Senior Market Research

Seniors Speak Out on Finances and Health

2012-04-02T15:20:00.001-04:00

We reached out to seniors to get a read on how they feel about their current financial and health situation and how they feel they’ve prepared for the present and future of their lives. The following are highlights from those conversations.

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Who knows about one's health at this age? Each day is a new experience. My financial situation is another problem. I am working and will continue to work until I can't, but that is tied to the economy and the condition of the country. My business is more affected by state and local conditions thanks to regulation and taxes than I like. This adds to questions of survival and consequently questions of financial stability.

James S.

I am presently in good financial shape and put money into a 401(k) each month and have put aside a good nest egg but want to continue working until 65 or 66 because I enjoy working and would like to put additional money aside. I will have a company pension at age 65 and that along with social security and other savings should enable me to have a comfortable retirement. I am in good health and my wife and I have LTC we took out about 6 years ago.

Philip Y.

I feel I have been lucky to have good health and have been saving for retirement but am disappointed in the Social Security system and the government’s lack of money management for Social Security.

Fred K.

Between Social Security and the guaranteed income from a variable annuity with a guaranteed income rider, I expect to be able to cover my basic living expenses. I have enough other assets that should supplement my income and, by the projections I've done, these should last to age 82. Since I am a cancer survivor, I don't expect to live as long as I once thought.

Linda T.

President’s 2013 Budget Proposes Shifting More Medicare Costs to Beneficiaries

2012-04-02T09:24:00.000-04:00

President Obama’s 2013 budget proposal includes a recommendation projected to save $2.5 billion over 10 years by imposing a surcharge on Medicare beneficiaries who buy “near first-dollar” Medicare supplement insurance often called Medigap. This surcharge would add an estimated average of $400 to the annual premiums for beneficiaries who buy one of these policies to cover out-of-pocket costs in Original Medicare. This is one of many proposals being considered in Congress to make beneficiaries pay more for their care as a way to reduce Medicare costs, but would do nothing to address the skyrocketing costs of health care services.

The President’s budget also shifts costs to beneficiaries in other ways, by expanding means testing, adding a copayment, and increasing the Part B deductible. Currently, beneficiaries with higher incomes already pay higher premiums for Medicare Parts B and D. The President’s proposal would increase the number of Medicare beneficiaries who must pay higher premiums from 5% to 25%. A new copayment would be added for home health care, which currently has no copayment. The annual Part B deductible would be increased for new beneficiaries beginning in 2017.

The Catch: How Sick Are They?

2012-03-29T11:34:00.001-04:00

By: Allison Bell

Officials at the U.S. Government Accountability Office (GAO) say Medicare Advantage plans are pretending that their enrollees are sicker than they probably are.

The health insurers that offer Medicare Advantage plans tell the Centers for Medicare & Medicaid Services (CMS) how sick enrollees are to participate in a program that provides extra risk adjustment payments for plans with enrollees who are sicker than average.

GAO investigators compared diagnostic coding levels for Medicare Advantage plan enrollees and traditional Medicare enrollees and found that the average scores for Medicare Advantage enrollees are 4.8% to 7.1% higher than the scores for traditional Medicare enrollees.

If the coding level difference is real, it translates into the Medicare Advantage plans getting $3.9 billion to $5.8 billion in extra risk adjustment payments, James Cosgrove, a GAO director, writes in a letter summarizing the GAO's findings.

The GAO is recommending that CMS take steps to improve the accuracy of diagnostic coding by, for example, accounting for more enrollee characteristics and incorporating the trend of the impact of coding differences on risk scores.

Dr. Don McCanne writes in a commentary for Physicians for a National Health Program, Chicago, that, in his experience, as CMS has refined risk-adjustment tools, "the private Medicare Advantage plans have found new ways to game the system which have resulted in even greater overpayments for their patients who are healthier than the data submitted by the insurers would indicate."

Analysts at the Deloitte Center for Health Solutions, Washington, note that CMS itself has found a scoring gap of just 3.4%.

The GAO did not account for enrollee characteristics such as whether the enrollee entered Medicare as a result of retirement or as a result of becoming disabled, the Deloitte analysts say.

