On this podcast channel we talk about innovations in life. That is, we talk about innovating the life insurance industry through technology for sure – that’s Insurtech. We also talk about business innovation in general, and innovations in living – that’s the business of you. Whatever you are doing, wherever you are in life, innovation is the key – to moving forward, and staying ahead in life and business. So we also explore the personal and professional bits that make you tick and continue innovating throughout life to become the best version you
Jon Sabes: Today I’m sitting with Chris Orestis, executive vice president here at GWG, who’s been out working in the field on a crisis of America, called failure to plan. And that is an issue that is occuring as boomers age, and just simply don’t have resources to pay for the long-term care needs that are facing them. Chris has been active in healthcare legislation. Over his career, he co-founded Life Care Funding, which was a really innovative company, helping seniors convert life insurance to pay for long-term care. And we’ve been blessed that he’s joined us to continue to carry that sword to create resources for seniors, and at this time the marketplace is really finally waking up to this need. So, welcome Chris to the podcast.
Chris Orestis: Jon, thank you, and just going to say, it’s been a great opportunity this year to come on board and become part of GWG Life, and take that Life Care Funding mission that we started over a decade ago into an organization like this with the foresight and the commitment to helping seniors using life insurance policies as a tool to pay for long-term care.
JS: So, as you look at the legislative landscape, and the need, and the marketplace, what’s going on out there? What are agencies, distribution points, IMOs, carriers, what are they talking about, and how urgent is this, and what happens next?
CO: A big part of what they’re talking about is the fact that so many seniors just haven’t planned for the eventuality of long-term care, and it’s something that people can’t avoid. 70% of people that are going to be 65 or older will end up needing long-term care, but so many people will think that it’s not going to happen to them. And that’s one of the big things that you’ll hear from agents when we’re out talking to them is we were out sitting in front of families a decade ago talking about needing to plan, and then one day the phone rings, and it’s that family calling us saying, hey, remember that long-term care insurance policy we talked about 10 years ago, we need to buy that today now.
JS: Yeah.
CO: And we all know why. The need now is there, but now they can’t get the coverage.
JS: The product’s gone.
CO: Yeah. There’s no opportunity for them to now get insurance because it’s like trying to buy home insurance after your home’s burned down. It’s too late.
JS: It’s too late. And the marketplace for long-term care insurance is basically evaporated, right? Does it even exist?
CO: You know, it does, but it’s become very much a niche market. The irony of that is when I used to work in Washington DC, and I was with two of the major trade groups that represent the insurance agency, the old HIAA, and the American Council of Life Insurance, ACLI, and in those days, this was the ‘90s and early 2000’s, there were well over 100 companies that sold long-term care insurance. Today there’s a handful or less, literally you’ll count them on one hand. And no one could have predicted that when the baby boomers were going to start turning 65 that the long-term care insurance market was actually going to go down, not up. They thought it was going to go through the roof, and it disappeared almost.
JS: Right. You would presume the market would develop to meet the need, and the exact opposite has happened.
CO: Right. Incredible irony. So, what are agents looking for, and what are families looking for? Solutions, how do we solve the problem today. We ignored it, but here it is. You know, I always joke with the agents, I say, you had all these families out there where the father said, you’re going to take me out back and shoot me before you’re going to put me in a nursing home, but guess what, there’s been an alarming lack of kids taking their parents out back and shooting them when their parents need long-term care, so they need to find solutions. One of those solutions that people are waking up to understand now, and that’s evolved over the last few years, but it’s really starting to take off, is the fact that so many of these seniors have life insurance policies that instead of lapsing or surrendering, could be turned into a way to pay for long-term care.
JS: So, what does long-term care cost? What should people be thinking about, and where, if they don’t have resources, how are they paying for it?
CO: Well, the costs of long-term care are pretty significant. If you were going to, say, move into an assisted living community, have a loved one move in, the national average cost for an assisted living community on a monthly basis is about $4,000, four to five thousand dollars a month, and that’s out of pocket. Insurance doesn’t cover that. Medicare, Medicaid doesn’t cover that. Nursing homes can be twice that. You can easily be in the eight to 10 thousand dollars a month for the cost of care in a nursing home. And home care could be somewhere in between that. So it’s very expensive, and if you’re not on Medicare, Medicaid, and remember, to get onto Medicaid, you have to be below the poverty line, so the vast majority of middle-class Americans, they’re trying to figure out, how do we cover these costs. We’re not poor enough to go onto Medicaid, and we’re not rich enough to just start cutting checks for five, seven, eight thousand dollars a month. What do we do? Well, among the things they’ll do is they’ll look to sell a home if they still have a home because that’s an asset that could contribute a significant amount of money. One of the areas they’ll also look to now is do we have a life insurance policy because if we do, there’s a secondary market where we could liquidate that policy, and potentially then put those funds towards our long-term care, and a vehicle they could choose to use we have developed is called a long-term care benefit plan.
