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Following is a Letter to the Editor of the National Underwriter from Samuel X. Kaplan in response to Greg Gurlik's Letter to the Editor—January 4, 1999: 

National Underwriter—January 25, 1999 

More on What 'Responsible' LTC Companies Should Do


Several points in Greg Gurlik's Jan. 4, 1999 letter to the editor concern me. The long-term care industry should serve the consumer, rather than the reverse. 

The consumer does not need to "ensure the long-term viability of the company" (insurer)—the insurance companies have done that for themselves by making sure they receive full margin, full risk charge, full expenses and all of the interest credit on all of the reserves held. And they have added another dandy—"Active Life Reserves." This is a unique reserve for long-term care that is held for every active LTC participant covered by the plan. 

The profits already reaped by LTC insurers do not even include the latest insurance company bonanza through HIPAA. This law has no impact on non-tax-qualified LTC plans, but allows qualified plans to use a different reserving method (one-year preliminary term method) in calculating policy reserves instead of the two-year preliminary term method required for non-qualified plans. The tax savings due to the reduction in the preliminary term period are used to increase after-tax profits for insurance companies by approximately 12 percent over each policyholder's lifetime. 

This windfall is in addition to the large reduction in claims processed and paid as a result of the 90-day chronic condition definition in qualified policies. 

Any wonder that insurance companies promote tax-qualified plans, but do nothing about passing the savings on to the policyholder? 

Mr. Gurlik said: "All of us in the industry... should be striving to ensure that all LTC insurers can meet their long-term obligations without unduly burdening policyholders with premium increases." The inference is that the introduction of the "liberal benefits" that consumers are requesting at a reasonable premium will result in an increase in premiums. Then why have a majority of the 10 largest LTC insurers increased premiums or reduced benefits over the past five years without introducing any new "liberal benefits?" 

And insurers wonder why LTC doesn't sell—it simply costs too much and offers too little to the consumer. 

If "responsible companies" really want to aid the policyholder and make LTC affordable, why don't they address quality issues to reduce costs while enhancing the value of the policy for their insureds? 

If you ask me, the buck is not stopping. It is literally disappearing into the black hole of insurer profits. 

Founder and Chairman
U.S. Care, Inc.
Santa Monica, CA

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