Frank Thomas interviews Dr. Geri Bemberg. Geri specializes in prescription drug formulary and pharmacy benefit management solutions. Geri explains what a pharmacy benefit manager does. She covers the types of contracts PBMs make with plans, pharmacy groups and drug makers, and the differences between traditional and pass-through plans. Geri explains the benefits of having Stephens Insurance get involved between the plan and the PBM, and also offer formulary management and pharmacy benefit auditing. Finally, Geri leaves advice for plan managers to know how they can get the most transparent pharmacy benefit contracts to save money for their plans and their members.
[:24] Frank Thomas introduces Dr. Geri Bemberg.
[1:31] Over the years, the definition of a pharmacy benefit manager has changed quite a bit. Historically, pharmacy benefit managers have been evaluated on their ability to lower ‘total spend’ on prescription medicines for employers in health plans.
[1:49] Pharmacy benefit managers (PBMs) do this primarily by using their collective buying power to obtain discounts from pharmacies and rebates from drugmakers.
[2:01] At first, PBMs came onto the market as a way to electronically process prescriptions. Previously, the pharmacy had to send off paper prescriptions and it could take weeks or longer to find out how much they were going to be paid for them.
[2:21] When PBMs emerged, pharmacies could submit claims electronically. It also helped broaden pharmacy networks so patients traveling could go to different pharmacies where they were. Also, workers’ compensation plans could use multiple pharmacies.
[2:38] As pharmacy has changed and drugs have become more expensive, PBMs have started to take a more active role in plan management. You’ll start seeing them have clinical input. They’ll put prior authorization or step therapy on some medications.
[2:56] PBMs may also say we’re going to exclude a drug because they may have a rebate with another drug manufacturer for something similar.
[3:04] In the rebate area, PBMs may go to more narrow network pharmacy plans. A plan may completely eliminate a chain or group of pharmacies to try to get better rates at another group of pharmacies.
[3:27] The role of PBMs has changed over the years but essentially, they pay claims, they manage a pharmacy network, and now they’re in that plan management space. This is where Stephens believes they could use some help.
[3:42] PBMs would say they serve plans, consumers, and the market overall. Others might say PBMs serve themselves.
[4:04] Theoretically, PBMs should provide patients with greater access to the medicines at better cost. What is their process of negotiating rates with the wholesaler? Geri explains that the world of PBMs is opaque, at best. There’s not just one contract that’s held with a pharmacy supplier.
[4:26] PBMs first contract with the plan. If somebody is self-funded, or if they’re fully insured, they have a contract with a PBM to manage their pharmacy plan. Then, PBMs have contracts with pharmacies, in terms of a pharmacy network, negotiating a discount and providing a group of members.
[4:54] PBMs will also have contracts with manufacturers. Through these contracts, they negotiate a discount on the drug in exchange for a preferred place in the formulary. PBMs also have contracts from pharmacies to pharmaceutical wholesalers. The issue here becomes there’s not any clarity on what any of those contracts look like.
[5:45] The PBM is the holder of the ‘black box,’ if you will, on contracting and nobody’s really certain how the money is flowing.
[5:55] Stephens Insurance inserts themselves in between the PBM and the plan. They make sure that they guide the plan not only toward the best PBM for them but also the best contract for them.
[6:21] When Stephens Insurance is involved in monitoring the health plans, it benefits plan sponsors in four ways. First, plans get savings by knowing what you are paying for and second, by having that transparency put into your plan.
[6:55] Stephens talks plan sponsors through what the plan options are and how moving in a different avenue can save them money. Third, Stephens helps hold PBMs accountable to their plan contracts.
[7:14] Finally, Stephens helps provide guidance to the plan. After guiding the sponsors to a plan contract, Stephens is on hand to help find coverage solutions for issues that may come up throughout the year.
[7:43] According to the Pharmaceutical Care Management Association, over the next 10 years, PBMs are projected to save employers as much as $654 billion.
[7:54] PBMs can also push prices up. Geri explains it has to do with contracts. There are two main types of PBM contracts.
[8:28] The two types are traditional and pass-through. In a traditional contract, a PBM manages the pharmacy benefit for the plan. In return, they take some off the top of every claim they process for the plan. There is no way to know how much they take. In the contract, there is no limit to the spread.