SPIA–One Solution to the Longevity Concern

2012-03-29T11:15:00.001-04:00

Everyone who reads this blog knows what keeps Americans awake at night as they contemplate their future in retirement. It’s money. To be more specific, it’s the fear of running out of money.

Americans have reason to be concerned. The two traditional pillars of retirement income–company-paid pension plans and Social Security–are either fast becoming extinct or in serious need of life support. And the hit many retirement nest eggs took in recent years due the market downturn has added to the anxiety that there may come a day when there is no check in the mailbox.

As you work with your clients to solve the problem of running out of money, there are many investment strategies to consider. One option you might want to take a look at is to include a single premium immediate annuity (SPIA) as part of the investment mix in a retirement portfolio. Why a SPIA? There are two ways it can help.

The first is obvious. It creates a guaranteed lifetime stream of income, even if the rest of the portfolio becomes depleted over time. The second advantage of a SPIA is not understood as well, but it may be even more important over the long term. According to research conducted by LIMRA in 2009, applying a percentage of assets to a SPIA will always lengthen the lifetime of a portfolio. This is an especially important advantage during periods of sustained market volatility.

The key thing to remember is the two-pronged power of a SPIA–a guaranteed lifetime stream of income and the ability to sustain an investment portfolio over a longer period of time–holds true in up and down markets as well as high and low interest rate environments. This consistency provides an element of security future retirees are looking for more than ever before.

In addition to increasing the likelihood your clients will not run out of money during their retirement years, SPIAs also offer a good growth opportunity for your business. LIMRA is forecasting a nearly 11 percent increase in fixed immediate sales between now and 2016. The key factors behind this forecast are predicted increases in disposable personal income over the period and the rapid growth in the demographic most likely to buy a SPIA: the 60- to 90-age group.

So give the SPIA a look. It could be part of the solution your clients are looking for to avoid an empty mailbox.

Zen and the Art of Social Security benefits

2012-01-06T09:02:00.004-05:00

By: Michael Ham

The Dalai Lama was asked what surprised him in life the most. He replied, "Man, because he sacrifices his health in order to make money. Then he sacrifices money to recuperate his health. And then he is so anxious about the future that he does not enjoy the present; the result being that he does not live in the present or the future. He lives as if he is never going to die, and then he dies having never really lived."

Balance and perspective. Why then do we fret so much? Simple answer: money or the lack of it. Struggle and strive to get paid just might be the path to all evil. But, hey, baby has to eat and get new shoes. Be sure to get all of the "free money" available to you and yours.

Social Security may be broke and busted but it’s still writing checks; get all that you’re entitled to before it changes.

Here are three super secrets for married folks

Pick which retirement you want; yours or your spouse’s. Obviously select the one that pays you the most. Usually in a marriage there is a huge difference in wages. But even if the lower wage earner worked and has their own Social Security benefit, he or she may elect to receive an amount equal to half of their spouse’s instead. This is called your Spousal Benefit.
Double dip. A person who has reached full retirement age could elect to take his or her Spousal Benefit and delay taking their own Social Security benefit. Working or not, take your Spousal Benefit and delay your own and let it grow until you’re age 70. It doesn’t matter if your spouse is taking their Social Security benefit or not. Upon age 70, if your own benefit is higher than the Spousal Benefit you’ve been receiving, just swap and take your own. That’s more money for you now and potentially more money for you later.
Getting paid to wait. Typically when one spouse hasn’t worked outside of the home as much as their mate, she won’t have much, if any, Social Security benefit and will default to receiving her payments when her higher earning spouse retires and decides to start taking Social Security payments. Do not wait. Once both spouses reach full retirement age, the higher earner (the husband in this example) should go ahead and file for his Social Security benefits. Then the lower earning wife files for her Spousal Benefit and step three, the husband immediately suspends his Social Security benefit request. His benefit amount will continue to increase (and by about 8 percent per year, too) and then when he reaches age 70, he can re-file to start taking his Social Security retirement benefit.

This will give the wife free monthly money instead of thinking she must wait until hubby fully retires and takes a check from Social Security before she can…very cool idea.

Insuring an Aging Population

2012-01-05T15:53:00.000-05:00

By: Marjorie Keymer, M.D.

