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Long Term Care Analysis
Hays Companies of Wisconsin
May 19, 2014
Long Term Care Analysis
TABLE OF CONTENTS
•  Long Term Care – Market Overview
•  Existing KUSD LTC Program Summary
•  LTC Plan Statistics
•  Summary and Considerations
LONG TERM CARE – MARKET OVERVIEW
Long Term Care – Market Overview
§  Underwriting performance of many LTC Carrier portfolios has been seriously
challenged by:
§  Higher than expected frequency and severity of present and projected claims
§  Low participation rates
§  As a result market leaders have:
§  Suspended new sales
§  Closed their active plans to new entrants
§  Imposed substantial rate increases
§  Left the market altogether.
§  Employer Concern:
§  What options are available to employees, retirees, and their families for
addressing the financial risk if LTC is no longer offered as an employer paid
benefit?
Financially, the only way to make private insurance work is to spread risk over a wide base of
policy holders. But the cost of long-term care coverage makes it unlikely that millions of healthy
people will purchase policies. This was the economic calculus that doomed the Class Act, the
voluntary long-term care insurance program that was originally part of the Affordable Care Act.1
1
NY Times Sept 19, 2013 No Easy Answers on Financing Long-Term Care
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Long Term Care – Market Overview
§  Currently, Genworth is the only national insurance carrier offering Group
Long Term Care insurance to new customers
§  The following insurers have exited or closed enrollment in the Group Long
Term Care insurance market within the last decade:
§  Aetna – total exit in 2009
§  John Hancock – suspension of new GLTC sales, closure of all GLTC plan to new
entrants, filing for 45% rate increase on all in-force GLTC customers
§  MetLife – cessation of Group and Individual LTC sales, closure of all GLTC plans
to new entrants, filing for 45% rate increase on all in-force GLTC customers
§  CNA – official cessation of new GLTC sales in 2011, although CNA has not been
engaged in any meaningful effort to grow their LTC business in years
§  UNUM – cessation of GLTC sales , filing for 75% rate increase on some in-force
GLTC customers
§  Prudential – cessation of Group and Individual LTC sales, closure of all GLTC
plans to new entrants as of 6/2013
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EXISTING KUSD LONG TERM CARE PROGRAM SUMMARY
Existing KUSD LTC Program – Insured by WEA Trust
Offered to:
§  Teachers (members of KEA)
§ 
§ 
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§ 
Active Teachers – paid for by KUSD
Retired Teachers between the ages of 55 – 64 if enrolled prior to retirement – paid for by KUSD
Retired Teachers age 65 and older if enrolled prior to retirement – paid for by retiree
Spouses of active teachers and retirees are eligible to participate at no additional premium, but are
subject to medical underwriting – paid for by KUSD until retiree reaches age 65
Background:
§ 
The Long Term Care (LTC) policy was written as a package with Life and Long Term
Disability insurance for the KEA (active and retired) effective January 1, 2000. Due to a
significant rate increase on the renewal, Life and LTD were moved to NIS effective July 1,
2013.
§ 
The LTC renewal was offered at a 9.5% rate increase by the WEA Trust. The annual
premium for the LTC program is about $2M.
§ 
KUSD made the decision to terminate the policy as it exists today, effective June 30, 2014.
§ 
WEA does not offer a group sponsored voluntary plan, whereby the participants could pay
the premium, but at a group rate.
§ 
WEA will not continue the group sponsored plan if paid by the employer and offered to only
retirees.
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Existing KUSD LTC Program – Insured by WEA Trust
Benefits:
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Existing KUSD LTC Program – Insured by WEA Trust
Historical Premium Paid Directly By KUSD:
Enrollment Ac6ve Teachers Premium Monthly per individual Annual Total 7/1/2011 -‐ 7/1/2012 1,466 7/1/2012 -‐ 7/1/2013 1,466 7/1/2013 -‐ 7/1/2014 1,466 7/1/2014 -‐ 7/1/2015* 1,466 $78.00 $85.40 $93.50 $102.85 $1,372,176.00 $1,502,356.80 $1,644,852.00 $1,809,337.20 Enrollment (per WEA roster) Re6rees age 55-‐64 300 300 300 300 Premium Monthly per individual $78.00 $85.40 $93.50 $102.85 Annual Total $280,800.00 $307,440.00 $336,600.00 $370,260.00 Grand Total Enrollment Premium Annual Total $ Increase % Increase 1,766 1,766 1,766 1,766 $1,652,976.00 $1,809,796.80 $1,981,452.00 $2,179,597.20 $156,820.80 $171,655.20 $198,145.20 9.5% 9.5% 10.0% *Assumes 10% Annual Increase
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Existing KUSD LTC Program – Insured by WEA Trust
Historical Premium Paid by Retiree directly to WEA Trust:
7/1/2011 -‐ 7/1/2012 Enrollment Re6rees age 65 and over Premium Monthly per individual Annual Total $ Increase % Increase 7/1/2012 -‐ 7/1/2013 177 $78.00 $165,672.00 177 $85.40 $181,389.60 177 $93.50 $198,594.00 $15,717.60 9.5% $17,204.40 9.5% Annual Premium by Payor $3,500,000 $3,000,000 $2,500,000 $2,000,000 7/1/2013 -‐ 7/1/2014 $1,652,976 $1,809,797 $1,981,452 $2,179,597 $2,397,557 $2,639,497 $2,907,816 $1,500,000 $1,000,000 $500,000 $165,672 $181,390 $198,594 $218,453 $240,299 $262,144 $283,989 7/1/2011 7/1/2012 7/1/2013 7/1/2014* 7/1/2015* 7/1/2016* 7/1/2017* $0 KUSD 10
Re6rees *Assumes 10% Annual Increase
LTC PLAN STATISTICS
LTC Plan Statistics
WEA Trust Manages Transition of Employer Based Plan to Individual Plans
Financial impact to KUSD: $2M Annual Savings
§ 
If the LTC plan in its current form terminates on 7/1/2014.
