality

LTCi Underwriting • Evaluates the risk that the applicant will need help with the activities of daily living or develop a significant cognitive impairment requiring constant supervision • Less actuarial data to rely on than is found for life insurance • Lapse ratios are much lower for LTCi than for life insurance

Insurability • Each carrier has a list of conditions that are uninsurable—these include the presence of chronic conditions and or the use of supportive equipment such as walker, wheelchair, or use of oxygen. • Most carriers also publish a list of medications the use of which results in the applicant being uninsurable. It is important to determine why each medication is being used—occasionally the med is being used for a reason other than it’s typical usage and the person may be insurable.

Uninsurable Conditions • The presence of certain conditions will routinely rule out being able to obtain coverage. Conditions include: Alzheimer’s or other dementia, ALS, MS, Parkinson’s disease, active cancer, AIDS • Applications for multi-life coverage may result in some simplified underwriting but most will still rule out the conditions listed above • True group/guaranteed issue products are available from a few carriers and have participation requirements to get guaranteed issue

The Role of the Underwriter • Underwriters look for information in the application and in the medical records to help them determine the risks in each individual case.

Underwriting Concerns • Cognitive impairment • ADL impairment • Musculoskeletal issues • Co-morbid conditions • Multiple medications • Current or recent physical therapy • Independence factors

Cognitive Impairment • Cognition includes basic processes of perception, attention, memory, reasoning, decision-making and problem-solving • Problems with cognitive impairment can result in misuse of prescription meds, car accident, squandering life savings • Disease, meds and head injuries can affect cognitive abilities • Cognitive impairment is often progressive

ADL’s • The lack of ability to perform ADL’s is one of the triggers for tax qualified long term care policies • ADL’s include: bathing, dressing, continence, toileting, eating, and transferring

Instrumental Activities of Daily Living • IADL’s are activities that support independent living. The need for assistance only with IADL’swill not trigger the benefits of the LTC policy • The existing need for assistance with IADL’s will generally result in the person being uninsurable • IADL’s may include: Meal preparation, housework, laundry, managing money, taking meds, driving

Musculoskeletal Issues • Osteoporosis is found in men and women • Osteoporosis increases the risk of fractures from falls which is a leading cause of the need for long term care services • Severe arthritis can also limit the ability to live independently

Co-Morbid Conditions • Co-morbid conditions are those whose presence makes other conditions more significant • Examples: Diabetes with Obesity, Asthma with Smoking • Multiple Medications: May cause adverse side effects

Physical Therapy • Current (or very recent) physical therapy treatment is usually a red flag for underwriters. They will want to know the outcome of the treatment before accepting an application. They cannot assess risk while treatment is ongoing or if condition is not yet stable.

Independence Factors • The applicant’s current level of independence is a good predictor of their ongoing level of independence. • Many carriers ask questions related to hobbies and involvement in volunteer work as an indicator of current activity level. • It is the producer’s job to “paint a picture” of the client for the carrier.

Immobility • Difficulty with movement can be a result of many different conditions including orthopedic conditions (osteoarthritis or fractures), neurological conditions (such as stroke), or psychiatric conditions (severe depression)

Instability • Instability may be caused by vertigo (dizziness), musculoskeletal conditions (e.g. arthritis), or by alcohol, drugs, or side effects of drugs • Instability may result in falls and/or injuries which can then lead to a need for care

Incontinence • Incontinence is a lack of bowel and/or bladder control. This may be caused by conditions such as multiple scleroses, stroke, benign prostatic hypertrophy (BPH), drug effects or urinary tract problems. • If incontinence is an issue for an applicant, make sure to spell out the reason for this in detail on the application

Iatrogenic drug reactions • Iatrogenic: “Inadvertently induced in a patient by a physician's activity, manner, or therapy” • Iatrogenic drug reactions are common in the elderly. Studies show that the average geriatric patient takes eight different meds daily. Thus there is significant risk of drug interactions, toxicity, and dosage errors. Any of these may adversely affect intellectual capacity and/or physical abilities.

Screening for Cognitive Impairment • Because a cognitive impairment is potential more costly than other health problems, most carriers use some kind of memory screening questions in the phone or in-person interview they conduct with the applicant. Face-to-face interviews are routinely conducted with applicants over age 70 and may be conducted with younger applicants.