The U.S. population is aging rapidly. Today, 1 out of every 9 Americans is "old" — another individual turns 50 every 8 seconds. Those aged 65 and older now exceed 35 million, a number poised to explode. January 2011 ushered in the first 65 year old of the approximately 77 million baby boomers, born from 1946 through 1964, who are surging toward retirement (Transgenerational.org, Human Aging — A Recent Phenomenon 2011).

The latest brief on data from the 2010 U.S. Census shows the numbers of seniors increasing faster than younger populations, raising the nation's median age from 35.3 in 2000 to 37.2 in 2010. Seven states have a median age of 40 or older.

Despite the common perception that baby boomers are more active and fit than their parents’ generation, this population tends to have more impairments. Roughly one‐third of boomers are obese and another 36% are overweight, according to a 2011 Associated Press – LiveStrong.com poll. The poll also found that only half of boomers exercise on a regular basis, and 37% do not perform strengthening exercises, which are important for combating muscle and bone loss in seniors.

This demographic makes it challenging for agents and brokers looking for life insurers to take on their risk. But for carriers that take a more in‐depth look at these potential policyholders, it is possible to insure many of these aging Americans with affordable coverage. Fortunately for our industry, some carriers have developed innovative and comprehensive risk analyses that consider much more than traditional impairments. These forward‐thinking evaluations take into account other critical applicant factors — such as current lifestyle and activities along with past health patterns — to enable carriers to offer better underwriting terms and, ultimately, more competitive premiums.

A Lucrative Opportunity

This trend may, in turn, help producers and distributors boost their businesses. The numbers speak to the huge opportunity. Between 2000 and 2010, the U.S. population between the ages of 45 and 64 grew 31.5% and now makes up 26.4% of the total population. By 2012, America's 50-plus population will reach 100 million (U.S. Census Bureau 2010 Census brief), and 1 in 5 people will be 65 or older by 2035 (UN Population Division report, 2010). This is a lucrative and growing pool of clients, currently underserved by those carriers that have traditionally taken a stricter actuarial approach to evaluating client risk.

From an actuarial point of view, insurance is about taking factors like age and gender and finding an expected mortality for each group based on these factors. Then there’s the collection of applicant information, which is reviewed for indicators that might put the person outside of the expected mortality for his cohort. But at Genworth, one of the key points our research has shown is how the history of an applicant’s impairment(s), combined with knowledge about his or her lifestyle, gives a much clearer picture of the risk that a carrier is taking on with each applicant.

For example, Genworth has been studying how specific impairments relate to each other. What is the inter‐relationship, for instance, between osteoarthritis, asthma and heart disease? Clearly asthma and heart disease may be related in terms of co‐morbidity (from a cardiovascular perspective), but the osteoarthritis may have no bearing on this applicant’s long‐term survival. Smart carriers are using precision analyses to separate out factors such as these to make sure applicants are not overcharged for having multiple impairments.

Genworth also evaluates the natural history of the disease. How is it acting in each applicant? Is it progressing slowly or rapidly, or is it stable? For example, if a client has had asthma for 70 years and is now developing chronic obstructive pulmonary disease (COPD), this may indicate that this person is a robust, long‐term survivor who may be able to live for an extended period with encroaching pulmonary disease. On the other hand, an applicant who has had asthma for 20 years and is developing COPD may actually be a higher risk because the disease is evolving faster.

Moving Beyond Medical Problems

Medical science is now able to find signs of disease earlier than ever. The challenge for many carriers is that, as doctors cast the net of diagnosis wider to an earlier stage and age, insurance applicants are labeled much sooner in life — often long before any real morbidity issues pop up. For example, when PSA testing became popular, many men found to have tiny malignancies were labeled with prostate cancer. Ironically, these men with “cancer” were generally healthier and their insurance risk was lower than men from the previous generation diagnosed with prostate cancer at a later stage of disease. With new monitoring and treatment techniques, prostate cancer can now be watched and controlled much more effectively than in the past. Underwriters need to account for and deal with these trends.

Adding to the challenge, underwriters must do this analysis in the present day, without the benefit of being able to wait for all the results of long‐term medical studies. However, smart carriers are looking at other factors that drive an applicant’s morbidity and mortality.

