Important Work Happening at Milliman

Valuation

We have had the opportunity to help many of our clients on their experience analysis, projections, assumption setting and financial reporting in preparation for yearend reporting. We are looking forward to hearing from you in our year end valuation survey discussed more below.

Milliman LTC Advanced Risk Analytics (Milliman LARA™)

In 2023, the Milliman team moved LARA into production. We have run LARA on approximately 400,000 lives and generated valuable insights. As more carriers and vendors focus on aging-in-place, LARA unlocks insights with advanced analytics that identify high-risk policyholders before they face more severe long-term care needs.

Wellness

We continue to see an increase in LTC Wellness vendors entering the market to offer services that they say are intended to improve seniors’ lives. We are evaluating value propositions and effectiveness for these vendors.

Upcoming Studies

2023 Milliman LTC Guidelines

Development of the 2023 edition of the Milliman LTC Guidelines (Guidelines) is nearing completion and updated assumptions will be ready for use soon. We previously reviewed experience in 2020 and 2021 to analyze the impacts of the COVID-19 pandemic. The updated 2023 Guidelines assumptions are generally based on experience through 2019.

Compared to the 2020 edition of the Guidelines, we have observed the following relationships:

• Claim incidence has generally decreased for ages less than 75, increased slightly for ages 75 through 90, and remained stable for ages 90+, with variability by gender and site of care. Generally, incidence continues to shift away from skilled nursing facilities toward assisted living facilities and home health care.
• Transfer rates have generally increased, with variability by transfer path and claim duration.
• Total claim termination rates are relatively stable, with slight increases at older claim ages, with variability by gender, age, and claim duration. This is generally driven by increases in disabled mortality rates, partially offset by decreases in recovery rates.

We expect the updated edition of the Guidelines to be finalized and available for use with clients in the first half of 2024.

2023 Combination Product Experience Study

Milliman Long-Term Care (LTC) consultants concluded the 2023 Combination Product Experience Study. This study is the largest of its kind, collecting combination product (aka “hybrid” product) claims and summarizing these for use in assisting clients with assumption setting.

New to this study, our participating carriers include those with worksite as well as individual business. The experience study includes combination products that couple life or annuity products with LTC or chronic illness riders. We evaluate policyholder incidence rates, lapse rates, and overall insured population mortality.

Combination product LTC incidence continues to emerge substantially lower than standalone LTC company incidence rates. Our study notes substantial differences in experience for policies with extension of LTC benefits (EOB) than those policies that only accelerated death benefits (ADB) as shown in Figure 1 below.

Combination product LTC claim termination rates in the first claim year continue to trend lower than what we observe in standalone LTC company experience.

The participating companies receive a free copy of the report summarizing our results.

If you’d like to know more, or if you’d like to participate in future studies, please contact [email protected] or Dan Nitz ([email protected]), Robert Eaton ([email protected]), or Alyssa Lu ([email protected]) .

Rate Increase Survey

As a follow-up to prior surveys (most recently conducted in 2021), Milliman will solicit input for the third LTC rate increase survey. This survey focuses on LTC rate increase strategies and experiences across the industry. The survey will look to evaluate industry trends in rate increase filing outcomes, approaches to filing the rate increases, and underlying assumptions.

If you’d like to know more, or if you’d like to participate, please contact [email protected]  or Courtney Williamson ([email protected]), John Hebig ([email protected]), or Mike Bergerson ([email protected]).

Valuation Survey

Every three years, Milliman conducts a survey of long-term care insurance (LTCI) valuation practices, and we are requesting your participation in this year’s survey.

We consistently receive feedback that the Milliman LTCI Valuation Survey is a valuable resource to issuers for understanding the common valuation practices and trends in LTCI over time. As a participant in the survey, we will provide results immediately upon completion of the survey. For non-participants, we will make the report available six months after completion.

If you would like to know more, or if you would like to participate, please contact [email protected]  or Juliet Spector ([email protected]), Tim Kempen ([email protected]), or Evan Pollock ([email protected]).

Industry news

Education in the Long-Term Care Insurance Industry

The CLTC (Certified in Long-Term Care) designation recognizes professionals that have been trained in long-term care as an essential component of comprehensive financial, retirement, and estate planning.

CLTC has expanded its reach and influence in the LTC planning industry over the past several years by commissioning studies, organizing the annual CLTC Leadership Summit (with involvement from Milliman consultants), introducing consumer focused, educational tools and resources as well as a steady stream of educational assets for CLTC member use and new training programs. The 2023 Summit featured active dialogue and interaction between industry leaders from insurers and agents and advisors. The goal of the Summit is to foster mutual understanding of the issues that face the LTC insurance industry, and to learn how these issues are addressed in different places.

