2012--Year One of the Silver Tsunami Comes to an End

2011 was a benchmark year for the Baby Boom generation. By the time the clock strikes mid-night and we welcome 2012, almost 4 million Baby Boomers will have turned 65 years of age. During the 365 days of 2011, ten thousand Americans turned 65 each and every day. 2012 is only the second of a twenty year journey where that pace continues annually until it ends with almost 80 million Baby Boomers crossing the threshold of age 65.

What other benchmarks occurred in 2011?

• MetLife exited the long term care insurance market, and additional departures from the market are anticipated this year;
• The CLASS Act was enacted and then killed in the midst of a Medicaid funding crisis to pay for costs of long term care across the United States;
• Medicaid spent $427 billion prompting CMS to summarily cut all long term care funding by Medicare and Medicaid across the board 11.1%;
• We saw equity in American homes drop to under 50% for the first time in our nation’s history to just under $10 trillion, and by comparison, in-force life insurance now stands at almost $30 trillion;
• NCOIL passed the Life Insurance Consumer Disclosure Model Law to attack the massive problem of seniors abandoning life insurance policies because they are unaware of alternative options;
• State legislatures started looking at how converting life insurance policies into long term care benefit plans could save tax payers money by extending the spend down period before Medicaid eligibility;
• The Florida Legislature introduced a first in the Nation consumer protection bill (HB 1055) that provides for conversion of a life insurance policy into a long term care benefit plan as a Medicaid eligibility requirement, use of accelerated death benefits to pay for nursing home (SNF) costs, and mandates the NCOIL Life Insurance Consumer Disclosure Model Law.

What we are seeing as we enter 2012, is a growing awareness that this $30 trillion pool of in-force life insurance policies is an asset base of immense proportions and a source for long term care funding solutions. But, the policies are in the hands of owners that for the most part have no understanding of their legal ownership rights and the variety of options available to use their property while still alive. Seniors in particular have been the most vulnerable to lack of information, and therefor disproportionately abandon life insurance policies in their final years.

This lack of information coupled with difficulty affording premium payments, disappearance of the original insurable interest when the policy was initiated (the children have grown up and/or lack of spouse), and life insurance ownership counting against Medicaid eligibility all conspire to push seniors to needlessly abandon policies. Consumer protection measures such as the NCOIL Model Law and Florida legislation, long term care funding options such as policy conversions, and education efforts spear headed by the assisted living and nursing home industry will have a major impact in 2012.

This is the year when policy owners will start to come out of the dark in large numbers. As they become better informed about their legal rights of ownership and alternatives to policy abandonment, they will realize that a life insurance policy they are about to discard can be put to much better use helping them pay for long term care. And based on the growing demographic tide, ongoing economic malaise, cuts by the government in Medicare and Medicaid (as well as elimination of programs like CLASS act), and the very challenging marketplace for long term care insurance-- the emergence of another private market funding solution for long term care services comes not a moment too soon.

If 2011 was the year of challenges and a search for solutions; 2012 will be the year of awareness and implementing solutions.