As people age, they are bound to have some impairment or impairments. To determine where they fall on the spectrum of severity — and financial risk for a carrier — involves looking not just at their medical problems but at the level at which they function. Smart carriers are looking at applicants’ vitality along with their interest in and ability to participate in the “good life.” Connecting with other people is especially important. Are they active in organizations and programs in their community? Are they involved in their religious or spiritual community? Do they exercise?

On the other hand, have applicants’ physical or behavioral impairments forced them to give up something important in their life? Can they still travel for vacation or to see grandchildren? Or are they “stuck” close to home? One of the important factors that Genworth’s research has uncovered is that older applicant’s risk rises not necessarily as her age increases, but as her world shrinks due to impairments, whether physical or cognitive.

Moreover, this is why some carriers can view even a 75‐year‐old applicant with a diagnosis of three or four impairments as still “healthy.” If they are vibrant and rigorous, they deserve credit for that fact.

Multi‐Disciplinary Approach

Savvy carriers realize that healthcare professionals are working with older applicants to shift diseases that were once debilitating or deadly into the category of “background noise.” With that trend continuing, insurers now look not just for medical problems, but for early signs of frailty that may lead to an inability to participate actively in life. We can expect an 80‐year‐old man to have multiple impairments, but if he shows minimal signs of becoming frail, this may indicate that he will be a long‐term survivor.

As the U.S. population ages, it is imperative that underwriters look at their job strategically and make certain that the application process includes such tools as a multi‐disciplinary geriatric assessment. More and more today, carriers are using tactics such as phone interviews with applicants to examine such factors such as cognition, orientation, the applicant’s ability to perform the activities of daily living (like bathing) along with instrumental activities like driving. Carriers are also looking at cognitive abilities, such as recall and decision making.

In short, are older applicants able to work? To travel? Are they living as if the world is their oyster? Answering all these questions enables carriers to unveil not only bad risks, but, more importantly, pinpoint the good risks.

This, in turn, allows life insurers to offer the huge market of older Americans better pricing and greater accessibility. Because the demographic group most critical to the growth of the life insurance sector may be the U.S. baby boomer, this type of risk analysis will become increasingly crucial in years to come.

Dr. Marjorie Keymer, chief medical director, and her team of insurance medical experts support Genworth’s life insurance business through research and development of underwriting innovations as well as training and renewal of medical underwriting knowledge both inside the company and across the life insurance industry.

Medicare Basics

2012-01-03T11:49:00.002-05:00

We all know the Medicare landscape can be complicated, with more restrictions and guidelines than traditional insurance. My job is to eliminate the confusion and to simplify the process for my brokers. To help you get started, I have prepared Medicare Basics.

Medicare Part A

(Hospital Insurance)

Helps cover Inpatient Care in a hospital (includes critical access hospitals, inpatient rehabilitation facilities, and long term care hospitals).

Helps cover skilled nursing facilities (not custodial or long term care), hospice and home health care services

Medicare Part B

(Medical Insurance)

Doctor Services and outpatient care

Helps cover some services not covered under Part A, such as home health services, physical therapy and occupational therapy, as well as some preventive services

Generally pays 80% of the Medicare approved amount for covered services after the Part B deductible ($140 for 2012), has been met.

Medicare Part C

(Medicare Advantage Plans)

A way to get Medicare benefits through private companies approved by and under contract with Medicare

Includes Part A, Part B and usually other benefits Medicare does Not cover. Most plans also provide prescription drug coverage.

Must have Part A and Part B of Medicare.

Medicare Part D

(Prescription Drug Coverage)

Run by private companies and approved by Medicare, which can either be Medicare Advantage Plans, or separate Medicare Prescription Drug Plans.

Helps cover the cost of prescription drugs.

Each Plan can vary in cost and drugs that are covered.

5 Reasons to be Optimistic about Medicare

2011-12-23T08:58:00.002-05:00

The last five years have proven to be some of the most exciting and perilous times for insurance carriers and producers in the industry. Talk to producers just prior to the Annual Election Period and you’ll receive a mixture of excitement for the coming season and distaste for the rules governing the entire process.

Reasons for optimism

1. We’re seeing a growth market in terms of Medicare beneficiaries.

The size of the Medicare Market is growing, and is projected to increase from 48.6 million in 2011 to over

80 million by 2030—an astonishing 70 percent increase in Medicare enrollments. Fueled by a Baby

Boomer population aging into Medicare at roughly 3 million per year, opportunities abound.

