Long-Term Care Focus: August 2021
An update on important work we are doing with respect to long-term care.
Milliman 2020 LTC Guidelines
The 2020 edition of the LTC Guidelines is now available! As part of the 2020 update, we expanded the use of industry data and analyzed experience from 15 of the top 20 long-term care (LTC) carriers based on in-force lives while also expanding our industry-leading use of predictive analytics to additional analyses. Disabled life mortality and claim recovery rates were studied separately as part of the claim termination analysis. We also performed detailed analyses of rate increase adverse selection and historical incidence improvement. Compared to the 2017 edition of the LTC Guidelines, we observed a steepening of the incidence curve, with shifts from skilled nursing facilities to assisted living facilities and home health care in addition to slight increases in the average length of stay.
Please reach out to your LTC consultant if you have any questions and watch for additional information that will be published soon on the Milliman website.
MG-ALFA, Model Governance, and ASOP 56
Actuarial Standard of Practice (ASOP) 56, Modeling, has been an active ASOP for a year and a half. Although the ASOP is relatively new, our LTC actuaries have long been entwined with its principles around developing, modifying, using, and reviewing models. One of our primary applications of ASOP 56 is in creating and altering valuation and projection models through MG-ALFA® (Milliman Global Asset Liability Financial Analysis), modeling software developed in-house that sees broad usage in the insurance industry. MG-ALFA is structured to support users in adhering to model governance and control recommendations—such as those directly embedded in ASOP 56 and many in the supplementary American Academy of Actuaries Model Governance Checklist—as well as other ASOP 56 topics like model documentation, change testing, and output analysis. In addition to the broad array of policy and benefit characteristics available with the standard install of MG-ALFA, we have worked with clients to customize models in myriad directions, and we are currently working on modeling enhancements that reflect benefit downgrades, LTC reform, and combination products.
Milliman is releasing the MG-ALFA standard formula database version 11.8 in July 2021. This database will be the first to include new combination (aka hybrid) product functionality for the traditional life line of LTC business (TradLTC). The TradLTC line of business has been updated to include pricing capabilities for acceleration and extension of LTC benefits. The new build also supports valuation in VM-20, including the use of different assumptions across the acceleration and extension of LTC benefit riders.
The TradLTC line of business uses a first-principles approach to LTC modeling, accepting claim incidence, claim continuance, and utilization assumptions. The model is able to apply a conservation of mortality approach to balance active and disabled lives to an assumption of total mortality. Further, the model supports key competitive features such as various inflation protection options and return of premium.
New attendees at the Intercompany Long-Term Care Insurance Conference (ILTCi)
As part of our goal to develop the next generation of actuaries, we invited our newer actuarial students to attend some of the ILTCi sessions this year. One new analyst, Rachelle Jacobs, gives her impression:
Some of the sessions I attended included: Modeling a Public Long-Term Care Program, Social Factors That Impact Aging in Place, Practical Artificial Intelligence and Predictive Analytics for LTC Actuaries, and Advancements in the Diagnosis and Treatment of Cognitive Conditions. Presenters gave a general overview then provided a deep dive into the particulars of each topic, making the sessions easily accessible to those new to the long-term care space. The surveys, Q&A sessions, and interactive breakout groups also provided the valuable perspectives of others. In one such session, Advancements in the Diagnosis and Treatment of Cognitive Conditions, the impact of COVID-19 and the subsequent challenges of diagnosing cognitive conditions via telehealth were discussed. The doctors participating on the call were eager to answer all questions from participants and recommended we read Vivek H Murthy’s Together: The Healing Power of Human Connection in a Sometimes Lonely World. These sessions expanded my understanding and provided meaningful context, broadening the lens through which I see actuarial work.
If you are interested in learning more about the ILTCi you can visit the conference website at iltciconf.org.
Short-term care
The senior market for supplemental medical products grows each year with the "silver tsunami" of the aging population in the United States. Medicare provides benefits to the elderly for most medical needs, but beyond those basic health needs there can be gaps in coverage. Medicare Supplement coverage fills in some of the gaps in original Medicare, while products such as short-term and long-term care (STC and LTC) provide coverage for custodial care needs toward the end of life. The short-term care market has seen modest growth in recent years, in part as a result of regulations that are less restrictive than LTC, and in part because the product is offered at more affordable premiums.
