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Marketing, Operations, and Product Design topics

Carol A. Barbour
President, Friends Life Care Partners

Carol celebrates her 30th year with Friends Life Care in 2016 and has served as the CEO/President since 1991. She was a member of the team that created the CCaH business model and has lead the growth of the organization to be the largest CCaH in the US with over 2,400 members—she is considered by many to be one of the most successful executives in the CCaH industry today.

M1. Describe the current design trends in regard to popularity in the market for levels for co-payment percentages and membership fees.

Of the approximately 30 CCaH plans in operation as of 2016, the majority offer pricing comparable to a Type A Life Plan Community, that is entry fees and ongoing monthly fees that do not change as the member moves through the continuum of care.  Most of these offer a variety of copayment options while still maintaining the unlimited lifetime benefit.   While our enrollment experience with this pricing model was quite robust in the 1990s, the velocity of enrollment slowed in the early 2000s; this lower rate has been experienced by many, if not all, the newly developed, “Type A” CCaH plans.   A few theories for this decline include:

  • The availability of comprehensive long term care insurance policies in the early 2000s;
  • The cost of CCaH in comparison to long term care insurance;
  • The availability of hybrid products such as life insurance proceeds that can be used for long term care expenses;
  • The lack of a Best Rating for CCaH plans;
  • The marketing challenge for a product that requires education of the target market (the “I’m not ready yet” syndrome);
  • The challenge for some potential clients to paying the membership fee without the benefit of the sale of real estate to fund the payment.

Several CCaH providers have responded to the marketing challenges by creating contract options that significantly lower the up-front membership fees and monthly fees by placing dollar limits on daily and lifetime benefit costs—essentially following the practices of the long-term care insurance industry. The homecare only product has become a more frequent selection among consumers who wish to lower their initial advance payments. A few progressive CCaHs now offer flexible pricing models that allow the consumer to determine the total dollar amount or number of days that they want their CCaH plan to cover for their care.  Depending on the state-specific regulatory environment, such contract designs may or may not include a membership fee.   The experience of Friends Life Care with this contract design in the Philadelphia market shows a relatively high level of market acceptance with triple digit enrollment rates for the past several years.

It should also be noted that the contract designs with no limits on daily or lifetime benefits will have very different actuarial implications for the provider versus contract designs that incorporate daily or lifetime benefit limits.  The unlimited lifetime benefit contract option requires higher fees and presents a greater actuarial risk exposure. However, if your CCaH market is willing to absorb these fees, then growing as large an enrollment as possible is the best method to mitigate these actuarial risks in lieu of benefit limitations.

What has your organization’s experience been in this regard?  What contract designs are consumers most interested in?

M2. Can one identify the three most effective marketing tools for generating leads and is it likely to vary by provider?

Gone are the days when it was possible to get someone’s attention with a simple direct mail letter, perhaps reinforced by an advertisement in the local newspaper.   Today we all have websites; we’re barraged with advertisements on social media, when we do a search on the internet, snail mail, radio, television, blogs…we are never without our smart phones.   Our attention spans are shorter than ever.  All this is to say that a multi-channel approach to marketing is required now more than ever.   There is no single silver bullet for generating leads.

I would also say that gone are the days of static websites.  We want the information when we want it and where we want it.  Consumers are demanding far greater transparency than ever before.    They don’t have any patience for calling to request more information…they want it now!

We’d love to hear what your experience has been in your market!

M3. List some pros and cons for engaging a third party underwriter for member enrollment.

Underwriting is one of the keys to the long term success of the CCaH plan.  It’s important to establish criteria that help you manage the actuarial risk while not being so rigorous that you deny enrollment to people whose care needs could be well managed.  This is a very challenging task.   Some of the pros and cons of the two approaches include the following:

Third Party Underwriting
Pros Cons
Experts in Underwriting The out of pocket cost can be quite high
Objectivity Can lengthen the admissions process
Continual training specifically in underwriting Little control over the process
Use sophisticated cognitive assessment and screening tools Clinicians performing the assessments may not represent your organization in the way you would like
Highly trained clinicians who perform the assessments to obtain medical information
Provides a comprehensive software program with customized reports
In House Underwriting
Pros Cons
Less costly Sacrifice objectivity
Less time from application to decision Staff not trained in underwriting
Direct access to the underwriters for questions and concerns Potential for pressure from sales staff to accept applicants
Medical records retrieval is extremely challenging

Please feel free to share your experience and add to this list!

M4. What techniques and tools are useful to maintain consistency among your care coordinators?

Not only does there need to be consistency among care coordinators, there needs to be consistency in regard to what is promised in the Continuing Care Agreement with CCaH members and what is delivered.  The social workers, nurses, occupational therapists, health & wellness specialists who we hire to serve as care coordinators are good at what they do not only because of the training in their specialty area but also because they are kind and caring people.  They establish meaningful relationships with the CCaH members assigned to them.  But we must also remember that they are the gatekeepers for providing care.  Objective assessment tools for determining eligibility for receiving care must be implemented from the outset; being liberal with care decisions in the beginning will no doubt haunt the CCaH plan at a later date.