2. The Part D donut hole is closing and many brand-name drugs are becoming generics.

You wouldn’t know it from all the talk about the skyrocketing cost of health care, but seniors are actually paying less today for their prescription drugs than they were five years ago, and they will continue to pay less in the future, according to a study by the IMS Institute for Healthcare Informatics and Ernst Berndt of the Massachusetts Institute of Technology and the National Bureau of Economic Research.

3. Quality Stars ratings reward carriers for customer satisfaction.

Agents agree that the customer service of Medicare Advantage carriers pales in comparison to that of Medicare Supplement carriers. Part of that is due to the difficulty of processing hundreds of thousands of applications during the short AEP. Another factor is the interface with CMS for membership eligibility and processing.

4. Employers continue to drop group retiree coverage in favor of individual plans.

It all started a few years ago when the “Big Three” auto companies started trimming their retirees from their group health plans. With the Retiree Drug Subsidy now subject to taxation, many larger employers have followed suit. This phenomenon is primarily happening amongst Fortune 500 companies who were traditionally far more likely to offer group retiree benefits.

5. Consumer preferences show interest in shopping online.

The Boomer population is increasingly open to researching insurance products online and becoming better educated about insurance options than the generations that preceded them. According to research from Pew Internet Project in December 2010 and April 2011, 68 percent of individuals age 60-64 use the Internet and 92 percent ages 50-59 are Internet users.

Coming Soon: Twitter Insurance To Protect You (And Your Brand) From Careless Tweets

2011-12-22T15:57:00.000-05:00

The best of us have done it. The worst of us keep doing it. More and more people are being fired over it, including celebrities and sports stars.

‘It’, of course, is writing something really careless on Twitter or Facebook.

Whatever the reason, once it’s out there the damage is done. No matter how fast you are to delete, somebody always sees it. And the more people you connect with, the further the message spreads and the worse the end result. Social media brings tremendous benefits but those gains also come with an element of risk, for individuals and especially brands.

Thankfully, where there’s risk, there’s insurance. And it could be coming soon to Twitter.

Kiln Group, an underwriter at Lloyds of London who amongst other high-risk clients provides specialist insurance services for foreign correspondents, TV personalities and film crews operating inside war zones, have revealed that brokers in Canada are closely watching trends in social media and are beginning to develop policies that will provide coverage in the event of a mis-post.

Social media tools have been rapidly adopted by brands of all sizes over the past few years and this boon will inevitably be accompanied by an exponentially-rising number of lawsuits and legal battles, likely tied to intellectual property, defamation and privacy breaches. That next mis-tweet could end up costing you big.

Part of the problem is that many organizations don’t have clear, written guidelines for the use of social media by employees, both at work and at home, which can lead to ‘big fat cow’ syndrome.

“‘My boss is a big fat cow,’ is a very common tweet,” but people often stupidly then say where they work and who their boss is in the tweet. The ‘big-fat-cow boss’ then brings a lawsuit against the individual. And the company has to take action because, from a reputational point of view, their brand is now suddenly gone viral, negatively.

Maximizing Your Options for Annuity Investments

2011-12-22T13:54:00.000-05:00

When you think of a suitable investment vehicle for numerous solutions, the annuity is one of the most flexible products available today. In fact, Webster’s Dictionary defines an annuity simply as a contract or agreement providing for the payment of money.

But simple, in this case, does not mean limited. According to the most recent persistency study performed by LIMRA, there is roughly $1.3 trillion worth of value held in deferred annuity accounts. Why not put a slice of these assets toward some of the other financial products that your clients need?

Traditionally, annuities have two primary uses: to earn tax-deferred interest and to function as a payment stream. However, they can do so much more. Annuities can access cash buildup in several ways, including:

Free withdrawals
Annuitization
Income riders
Waivers
Partial transfers

Given the ease of access to funds held in annuities, many clients will benefit from using this money for other valuable purchases.

