Flattening the Claims Curve

A few years ago, anyone talking about ‘flattening the curve’ for long term care (LTC) claims would have had to do a lot of explaining unless they were talking to a specialist audience.

For some of us working in the LTC industry, it’s something we have been aware of for a long time, but it’s only in the last five years that it’s become a wider industry focus. Since the liquidation of LTC insurance company Penn Treaty, the huge reserve hit leveled on GE’s LTC reinsurance business and combined with a growing number of claims, “flattening the curve’ has become a well-known and important strategic initiative for all insurers with risk exposure in this area.

In the past, insurance companies didn’t do anything to try to impact claims. Most LTC policies are so-called reimbursement policies, meaning that the policyholder incurs an expense for care, and the policy pays them back for those costs. Put simply, the claims came in and the money went out.

But that changed as insurance companies first realized that their pricing was understated, and the claims were not only much higher than expected, but also lasting longer. This created a sense of panic across the industry that they were losing a lot of money. And the problem is getting bigger – since many of these policies were written between 1996 and 2005 and claims are growing as those policyholders are heading into their 80s.

In 2022, there were approximately 300,000 LTC claims that paid out $11 billion in benefits.  These numbers will continue to grow as the policyholder base ages, putting more pressure on insurance company financials and driving continued rate increases.

As the population ages, and as advances in medicine and technology enable people with serious disabilities to live longer, the number of people in need of LTC services will also continue to grow.

This realization made a significant shift in the insurer’s mindset – from reactionary to proactive. Now, as an industry, we are asking what we can do to impact those claims. And we are thinking broadly – everything from AI to prevention, or direct interventions like adding a grab-bar to modify the home.

At illumifin, one of our techniques involves looking at the profile of people who might be at risk of going on claim, and identifying the kind of triggering events which can change people’s lives – such as a fall, or a caregiver burning out. Although these are very human events, we can analyze data supplied voluntarily by the policyholder, by using the risk factors we have identified, and come up with ways to help people before they need to make claims.

illumifin has been the industry leader in long term care administration for more than 25 years, and this knowledge has allowed us to transform from a transactional third-party administrator to a risk management solution for some of the largest carriers in the market.

One of our innovations is the Caregiver Advocate Program, a consumer-facing portal that provides information and services to help policyholders age in place successfully. This is what people want, to stay healthy and in their homes but many lack the knowledge and support to make that happen.

No one wants to be in a nursing home, however good the facility, and however caring the staff. Even before the COVID pandemic, those of us in the industry had concerns about the future of long-term care. The combination of an aging Baby Boomer population and a shortage of trained staff already looked to be a recipe for disaster. Post-COVID, the public’s perceptions of nursing home are even worse.

Although long-term care residents only represent about 1% of the population, more than 200,000 patients and staff of nursing homes have died as a result of the COVID virus since the beginning of the pandemic, according to data from the Kaiser Family Foundation.

Unlike individual carriers, for whom LTC may be  a relatively minor part of their overall business, illumifin has the scale (we are managing over 1.6 million policies) the breadth, the industry knowledge and the vision to make meaningful investments and real changes to transform the claims process. Being the largest claims payer in the LTC insurance industry gives us a significant advantage in managing this risk for our clients.

Our philosophy is to integrate all these moving parts. We can do things across the industry and embedded aspects into our claims management process that individual carriers cannot. For example, we’ve brought fraud detection directly into our claims practice, along with electronic visit verification, and wellness programs.

illumifin doesn’t just look at long-term care in terms of dealing with processing, but in terms of risk management, and it’s important to understand that these measures are not trying to prevent care. Our entire goal is to keep people as independent as they can be, for as long as possible. And that’s a win-win for everyone.

— Peter Goldstein · President & CEO of illumifin


in benefits paid to LTC claims in 2022