[9:54] In a pass-through contract, there is no spread. In that contract, the PBM charges an administration fee that could be per claim, per month or per member, per month or per employee, per month.
[10:06] That charge is what the PBM makes on your plan. A big part of pass-through contracts is making sure that the rebate portion is also passed through to the plan.
[10:55] The PBM can drive up costs to the pian and to the member in a traditional contract. Geri explains how the plan pays more money to the pharmacy than they would in a pass-through contract.
[11:51] What ends up happening, is that as plans spend more money in pharmacy, they have to make up the difference somewhere, especially in self-funded plans.
[12:00] The plans make up the difference through increased premiums or reduced coverage. That’s where you start seeing the increase in costs.
[12:10] You also have the back-and-forth argument between PBMs and drug manufacturers that rebates are a big cost driver right now.
[12:33] So the rebate portion is something that’s very opaque in the industry. As we drive toward more transparency, hopefully, you will see that become more clear or go away completely.
[12:44] The only way to keep PBMs accountable is through transparency. Stephens gets better contracts for plans, so they know what’s going on in the pharmacy world, and Stephens also offers the auditing of how the PBM performs against their contract.
[13:24] Rising drug prices have been in the news for several years. They have been creeping up under the radar for many years. Several drugs are going through accelerated FDA approval.
[14:34] Accelerated approval happens when a disease doesn’t have many treatment options so the clinical trial segments are shortened to get the drug on the market sooner.
[14:47] Sometimes surrogate endpoints (e.g. a lower amount of uric acid in the blood) are used instead of clinical endpoints (e.g. a smaller number of gout flares) to accelerate drug approval. However, surrogate endpoints do not always translate to clinical endpoints.
[15:41] Geri tells how drug companies price their drugs as ‘cures’ after meeting surrogate endpoints, and they charge what the market can bear for a cure, when the drug may not really be a clinically effective treatment option.
[16:27] When you start looking at pricing on drugs, the market can’t bear what drug companies are charging. Geri gives the example of a drug that lowers the Hepatitis C virus in the lab 12 weeks out from treatment and is sold as a cure when the clinical results are not yet proven.This happens time and time again.
[17:10] In the case of Hep C, clinical results are starting to come in, and they look promising, but they are not complete.
[17:20] When you have high prices on medications, plans have to be more aware of how often they can provide that medication because there is a limited amount of funds. At the end of the day, you have to make sure those funds are dispersed the best way that you can disperse them.
[17:39] This puts both plans and consumers in a frustrating spot. Plans are frustrated because they have to say no. Plans have to turn on prior authorization or step therapies to limit access for drugs that are expensive and unproven.
[18:28] It’s extremely frustrating for the consumer who sees a commercial for a drug that sounds ideal and the plan administrator needs to say, not yet, or maybe you don’t need it at all. It puts everyone in a bad place.
[18:52] Stephens Insurance offers formulary management to plan sponsors to take a step further in a proactive approach. Formulary management uses clinical data to assess if a new drug is better than what is currently available in the market, or if it was based on surrogate endpoints and we need to wait and see how it translates clinically.
[19:42] Formulary management is able to help the plan control costs a little bit better. When a plan is able to know they are spending their money on the best drugs possible, then they are able to get better outcomes both on the pharmacy side and the medical side.
[19:57] Geri uses the example of diabetic drugs. They may lower your A1C but are they shown to clinically reduce the risk of any of the cardiovascular events or other clinical endpoints that diabetics deal with on a day-to-day basis?
[20:26] If the plan stays with drugs that are known to provide cardiovascular benefits as well as lowering blood sugar, that is the best way to spend the money that is available.
[29:41] Formulary management is not yet an industry standard. Geri notes that FDA head Scott Gottlieb says the FDA is not going to be the regulator of what plans should it should not cover. Plans are going to need somebody to help them make that choice.
[21:00] Plans don’t have the resources to hire pharmacists and educate themselves to figure out what they need to be covering for their members. They should work with a formulary manager.
[21:11] Stephens Insurance comes in with an unbiased third-party approach to formulary management.
