AmericanAcademyOfActuaries

One large carrier has stopped offering long-term care insurance, another has raised rates up to 90 percent, and the federal government has canceled plans for long-term care coverage aimed at low-income people, even though Congress had approved it.
 

A joint Academy/SOA working group recently updated the NAIC’s Health Actuarial Task Force on efforts to develop a group LTD valuation table. In their update report, the actuaries suggest that regulators could provide detailed rules for setting termination assumptions. In addition, the actuaries said that reserves should be higher than 100 percent of an insurer’s own claims experience and also higher than 130 percent of what the valuation table shows the expected claims level to be.
 

Academy Senior Pension Fellow Don Fuerst told Employee Benefit News that he believes DB plan terminations will continue in 2012—but that there will not be a huge spike in terminations. “Because interest rates are low right now and asset values are depressed, plan terminations are expensive,” Fuerst explained. “Companies may wait until the markets recover a bit before making a termination decision. While the corporate bond rate is higher than lump-sum rates in recent years and higher than annuity rates would be, companies would not see a huge gain right now if they terminate their plans.”
 

In an overview of the continued election-year focus on health care reform, Senior Market Advisor observes that the demise of the CLASS Act last October was a setback—but one not completely unexpected within the industry. Malcolm Cheung of Prudential Insurance and a member of an Academy group that reviewed an early version of the CLASS Act is quoted: “We had recognized as actuaries that there were some program design issues that would make the program itself very difficult to manage over the long term.”
 

Commenting on a cost accounting rule change that will require the U.S. government to reimburse federal contractors at a higher rate for the contractors’ employee pension costs, Academy Senior Pension Fellow Don Fuerst told Federal Times that contractors still will be contributing more to their pension plans than they are reimbursed—although the gap will narrow.
 

GM salaried employees in their mid-40s to mid-50s and who have worked for the automaker for at least 10 years are those who would be hurt most by GM’s recently announced plan to freeze contributions to its DB plans, according to Academy Senior Pension Fellow Don Fuerst. Fuerst also noted that since many plan sponsors do not enhance their 401(k) contribution after a DB plan is frozen, GM’s decision to do so is a plus.
 

American Academy of Actuaries Senior Pension Fellow Nancy Bennett says in an interview, “Our position from an actuarial viewpoint is that contingent annuities are annuities, not financial guaranty products.” The Academy commented on contingent annuities to the NAIC. “They contain similar risks as VA contracts that are already issued by life insurance companies,” Bennett added.
 

American Academy of Actuaries Senior Pension Fellow Don Fuerst is cited for providing data on life expectancy at 65 for someone who retired in 1950 (14 years) compared to someone who retires today (20 years). Fuerst also noted that while there are 100,000 Americans 100+ today, projections are that by 2050 there will be more than 1.1 million older than 100.
 

Insurance brokers and agents in Vermont face a gloomy financial outlook under health care reform. Regarding a concern that the law will encourage brokers to direct healthy people to certain health plans, the article cited an American Academy of Actuaries issue brief and explained that “the law will require plans with lower-than-average risk to compensate plans with higher-than average risk, eliminating the incentive to only insure healthy people in order to save money.”
 

Steve Schoonveld, co-chairperson of the Joint American Academy of Actuaries and Society of Actuaries CLASS Act Task Force, notes that average annual nursing home expenses range from $85,000 to $120,000 a year and that the cost for six hours a day of in-home care starts at around $40,000 a year.
 

Former American Academy of Actuaries Pension Vice President Ethan Kra is quoted extensively. “There’s a fundamental difference in perspectives” between AMR’s valuation of its pension obligations and the estimate of the Pension Benefit Guaranty Corp (PBGC), Kra said. “The PBGC is using a very conservative rate,” he noted.
 

American Academy of Actuaries statement released before the 2012 State of the Union was discussed; the actuaries identified four policy priorities needed to restore the nation’s fiscal health and financial security.
 

The Academy was cited in an op-ed by Rep. Charles Boustany Jr. for expressing concerns with the Community Living Assistance Services and Supports (CLASS) Act.

The Academy Contingent Annuities Work Group's analysis of contingent annuities that was provided to the National Association of Insurance Commissioners on Oct. 28 was cited. The work group concluded that contingent annuities differ from financial guaranty insurance and should not be classified as such. Rather, the work group said contingent annuities should be classified as a type of annuity product.

The Academy’s former Risk Management and Financial Reporting Vice President Henry Siegel and former Life Financial Reporting Committee Chairperson Leonard Reback discussed the Financial Accounting Standard Board’s new guidance for acquiring and renewing insurance contracts.
 

The Academy Contingent Annuity Work Group’s report to the National Association of Insurance Commissioners (NAIC) Contingent Deferred Annuity Subgroup during a Dec. 22 conference call and a related Oct. 28 analysis provided to the NAIC were discussed. Academy Life Products Committee Chairperson Cande Olsen was quoted. Olsen said that the Academy work group concluded that contingent annuities are similar to products with guaranteed lifetime withdrawal benefit (GLWB) and that the basic regulatory framework in place for other products can be applied to contingent annuities “with little or no modifications."

Academy Senior Pension Fellow Don Fuerst discussed efforts to extend a temporary cut to Social Security payroll taxes. He said the payroll tax cut is being used as a tool to manage today's economic conditions, but that Social Security's long-term challenges are not being addressed.

The Academy Medicare Steering Committee's letter to the Joint Select Committee on Deficit Reduction was cited and briefly discussed. The actuaries urged the committee to address Medicare’s solvency and sustainability by developing proposals to slow health care spending growth.