Rate Classes • Most carriers offer at least two rate classes (Preferred and Standard) but some offer up to five classes. • Agents should utilize available resources including underwriting guides and underwriting hotlines to attempt to provide and accurate quote for coverage—it’s best to be conservative in your ratings. Carriers will issue the policy based on medical data regardless of the rating you indicated on the application or quoted to the prospect.

Pre-Underwriting Your Client • It is important to get adequate information from the prospect to allow you to determine insurability and likely rate classification • It is helpful to obtain the information before meeting with the client if at all possible—you can provide a health questionnaire to be returned to you or you can obtain the information via the phone

Pre-underwriting Questions • Date of Birth • Height/weight— at last doctor visit • Medications prescribed (frequency, dosage). Usually need a period of stability on meds • Hospitalizations in past 10 years • Tobacco usage in past 5 years • Other health issues in their medical history • Procedures/surgeries that have been recommended but not completed • Current P.T.?

Helpful Hints • Information that is important but often missed relates to height/weight issues, the use of anti-depressants, current physical therapy treatment, and/or the use of a CPAP machine. These may or may not affect overall insurability but they will affect the rate class assigned and your quote should reflect that.

Height/Weight Issues • Hint: It is easier to ask height and weight over the phone rather than when the person is in front of you. • Being under- weight can be an issue as can being overweight • Carriers have different guidelines for insurability and rate class. You can find the charts in the underwriting guides of each carrier.

Asking Health Questions • You will become more comfortable asking health questions—just as you became comfortable asking financial questions • Start by saying “tell me a little about your health” and then move on to more specific questions. Do NOT settle for “we’re in good health”. • Some conditions require more extensive questioning—e.g. the “staging” of cancer, date of last treatment, A1C scores for diabetes, any complications related to the condition, how long ago was the diagnosis made • Underwriting hotlines are helpful sources for information on conditions and direction on what additional information to request

Career Agents • Your carrier publishes a field underwriting guide – should be available in hardcopy or as a download. • Underwriting guide provides info on different medical conditions and how they are rated. It also contains height/weight chart. • The people on the underwriting hotline are your friends! Utilize them.

Independent Agents/Brokers • Obtain the underwriting guides for each carrier you represent • There are software programs that allow you to enter an impairment or combination of impairments and check the requirements of selected carriers simultaneously • Being familiar with the various underwriting requirements can help you chose the best carrier for your client

Completing the Application • Remember to watch for co-morbid conditions • Don’t hesitate to call the underwriting staff with pre-underwriting questions • On the app, paint a picture of the applicant’s health situation—they may be much healthier than they appear on paper. Help the underwriter see the whole picture.

Preparing Your Client for the Underwriting Process • Carriers have different underwriting processes in general and requirements may vary based on the age of the applicant—many have brochures available to explain their process • Older applicants will go through a more rigorous underwriting process • Explain to the applicant the difference between underwriting for morbidity vs. mortality

Underwriting Tools • Application • Phone History Interview (PHI) • Face-to-face interview (FTF) • Medical Records (APS-Attending Physician’s Statement) • Para-medical exam

Underwriting Decisions • Approved • Coverage is approved. • The rating may be different (less favorable or more favorable) based on the information received during the underwriting process. • Declined • Approved with Modifications • Reconsideration offered

The Appeals Process In some situations a declined application can be appealed. The applicant or the physician may have additional information that will affect the decision in a positive manner. Appropriate documentation (usually test results or a letter from the physician) will need to be submitted and reviewed by the underwriters. Changes in underwriting will be made if appropriate. Note that this does not happen often and should be attempted only if you truly have additional supporting documentation. Process can be frustrating to the applicant and to the producer.

Reminders • Remember that underwriting for LTC is about morbidity rather than mortality. Most physicians do not understand this—may have told the applicant/patient that “you could live forever with this condition”. That is the type of condition that may not affect mortality but could increase the likelihood of a long term care need.

Summary • The agent must get comfortable with field underwriting • Tools available include written underwriting guides, access to underwriting staff, possible resources from your General Agent • Do NOT submit apps that do not meet underwriting guidelines—it is a waste of your time, the applicant’s time, the underwriter’s time, and the carrier’s resources.

Presented by Betty Doll, MBA, CLTC Doll & Associates Long Term Care Insurance Services Asheville, NC www.BettyDollLTC.com Broker, Trainer, Consultant “Making the discussion of long term care planning easy, enlightening, and enjoyable.” ™

Morbidity vs. Mortality