[21:17] Stephens is not related to a PBM nor do they receive payment from PBMs. More plans will move in the direction of having a formulary manager as more drugs come out.
[21:33] The drugs coming out now are not $100 blood pressure medications. The new drugs are five-digit cancer treatments and five-digit per year cholesterol treatments.
[21:59] Geri hopes to see PBMs returning to the roles for which they were developed, network management and claims processing. Geri sees the rebate management and plan management aspects of PBMs as being too opaque.
[23:14] Increased consolidation between healthcare retail chains and insurers as well as between health insurers and PBMs is concerning for Geri. Consolidation traditionally leads to increased pricing.
[23:43] Only time will tell where consolidation is leading in the world of pharmacy benefits.
[23:53] Amazon purchased a company called PillPack recently. PillPack mails you your prescriptions. Amazon is known for their shipping service and quickness. It looks like they are getting into the pharmacy benefit world. Geri is interested to see where they will go over the next few years, possibly including PBM service.
[25:02] Geri considers how she might be able to help drive the industry in her position at Stephens Insurance. In this time of high prices, she sees opportunities for change in the pharmacy benefit world. Stephens Insurance can take this disruption and use it as teaching points for their plans and the plan members.
[26:28] Geri’s advice for plan sponsors: First, know your contracts. What are you paying for and who are you paying? Are you paying just for drugs, or for profit on the side? Ask how innovative is your plan design. Are you taking advantage of different PBM programs? Are you helping your members save money?
[27:15] Finally, Geri says, take a look at your formulary. What are you paying for in your drug benefit design? Are you paying for expensive, marginally effective treatments or for treatments with proven important clinical benefits?
[27:41] Geri says, we like to say we want to cover drugs that make your life better and longer. And so that’s really looking into your formulary and saying, are we doing those two things?
[27:53] Frank thanks Geri for this fascinating discussion and information.
[28:00] For more information on this topic, please contact Stephens Insurance at 1-800-643-9691. To listen to more Stephens Viewpoints, check out our website. Insurance products offered through Stephens Insurance, LLC, National Producer Number 8844362. Securities offered by Stephens, Inc., Member NYSE, SIPC.
Frank Thomas interviews Prentice McIntosh, continuing and concluding the conversation on hurricane preparedness in this episode of Stephens Viewpoints. Prentice and Frank discuss steps businesses should take after a hurricane. They focus on getting back to the property and meeting the claims adjuster as quickly as possible, putting in place temporary fixes to mitigate future losses, and revisiting the disaster recovery plan to make sure all aspects of the business are protected.
[:24] The previous two episodes, Part 1 and Part 2 of this conversation, covered how businesses can prepare ahead of a hurricane and during a storm. Today, we look at how businesses can deal with the aftermath of a storm.
[:41] Oftentimes during a major storm, businesses have to shut down, which can, in turn, impact the company’s revenue, staff members’ employment, and inventory. It goes back to having the natural disaster or hurricane preparedness plan. It’s important to begin to rebuild and fix the damage as quickly as possible.
[1:16] Contact any suppliers and vendors that you need to get your product back in line or to halt production for a period of time. Having things, like building supplies, prepared ahead of the storm so you’re not faced with inflationary pricing after the storm can greatly lower the cost of a potential claim.
[1:45] Have generators and fuel for the generators ahead of the storm. Fuel can be scarce or much more expensive post-storm. Thinking through those things ahead of the storm can help you lessen the impact of the storm after it’s over.
[2:08] In the last episode, Frank and Prentice talked about the 40% of small businesses that never reopen after closing for a hurricane. How can a business rebuild to ensure that this does not happen to them? Once you are allowed back on your property, assess the damages and make any immediate temporary fixes you can to minimize future loss.
[2:46] Document and photograph everything, including temporary fixes. As a Stephens Insurance customer, you will have been in touch with Stephens before and during the storm and loss adjusters will already be engaged and en route to see your property as quickly as possible to get you to the rebuilding phase and reopen as quickly as possible.
[3:17] Sometimes, lessons learned are the best way to revise your disaster recovery plans. Even after planning and running tabletop drills, testing your plan through a storm is the best way to reveal potential gaps to fix for the next disaster. Look back and see what you missed, so the next time you will be prepared even better.
