Group captives offer a long term care solution: VCIA panel
Group captives represent a possible solution to some of the biggest issues posed by the continued growth of the long-term care (LTC) market in the US.
At a discussion session at the Vermont Captive Insurance Association’s (VCIA) annual meeting, attendees were told that the number of people in the US who require LTC is currently 14 million – but it is projected to hit 24 million by the year 2030.
The speakers included Karin Landry, managing partner, Spring Consulting, Greg Nowakowski, partner at Honigman, Greg Cook, vice president at CARE Risk Retention Group and Heather McClure, chief risk advisor, US Healthcare at Aon.
According to figures cited at the presentation around 70 percent of Americans will need LTC services of some kind after the age of 65, with an average cost of $8,000 a month for LTC. The average LTC stay in some form of accommodation being 2.4 years, although female patients typically stay for longer.
One potentially good solution for a group of organisations involved in the LTC market is forming a group captive or a risk retention group (RRG). According to the discussion group the benefits of a group captive include the ability to accelerate cash flow through premium, claims and reserve funding, the ability to reduce frictional costs, including commissions, risk charges and administration, the fact that they purchase fewer external premiums and finally group purchase power.
Advantages of an RRG include the fact that they can be multi-state and are easy to register in new states, their flexible structure, with a single policy over multiple states. They can potentially secure a Demotech rating approved by the US Department of Housing and Urban Development. Also, the insureds are owners who share in underwriting and investment profits.
The panel also looked at overviews of some of the specific LTC programmes that are being developed in the US that cover this area. These included Washington’s WA Cares Fund, the California Partnership for Long-Term Care and the Massachusetts Managed Care programme.