The 2023 Summit featured discussions on health and wellness in LTCI, as well as deep dives into how home long-term care is delivered (and can be improved), and what the products of the future may look like.

To learn more about CLTC, click here.

LTC reform update

Updates on LTC reforms in several states:

• Washington: Milliman continues to conduct actuarial analysis to support the Long-Term Services and Supports Trust Commission as it evaluates policy changes and program solvency (published here). Recently, the state legislature passed HB 2467, which allows individuals who move out of state to be eligible for benefits if they continue paying into the program. Additionally, Initiative 2124 was submitted to the Legislature and may be on the November ballot, which proposes making the program voluntary rather than mandatory. A fiscal note covering the estimated potential fiscal impact of Initiative 2124 by state agency can be found here, including a letter from the Office of the State Actuary starting on page 48.
• California: The Long-Term Care Insurance (LTCI) Task Force hosted a live call to the public that presented the final actuarial report on November 15th. This report included actuarial results for five previously recommended program design options. Work that Milliman performed in 2020 quantified similar plan designs and is being taken into consideration as part of the ongoing feasibility work by the Task Force.
• Minnesota: In October, the Minnesota Department of Human Aging and Disability Services Administration reviewed the updated stakeholder report including actuarial analysis to support the “Own Your Future LTSS Funding and Services Initiative” proposed program. The report focuses on three benefit plan designs: Care Navigation and Support Services, a Medicare Companion Benefit and a “Catastrophic-Lite” state-based program. These proposed plans focus on assisting individuals with household incomes of $25,000 to $125,000 and individuals in the beginning stages of LTSS needs. More information of these proposed programs can be found here.

Merger and acquisition (M&A) news

In December 2023, Manulife Financial Corporation (Manulife) announced a deal to reinsure four legacy blocks to Global Atlantic. The deal included an LTC block with CA$6 billion of reserves, which represents the largest ever LTC reinsurance transaction. According to Manulife, Global Atlantic will reinsure the LTC insurance risk with “a highly rated third-party global reinsurer”.

Last year we published an article (which can be found here) that speculated LTC blocks could be part of the next wave of M&A deals. The article touched on the following three attributes of blocks that sellers may consider and these generally appear to be reflected in the Manulife deal:

• Blocks should be stable with higher certainty to cash flows. Manulife indicated that the transacted block was more mature with an average attained age of 83 years.
• Blocks should be “bite-sized” with statutory reserves measured between $1 billion and $3 billion. The Manulife deal is slightly larger than this when measured in US dollars (approximately $4.5 billion).
• Sellers should consider packaging LTC blocks with other liabilities. In addition to US LTC, the Manulife deal included a block of US structured settlement business and two blocks of Japan whole life products.

The Manulife deal builds on momentum from two other M&A deals announced in 2023 related to LTC:

• In March, Continental General Insurance Company announced a deal to acquire a block of standalone LTC policies from Elevance Health, Inc. (formerly Anthem).
• In May, Lincoln Financial Group announced an agreement with Fortitude Reinsurance Company Ltd. to cede nearly $12 billion of its MoneyGuard statutory reserves, representing about 80% of Lincoln’s total in-force for MoneyGuard. MoneyGuard is a life/LTC hybrid product.

Milliman publications and news

Implementing a long-term care statewide program: See how tax rates could vary by state (milliman.com)

States across the country are grappling with the increasing challenge of how to finance LTC (which may interchangeably be referred to as “long-term services and supports,” or LTSS) and are beginning to consider new solutions they could employ, because government programs are currently the largest payer for LTC services.¹

Should providers steer toward or away from GUIDE? (milliman.com)

The Centers for Medicare and Medicaid Services recently released a request for application for its new Guiding-an-Improved-Dementia-Experience (GUIDE) model. The aim is to test an alternative payment methodology for the support and treatment of Medicare fee-for-service beneficiaries with dementia. In this paper, we discuss:

• Participant requirements
• How overall experience differs for beneficiaries with and without a dementia diagnosis code
• What revenues, expenses, and savings might look like
• Shared savings and Innovation Center accountable-care-organization models
• Is it worth applying for GUIDE?
• The impact on long-term care insurers and Medicaid
• What about Medicare Advantage?

Milliman in the community

The Society of Actuaries and Milliman announce completion of Climate Change Risk Certificate Program

The Society of Actuaries (SOA) and Milliman announced the completion of the first certificate program focused on measuring and managing climate risk for actuaries.

Milliman launches research tool built on CMS Qualified Entity Data

Milliman announced the availability of a new interactive research dashboard that shows healthcare provider performance metrics and social determinants of health (SDoH) characteristics.