[4:07] Stephens Insurance calls their clients proactively to advise them when a storm is tracking toward them, so even a business without a formal plan in place can take necessary precautions prior to that storm making landfall.
[4:54] If a company gets into the middle of a storm and they still don’t have a plan, they should call Stephens and the risk management, loss control, and claims departments will help them the best they can to mitigate loss and help them through that process.
[5:16] You need to look at all aspects of your company, from accounting to human resources, to IT, to suppliers — all aspects, so after the storm, Stephens and you can start over looking at all those areas of your business and help build a plan around any potential losses to any of those areas of your business.
[6:20] Not everything can be mitigated or avoided, so at that point, you would look to purchase insurance to cover those losses. That’s where Stephens Insurance can really be a team member for you to dovetail your insurance coverage and make sure all of your potential losses are potentially covered.
[6:52] Stay tuned for more insights from the Stephens Insurance team in the near future.
[6:56] For more information on this topic, please contact Stephens Insurance at 1-800-643-9691. To listen to more Stephens Viewpoints, check out our website. Insurance products offered through Stephens Insurance, LLC, National Producer Number 8844362. Securities offered by Stephens, Inc., Member NYSE, SIPC.
Mentioned in This Episode:
Frank Thomas interviews Prentice McIntosh, continuing the conversation on hurricane preparedness, in this episode of Stephens Viewpoints. Prentice and Frank discuss steps businesses may take to cover the business disruptions that come with a hurricane. These can include a storm safety plan, disaster recovery plans, business interruption coverage and contingent business interruption coverage.
[:41] According to FEMA, almost 40% of small businesses that close during a disaster never reopen. How can a small business plan ahead to fight these odds?
[:52] A hurricane preparedness or natural disaster plan is important. What is most important for small businesses is to make sure that they have business income within their property coverage. Business income coverage would continue to pay your lost income and key employees while your covered business is down.
[2:16] Transit disruptions, power failures, and storms affecting suppliers and vendors can have a trickle-down effect on small businesses that can cause them to close their doors. Consider contingent business interruption, a sister coverage to business interruption coverage.
[3:16] Part of your disaster recovery plan needs to identify those key suppliers. Are there other suppliers you could use in the meantime to keep you in business? If not, it would be very important to have this contingent business interruption coverage to bridge the gap until they are back up and running.
[3:41] How can a business prepare their staff for a hurricane about to hit? When the plan is in place, the plan needs to be communicated to all the employees and all the employees need to be aware of how this plan is going to play out. It would be very beneficial to have a tabletop drill of the plan so that everyone is familiar with it.
[4:24] Someone needs to have the role of maintaining contact information post-storm, because all of your employees are going to evacuate and be spread out. If there is a way to monitor that and communicate with those employees, that is very important.
[4:43] What are some of the steps companies need to take during the storm? The first concern is safety. If you don’t evacuate, you need to make sure you have safety, food, water, and a way to communicate with others that have evacuated so you can protect your property.
[5:25] If you do evacuate, being able to communicate with local authorities, staff, and other employees, and getting back to your location to assess the damage are all important.
[5:41] During the storm, for safety, turn off all the utilities that you can, stay away from any windows, and take normal safety precautions. If you hunker down, make sure you’re in a safe place and have taken the necessary precautions.
[6:09] In the next episode with Prentice McIntosh, Frank Thomas will discuss with her what businesses need to do following a storm.
[6:14] For more information on this topic, please contact Stephens Insurance at 1-800-643-9691. To listen to more Stephens Viewpoints, check out our website. Insurance products offered through Stephens Insurance, LLC, National Producer Number 8844362. Securities offered by Stephens, Inc., Member NYSE, SIPC.
Mentioned in This Episode:
Prentice McIntosh is interviewed by Frank Thomas in this episode of Stephens Viewpoints. Prentice and Frank discuss the steps businesses should take to plan for hurricanes and other disasters, how to recover from disasters, how to drill the disaster plan, and how to obtain appropriate property insurance.
[:31] Harvey, Irma, and Maria really whacked the U.S. last year. Prentice shares statistics. Insured losses are estimated at over $100 billion, with total losses at over $200 billion. The three main forecast centers predict 10 to 16 named storms in 2018, five to nine of those being hurricanes and one to four being major hurricanes.