§ 
WEA Trust offered to meet individually with each participant; actives, pre and post 65 retirees to
explain their options, as follows:
§ 
All current participants may convert their coverage to an individual private pay policy. The cost of
this coverage is the responsibility of the participant and is expected to increase annually, due to
inflation and advancing age of the participant.
§ 
§ 
§ 
Most participants will be offered an opportunity to buy up their policy in whole. This buy-up option
is estimated to cost on average, $40,000 per individual, and only participants that have been on
the plan for a minimum of ten years will be offered this option.
§ 
§ 
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For retirees, the premium for the converted policy at the time of termination is estimated at $264 per month
on average. Some individuals actual cost will be much higher, some being over $500/month.
Spouses of retirees wishing to convert their coverage will be charged a separate premium on the individual
policy. Average monthly premium for spouses of retirees is about $468, some being over $600/month.
Approximately 13 retirees have not been on the plan for ten years, and would therefore not be eligible for
the buy-up option.
Further analysis will be necessary to determine the number of active employees on the plan for less than ten
years.
Per WEA Trust, this approach has been adopted by other school district clients moving away from
the financial liability of the LTC employer-based plans.
§ 
Concern: Longevity of plan existence with WEA Trust
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Cost of Current Board Action (6/25/2013)
“. . .approve the cancellation of the Long Term Care policy for all active employees, a
recommendation of a six month transition period for retirees, and that the District provide a
“paid up” policy for the 186 retirees currently covered by the plan. Motion Carried.”
§ 
The LTC plan in its current form terminates on 7/1/2014
§ 
KUSD will buy-up the LTC for the post-65 retirees
§ 
Currently,163 post-65 retirees on WEA census; 7/1/2014 shows additional 24 pre-65 retirees
moving to post-65
§ 
Average approximate cost per retiree = $40,000
§ 
Post-65 retirees = approximately $7,480,000
§ 
Considerations:
§ 
This option includes enrolled spouses of the post-65 retirees. They are rated together with
the retiree at one amount. (No added expense for including spouses; no savings by
excluding spouses.)
§ 
The buy-up provision requires the individual be on the plan for a minimum of ten years to be
eligible for this provision.
§ 
Further discussion to be conducted with WEA Trust to allow payment in installments over
multiyear arrangement.
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* These figures represent estimates, based on current census
information. Final expenditure will be determined by WEA Trust
Option LTC Plan Continues – with Modifications*
WEA Trust Manages Transition of Employer Based Plan to Individual Plans (Conversion)
Annual Premium by Payor $2,500,000 $2,000,000 $1,652,976 $1,809,797 $1,981,452 $1,581,427 $1,500,000 $1,000,000 $500,000 $165,672 $181,390 $198,594 7/1/2011 7/1/2012 7/1/2013 $0 $0 KUSD Re6rees *Assumes 10% Annual Increase
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* These figures represent estimates, based on current census
information. Final expenditure will be determined by WEA Trust
7/1/2014* Option LTC Plan Continues – with Modifications*
Annual Premium Pre-65 Phase Out
$350,000 $327,063 $302,749 $300,000 $273,289 $250,000 $211,911 $200,000 $157,208 $150,000 $139,138 $96,204 $100,000 $55,317 $26,456 $50,000 $0 7/1/2014 7/1/2015 7/1/2016 7/1/2017 7/1/2018 7/1/2019 7/1/2020 7/1/2021 7/1/2022 KUSD *Pre-Age 65 Sunset with no more enrollees
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* These figures represent estimates, based on current census
information. Final expenditure will be determined by WEA Trust
$11,641 7/1/2023 7/1/2024 SUMMARY & CONSIDERATIONS
Summary & Considerations:
SUMMARY:
§ 
Ongoing efforts to offer a viable, affordable LTC program to employees (whether active
or retired) will be frustrated by the lack of marketplace options
§ 
Cost escalation for any LTC program offering will be substantial over the next 5+ years
CONSIDERATIONS:
§  Terminate LTC offering to active and retired employees effective 7/1/2014
§  Pre-65 retirees: Obligation to provide coverage?
§  Post-65 retirees: Convert to individual policies?
NEXT STEPS:
§  Illustrate additional scenarios and or coverages?
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* These figures represent estimates, based on current census
information. Final expenditure will be determined by WEA Trust

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