The key to establishing objectivity and consistency is the use of assessment tools accompanied by training, supervision and good judgment of the care coordinators and their supervisory staff.  There are some assessment tools in the marketplace that are appropriate for this populations (SLUMS, Caregiver Burden Survey, and so forth), but in many cases the CCaH provider will need to develop tools to fit this purpose.

What tools are you using to achieve and maintain consistency?

M5. Will a CCaH plan undercut interest in people moving into my Life Plan Community (aka CCRC)?

First, full disclosure: Friends Life Care is an independent organization.  We are not affiliated with a bricks and mortar CCRC.

Having said that, every research study I have ever seen quotes a percentage between 85% and 95% of older adults indicating that they prefer to remain in their own homes.  CCRCs were never intended to have “mass market” appeal; simply by virtue of the membership fees required to move onto a campus, the target market is limited.

It has been our experience that the people who enroll in CCaH are making a LIFE STYLE CHOICE; they simply prefer to remain in their own homes.  Some people who plan to move to a CCRC will enroll in CCaH while they are on the waiting list for the CCRC.   It has also been our experience that CCaH is attractive to a more moderate income population than is served by CCRCs (50% of our membership reports annual incomes less than $100K).

In general, I believe it’s fair to say that by offering a CCaH alternative, the sponsoring CCRC will have the opportunity to serve the 85%-95% of the market who they otherwise would not reach.

I believe there are a couple CCaH plans that have experienced a significant number of CCaH members actually moving into the CCRC.  We hope they’ll add to this thread with their experience!

Actuarial, Accounting, and Underwriting topics

Amy M. Lampo
Chief Operating Officer, AV Powell & Associates LLC

Amy has nearly 25 years of consulting experience and during that time she has conducted hundreds of comprehensive actuarial studies for CCRCs and CCaHs. Amy is one of the most experienced practicing senior living actuaries in the US today.

A1. What is the optimum size for a CCaH plan and what are the actuarial and pricing implications if a developing CCaH targets a lower stabilized membership census?

We think a successful CCaH plan will have 1,000 or more members. A basic tenet of insurance pricing models is risk-pooling. The larger the group over which risk is spread, the better. In addition, CCaH plans have fixed administrative and marketing costs that can be quite high on a per member basis if the number of members is low.

If a developing CCaH plan targets a lower stabilized membership level, the higher administrative and marketing costs on a per member basis can drive the pricing up.

A2. How will ASC 606 affect CCaH financial statements and pricing?

ASC 606, the accounting standard which addresses revenue recognition, applies to revenue from contracts with customers. It is clear that CCaH plans enter into contracts with their members. So, the accounting standard requires that revenue be recognized as the entity satisfies a performance obligation. The question remains whether there are separate performance obligations for varying levels of service within the plans. So, the verdict is still out on whether or not and how the financial statements of CCaHs will change after implementation of the standard.

ASC 606 will not change the way operators manage their CCaH plans. The cash flow is the same relative to entry and monthly premiums receipts. And, the long-term liabilities of the plans are also unchanged by the standard. So, there would be no impact on pricing from ASC 606. Any changes under the standard will be for GAAP financials only. However, if the cost of administering revised revenue recognition rules adds significantly to the overhead costs of the plan, premiums may have to be increased accordingly.

A3. What are reasonable options for providing credits to entry fee for CCaH members who move into your sister CCRC?

While most CCaH plans are established to keep their members in their own homes, there are some cases where the CCaH member wants to move on-campus to the sister CCRC. There are two options to consider:

  1. The CCaH member continues to pay monthly premiums and maintains full membership in the CCaH plan. The member pays the full entry fee for the contract selected at the CCRC and enjoys the benefits of the CCaH program while residing at the CCRC.
  2. The CCaH member terminates membership in the plan and enrolls in the CCRC contract. In this case, applying a credit for the entry premium paid under the CCaH plan towards the entry fee for the CCRC would certainly promote goodwill. The amount of the credit may vary from 100% to a sliding scale based on the number of months of participation in the CCaH plan.

A4. How does one determine the amount/percentage of fees that might be considered a prepayment of future health care for IRS itemized deductions?

It depends…if the CCaH plan provides only qualified health care benefits, most, if not all, of the fees would be considered a prepayment of future health care for IRS itemized deductions. A conservative approach, even if the plan provides only qualified health care benefits, would be to exclude the portion of fees that are attributable to administrative and marketing costs. If the CCaH plan provides both qualified health care benefits and non-health care benefits (e.g., fitness club membership or handyman services), the amount of fees that would count towards the IRS itemized health care deductions should be based on the portion that relates to the health care benefits only.

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