[1:29] The impacts in 2017 were substantial. Stephens Insurance called their clients in the path of the storms and discussed their disaster recovery plans already in place in relation to the storms that were approaching and advised them to alert their loss adjusters to be at the ready before the storm so they would be at the top of the list.
[2:17] Stephens also advised clients to have building supplies and generators ready off-site, out of the path of the storm, so the impact would be as favorable as possible.
[2:45] A business can build a plan to have in place when a storm is approaching. The plan needs to incorporate all aspects of the business. Besides physical asset loss, it includes finance, human resources, and IT department. Look at how all areas of your business would be affected by a natural disaster and if you’re out of business for a time.
[3:28] Stephens’ Loss Control Group and Risk Management Group can be partners with clients to review their disaster readiness plans as they are being put into place to offer suggestions and to make sure that the plan is as robust as possible.
[3:47] Step 1 is to put the plan in place in writing. Step 2 is to do a tabletop drill. There are a lot of things to learn by going through a drill that you wouldn’t have thought of just writing it out. For instance, you might plan on the nearest warehouse being available to rent but 10 other companies might need to rent the same warehouse. Have a backup.
[4:39] Call your adjusters as the storm is tracking toward you to be at the top of their list. Store generators and building supplies off-site instead of trying to buy them when everyone else is trying to buy them. It’s very important to do the drill so that everyone goes through it. When a disaster happens, it won’t be the first time people see the plan.
[5:37] Both small and large businesses need emergency preparedness and disaster recovery plans. These need to be tailored exactly to the impacts a natural disaster would have on their business. This involves preparing for, reporting, and mitigating any losses that may occur. It’s important to have proper documentation in the event of a claim.
[6:19] As you go through your drill, assign different team members to have responsibilities for different parts of the disaster recovery plan. Team members will be assigned to contact all the employees and see that they’re OK. Make sure you have current contact information for all your employees. This is part of the plan.
[6:49] Make sure you have in your plan your preferred vendors for roof repair, water extraction and others that can help you recover as quickly as possible.
[7:04] Hurricane season runs from June to November. Prentice says there is no good time or bad time to build your plans. Review them early as often as needed, and especially as you make any changes to your business that would affect how you recover from a disaster. Review them at least every six months.
[8:02] At a minimum, reassess your plans annually, but as often as needed for your company.
[8:17] A disaster is a disruptive force. Key areas to plan for are all areas of the business that will be affected. Look at how you can minimize disruption or loss in each area of the business. If you can’t avoid or mitigate the risk, then you need to finance the risk with appropriate insurance coverage.
[9:07] Stephens has a manuscript form; special language built into property coverage that would respond to a natural disaster loss. Obtain the correct coverage that would protect you in the event of a loss and help you rebuild as soon as possible. Prentice stresses the importance of drilling your plans, so no one is surprised. Revise it.
[9:55] Stephens’ Risk Management and Loss Control Groups like to be support team members with the insureds to work with them as they’re building their plan. Stephens does not write the plan for the insureds because there are things only the insureds would know, but they help the insureds to follow best practices as they write their plans.
[10:41] Stephens will tailor insurance coverages that mirror the needs in the loss recovery plan, including business interruption and contingent business interruption for your major suppliers that are affected by the disaster. There are lots of things to look at and tailor into your property insurance coverages to have the best result possible.
[11:30] In the next episode with Prentice McIntosh, Frank Thomas will explore with her the unexpected hurdles that businesses can face when impacted by a hurricane.
[11:39] For more information on this topic, please contact Stephens Insurance at 1-800-643-9691. To listen to more Stephens Viewpoints, check out our website. Insurance products offered through Stephens Insurance, LLC, National Producer Number 8844362. Securities offered by Stephens, Inc., Member NYSE, SIPC.
Mentioned in This Episode:
Todd Whitthorne, President of ACAP Health Consulting, and Tom Kane, Executive Vice President and Director of Life & Health for Stephens Insurance, are interviewed by Frank Thomas in this episode of Stephens Viewpoints. Todd, Tom, and
Frank discuss the epidemic of obesity in America and around the world.