Milliman actuaries Ken Clark and Robert Eaton wrote in a recent SOA Health Watch newsletter about Medicare Supplement and short-term care products in more detail, and compare the products’ risk profiles. The two products—when offered together—may provide a complementary hedge of certain policyholder behavior risks.
Upcoming studies
Combination products study
We completed our combination experience study and released the study to participants. The study will be available later this year for purchase for nonparticipating companies. The study looked at morbidity, lapse, and mortality experience. This is an update from our 2018 study.
Valuation survey
As a follow-up to prior surveys (most recently conducted in 2018), Milliman has solicited input for an LTC valuation survey. New this year are questions on Actuarial Guideline (AG) 51 and long-duration targeted improvements. We have received input from many carriers already and expect to provide the report to participants this fall so that the results can be used to inform 2021 cash flow testing decisions. If you wish to participate, please contact your Milliman consultant. The survey results will be made public on the Milliman website in early 2022.
Rate increase survey
As a follow-up to a survey conducted in 2016, Milliman is conducting an LTC rate increase survey that will be a valuable resource for understanding common practices and trends in LTC rate increase filings. Twenty carriers participated in this survey representing roughly 65% of the industry by premium volume. The report will be made available to participating carriers this September and will be made public on the Milliman website in early 2022.
Industry news
ASOP 18 exposure
The Actuarial Standards Board released an exposure draft of a revision of ASOP 18, Long-Term Care. One of the notable changes in the exposure draft is to expand the scope of the ASOP to cover actuarial services related to hybrid products, public programs, and long-range financial projections of Medicaid programs. Comments on the exposure draft are due September 1, 2021. The exposure draft can be found here.
Long-Term Care Insurance Multi-State Rate Review Framework
On June 10, 2021, the National Association of Insurance Commissioners (NAIC) released the actuarial components of the Long-Term Care Insurance Multi-State Rate Review framework for comment. The exposure outlines different approaches for calculating justified rate increases, including the loss ratio approach, Minnesota approach, and Texas approach. Additional information regarding reduced benefit options and non-actuarial considerations are also discussed. The actuarial components of the framework released for exposure can be found here.
Long-Term Care Valuation Working Group
The long-term care valuation working group is working on new mortality and lapse valuation tables.
WISH ACT
On July 1, 2021, Congressman Tom Suozzi (D-NY) introduced the Well-Being Insurance for Seniors to Be at Home (WISH) Act. The proposed legislation would create a new federal LTC social insurance plan financed by a 0.6% payroll tax on wages (0.3% paid by employees, 0.3% paid by employers). Revenue would be placed in a new federal LTC Insurance Trust Fund that would pay benefits to individuals for the “catastrophic” period of LTC needs. Benefit highlights include a $3,600 monthly cash benefit, unlimited benefit period, and an elimination period of one to five years (varies depending on lifetime income earned). More information on the WISH Act can be found here.
Milliman Publications and News
Below are some recent publications we think will be of interest to our long-term care clients:
How big is the standalone LTC market? Bigger than you might think
This brief is the first in a series of articles seeking to examine the current state of the private long-term care insurance industry.
Interpretable machine learning for insurance
Machine learning algorithms fit models based on patterns identified in data and can be very complex. In this report, we describe and illustrate a range of methods for interpreting machine learning models from the growing field of Interpretable Machine Learning (IML).
Cloud computing and machine learning uses in the actuarial profession
This report details the use of cloud computing and machine learning in the actuarial profession. With advances in cloud storage and cloud computing, actuaries are in a position to leverage their current skills to new areas within and outside of traditional roles at insurance companies.
Dementia Neurology Deserts and Long-Term Care Insurance Claims Experience in the United States: How Does Limited Supply of Neurology Specialists Correlate With Claims Experience Data? (SOA)
A report describing the results of analysis into how the supply of neurology specialists for diagnosis and care of dementia relate to historical LTC insurance cognitive claims.
Milliman in the Community
See personal perspectives from Milliman employees on family and the importance of accepting gender diversity in this new video.
This year Milliman hosted its first ever climate resilience forum in the hopes of being part of the solution on climate change. Go here to watch the video: 2021 Milliman Climate Resilience Forum Video Library.