1. Annuity max

Turn a deferred asset into a payment stream that covers life insurance. You can do this by using a single premium deferred annuity, or by using an indexed annuity with a guaranteed minimum withdrawal benefit rider that will produce a fixed income stream for the rest of the client’s life. At death, the beneficiaries will receive the residual value in the annuity, along with the life insurance proceeds.

2. Long term care funding

You can also use that payment stream to pay LTCI premiums. Under the new provisions of the Pension Protection Act, some carriers will code the periodic payments as partial 1035 exchanges, making them tax-free.

3. Disability insurance funding

This type of insurance is incredibly relevant. A 20-year-old worker has a 30 percent chance of disability before retirement age, but only a 17 percent chance of dying before age 65. If the client becomes disabled, the premiums will stop, but the SPIA payments will continue. The client will then collect the disability benefits and keep the SPIA payments to supplement their income.

4. Longevity insurance

Many people have heard the term, but few have seen the power of longevity insurance. Clients can spend pennies on the dollar to purchase a product that will pay out at a specific date in the future, ensuring that they will never outlive their money. Just as important, this type of spending frees up money to purchase other financial tools they may need.

In a working world that demands an increasing degree of flexibility, understanding and maximizing your annuity options is one of the best ways to serve the specific needs of your clients. Now more than ever, careful planning is key to future protection. Think outside the proverbial box when it comes to this classic product, and you will find a wealth of opportunity.

Selling Long Term Care Insurance: Tips from the Pros

2011-12-22T13:42:00.002-05:00

Long Term Care (LTC) insurance policies can be hard to sell.

Why?

· People don't like to think that they might one day need long term care.

· Middle-aged consumers are more preoccupied with saving for retirement and putting their kids through college.

· Younger consumers don't feel a pressing need to purchase LTC.

Creating the Need

According to some statistics, it's estimated that half of all Americans 65 and older will need LTC.

Employing New Marketing Maneuvers

Life changes; follow up on leads that have previously turned down your LTC services.

According to Phillip Sullivan, CEO of SellingLTC.com, as a lead ages, it becomes neither good nor bad—it's simply a person who wasn't interested in LTC at one time or another.

Patience and Perseverance

Connect with your prospects, Sell with conviction and Stick to your marketing plan.

Final Expenses Insurance Techniques

2011-12-22T13:09:00.000-05:00

When a person dies, his/her family will have a number of expenses to cover. The family must cover his/her funeral, pay off medical bills and hire an attorney to probate his/her will. These costs are known as final expenses. Life insurance is a technique used to cover these final expenses. Four main type of insurance techniques cover final expenses.

Term

Term life insurance is a temporary form of coverage. It provides a death benefit for a stated period. It is the least expensive form of life insurance but pays you nothing if you outlive the policy. Term insurance is not the best choice for final expense coverage as you may outlive your policy and be left with no coverage. Term insurance should only be used for final expense coverage as a last resort if you can afford no other types of policies.

Whole

Whole life insurance is permanent coverage. The policy will never expire as long as you pay the insurance premiums. The annual premiums will not increase as you get older. Some whole life policies are designed to generate cash value while you live. Cash value can be withdrawn from a whole life policy but this will lower the total face amount of life insurance. Whole life insurance is the most expensive policy type but is the best for covering final expenses as it offers permanent coverage and a stable annual premium.

Universal

Universal life insurance is another form of permanent insurance coverage. It initially costs less than whole life insurance but becomes more expensive as you get older. If you can no longer pay the higher premiums, the policy lapses. The premium payments are not fixed, you decide when you want to put money in your policy. The concept of universal insurance is you overfund your policy when premiums are low so that you will have enough to cover the more expensive premiums as you get older. Universal life is a good choice for covering final expenses if you can properly manage its long-term funding.

Guaranteed-Issue

Life insurance policies require fairly strict health underwriting for a person to become insured. Not everyone will be able to qualify for these policies. Guaranteed-issue life insurance policies exist for this market to cover final expenses. Guaranteed policies have little and sometimes no underwriting for you to qualify. They only cover up to a certain face amount, roughly $25,000. Premiums will be more expensive annually than a regular policy. These policies may also require you to live a certain amount of time, roughly two years, to qualify for benefits. Otherwise they will not pay a death benefit and only refund your premiums to your heirs. Guaranteed-issue policies are not ideal to cover final expenses but may be the only option to some individuals.