[:31] According to the CDC, productivity losses from missed work cost employers about $225 billion annually, not to mention the impact that prolonged absences from work have on the individual.
[1:00] ACAP’s mission is to measurably improve the health of the employee population by impacting the risk factors that contribute to costly conditions that are preventable. ACAP partners with Stephens in this mission. Client companies seek intentionally to improve employee health over time.
[2:45] Tom presents a 4,000-employee population client case study. In five years, almost 2,000 client employees participated in Naturally Slim, for an aggregate weight loss of almost 20,000 lbs. Their cost curve is back to 2006 numbers.
[3:46] Health touches everything, especially productivity and employee happiness. There are many benefits to a company culture of health. Most of today’s top-performing companies have a strong culture of health.
[4:46] 40% of American adults are obese, meaning their Body Mass Index is 30 or greater. In 1980 that number was about 15%. It is predicted that 60% of today’s children will be obese by age 35.
[5:44] If we do our job properly, we can deliver interventions that are clinically measurable, that we can put performance guarantees around, and that are imminently scalable, and that are easy for the employer and the employee to facilitate.
[6:09] Stephens is great at helping companies understand the value of a program where people feel better, sleep better, miss less work, and are happier. No one loses in that equation. The C-Suite needs to lead by example. Everyone needs to feel personal accountability for their health. This includes spouses and children.
[7:24] Todd sees “wellness” two ways; cultural wellness programs and clinical wellness. He explains Metabolic Syndrome in terms of a scoreboard, with blood glucose being the most important score.
[8:41] Todd examines the numbers behind wellness programs. If you can prevent an employee from converting from prediabetes to diabetes, that’s great. 37% of Americans are prediabetic. 90% of them don’t know it. 12% of Americans are diabetic. Individuals want to look and feel better.
[9:47] No one has more impact on your health than you do.
[11:34] Naturally Slim helps people with their behavior and habits. There are weekly lessons that help with skills around food.
[15:00] Social contagiousness applies to weight loss. A lot of people lean in toward success.
[16:37] Hunger is a continuum.
[18:11] Some individuals in Tom’s department have had tremendous success with Naturally Slim. Small incremental weight loss can have dramatic improvement in health.
[19:21] How should employers address the health concerns of the various generations in their workforce? Personalize the message and meet people where they are.
[20:57] Todd says leadership from the C-Suite is the most critical aspect of a culture of health. Tom says you’ve got to be able to challenge the status quo. If you want different outcomes, you have to have different strategies.
[23:31] If you want more information, please don’t hesitate to contact Stephens Insurance.
Kara Trott, Founder and CEO of Quantum Health and Walker Bowden, Director of Self-Funded Marketing for Stephens Insurance, are interviewed by Frank Thomas in this episode of Stephens Viewpoints. Kara, Walker and Frank discuss innovations in engagement that allow members to navigate much better the healthcare maze.
[:48] Kara’s career before healthcare was working with companies connecting with customers on their journey purchasing consumer goods and services — where people were getting value during the journey.
[1:40] Kara moved into healthcare in an advisory role on managed care strategies. She saw a fundamental problem with the healthcare journey being a bewildering experience for the consumer. She considered ways to shorten the journey and reduce costs.
[3:00] Employers, working with advisors like Stephens, work to get advances in care and treatment to connect effectively with humans. The system, as is, is too complex and benefits are hard to access.
[4:10] Kara wants someone to be primarily responsible for guiding a person requiring healthcare through the journey. She sees companies recognizing that people on a healthcare journey do not act or engage the same as people on a chosen journey.
[4:51] Walker says employers struggle to connect their employees to the services they need when they need them. The Quantum Real-Time Intercept helps to engage employees earlier and catch things when there is time to intervene. Engagement is over 60%. Cost savings come when preventive care is used.
[6:36] Kara sees Quantum Health as an industry disruptor by engaging the member in a customer model rather than a transaction model.
[8:40] Companies are responding to the model. Quantum has grown at 40% a year over the last 10 years. Companies are looking for solutions to get the best from the network.
[10:16] Walker sees that a variety of clients are embracing the Quantum model. Walker explains the Quantum model. It is a one-stop shop for employees.
[12:18] Karen sees advances in technology as positive. But while technology advances, the human experience does not change. The need for healthcare causes agitation. This agitation literally shuts down cognitive functions. There needs to be an expert guide.
[14:17] Walker explains the goals of the Stephens and Quantum Health partnership. They want to educate employers to understand that, from a self-funded viewpoint, there’s a different way to manage risks. Compare your current model to Quantum’s services.
[16:00] Quantum Health calls themselves ‘Healthcare Warriors.’ Members have a better experience and they achieve health savings.
[17:31] Stay tuned for more insights from Stephens Insurance.
Olin Wage, Senior Vice President and Long-Term Care Advisor for Stephens Insurance, is interviewed by Frank Thomas in this episode of Stephens Viewpoints. Frank and Olin discuss why long-term care insurance should be considered as part of a prudent retirement plan, the options available, and options for providing for long-term care needs and expenses.
[:44] Olin explains that long-term care addresses the needs of an individual because of a chronic condition, accident, or trauma, which requires assistance with the basic activities of daily living, including transferring, toileting, bathing, dressing, and eating.
[1:18] There are six activities of daily living. To qualify for a long-term care claim the individual needs assistance with at least two of the six activities. Alternatively, a cognitive impairment alone could qualify a person to receive benefits.
[1:39] Many researchers estimate that more than half of today’s 65-year-olds will need long-term care, at an average total cost of $138,000. A recent Forbes article says only 89,000 bought private long-term care insurance in 2016, a decline of 14% from 2015.
[2:06] Unfortunately, most people think that the government, their health insurance, or disability policy will take care of long-term care expenses. Some people assume that they can self-insure, without actually investigating the implications of using assets to pay for expenses.
[2:29] Medicare and Medicaid are not good for long-term care. Medicare is very limited and only pays for skilled care, up to 100 days. Medicaid requires a person to be financially poor to qualify.
[2:52] Purchasing long-term care in your mid-forties to mid-sixties is optimal. It’s important to act while you’re in good health, because the cost of long-term care is highly dependent upon your physical condition.
[3:14] It’s important to have long-term care insurance in place before you become disabled and dependent on care, even before your retirement age. Income from a disability policy won’t be sufficient to cover the long-term care expenses.
[3:44] In a typical long-term insurance claim, people qualify for benefits after 90 days. Benefit periods run from four to 10 years. The average length of care needed is statistically less than three years.
[4:17] Insurance companies are trying to minimize their risk to a sustainable level by reducing benefit durations and having a broader selection of inflation riders. Some insurance companies are offering life insurance policies with long-term care riders. Also, annuities have been used for long-term care benefits.
[4:56] Elder care costs continue to rise. Live-in facilities may cost in excess of $90,000 annually. Insurance companies adjust for increases in cost through inflation riders on the long-term care policies. Each year that you own the policy, the benefit increases.
[5:37] Stephens advises clients, both individuals and employer group clients to include long-term care in their overall financial plans. Having a long-term care policy protects their financial plan and their investment portfolio, and protects their family from becoming their caregivers.
[6:18] More and more employers are embracing long-term care benefits for their employees, largely because of the tax benefits associated with the deductibility of the premium for companies, and also the tax-free benefits for their employees. Some employers carve out their top executives and provide long-term care benefits for them.
[7:01] Olin is encouraged to think that long-term care benefits will become a common employer benefit offering as employers learn the tax benefits on both the employer and employee sides.
[7:33] Clients should make sure that they have a financial advisor that is well-versed in long-term care. Clients should involve all their advisors — attorneys, CPAs, insurance agents. When all are involved, it works for the betterment of the client. The need for long-term care is an integral part of their retirement plan.
[8:20] Retirement health-related risk could involve the need for long-term care insurance. If you are limited in the six activities of daily living, and you need help in that regard, there needs to be a means of paying for those expenses. Especially if you need multiple caregivers or 24-hour care, the expenses are higher than average.
[9:32] Another option beyond the traditional long-term care policy is a life insurance policy with a long-term care rider. Discuss this with your Stephens Insurance advisor and your other retirement plan advisors.
[10:00] For more information on this topic, please contact Stephens Insurance at 1-800-643-9691. To listen to more Stephens Viewpoints, check out our website.