JS: Got it. So you mentioned in order to qualify for Medicare–
CO: Medicaid.
JS: Medicaid, you need to spend down, you need to get poor.
CO: Right.
JS: And after you do that, what will that cover? And is that what most people are thinking about as the safety net?
CO: Yeah.
JS: How should they perceive that in terms of a safety net?
CO: Well, a lot of people are going to look at Medicaid as their long-term care plan. Alright, let’s get onto Medicaid, let’s get rid of assets, let’s get ourselves poor. Let’s do what’s known as spend down to the poverty level. But when you’re on Medicaid, then you’re at bottom of the barrel. You’re getting a daily rate that’s covered that’s the bare minimum, and typically that means you’re going to be able to afford to go into a nursing home, and you’re going to end up sharing a room with one or more people, and that’s it.
JS: When I moved out of my dorm, I never wanted to go back to one, right. I didn’t like my roommate then.
CO: Right, full circle.
JS: I don’t want another one, other than my wife, I mean.
CO: Full circle.
JS: But she’ll be outliving me anyways, right.
CO: Well, statistically, yeah. Quite frankly if you’re a guy and you make it into the point where you’re in an assisted living community or a nursing home, it’s a ratio of like five women to every one guy that makes it.
JS: (laughs) So there is something to look forward to for those of us who get there.
CO: Right, life goals. Life goals, make it into a nursing home if you’re a guy. So, that’s the big issue right now. So many people try to get onto Medicaid, so from a political perspective, when you look at efforts to do health care reform or even now tax reform that’s on the table today as we speak, Medicaid cuts, Medicare reduction are front and center as a way to find dollars to save because so much money is spent on Medicare and Medicaid, particularly for seniors when it comes to covering the cost of healthcare and long-term care.
JS: Right, I don’t know what percentage of the budget that makes up, that entitlement section, but it is a massive piece. I think it’s over 25% of the federal budget, isn’t it?
CO: It’s a very large piece of the budget, and it’s always a very large target for cuts. When they start looking at, where do we find the cuts, you know, they go to Medicare and Medicaid before they go to the defense budget. They’re going there first, and it’s on the chopping block right now as we speak.
JS: And there is some interesting legislation being put forth to cover some of the things that we’re talking about here, specifically relative to a life insurance policy. I don’t know if it’s going to get introduced or not.
CO: That’s right. There has been a lot of attention paid to the idea that you have all these life insurance policies out there, as much as 200 billion dollars a year of death benefit could be potentially available that’s owned by seniors that could be used through liquidating the policy in the secondary market to help offset long-term care costs. So over the years, going back now, states started looking at that as well, this could be a way we could keep people off of Medicaid because instead of dumping a life insurance policy to get onto Medicaid, they could get as much money as they could for it, keep themselves private pay as long as possible. That has worked its way up the attention of lawmakers in Washington DC. And through the course of the tax reform and healthcare reform earlier this year, now into tax reform, they’re actually looking at a measure to introduce a bill that would make a long-term care HSA, health savings account, which is funded through the life settlement of a policy. Those funds would then be considered tax-free put into this long-term care HSA, and only spent on care. Somebody could settle a policy, and then years from now, decide those funds are going to be used for care. As long as those funds were sitting in this long-term care HSA account, they would be 100 percent tax-free.
JS: Interesting. So, again, this is the notion here. Private payer solutions for covering the long-term care service needs of the aging band of boomers here that are going to need these services. And the NIC, right, came out with something along these lines here in July. So what again was that, and how does that play exactly into exactly what you’re describing on current legislative initiative?
CO: In July of 2017, the National Association of Insurance Commissioners, the NIC, which is the regulatory body that oversees the entire insurance industry, convened over the course of 2016 and 2017, convened a study group on innovative ways to help pay for long-term care using insurance products. And one of the most prominent solutions that they put forward from a study they then published in July was life insurance policies that are liquidated on the secondary market that could then be used to pay for long-term care, and particularly they cited a couple of things. One, they cited GWG Life as a leading company in the space, and the funds being put into that long-term care benefit account structure that we’ve developed now has morphed into the potential of becoming long-term care HSA that is being looked as part of the tax reform plans. So you have the nation’s regulatory body that oversees the life insurance industry in essence endorsing the idea that people with life insurance policies, instead of lapsing or surrendering them, could use those policies, and through the secondary market in a structured, tax-advantaged vehicle to pay for long-term care expenses. That’s an absolute watershed moment, not just for the secondary market, but for the entire insurance industry in the long-term care world.
JS: We’re big into innovating here, particularly toward this business called life insurance in general. It’s kind of fun. We’re nontraditional life insurance people, aren’t we, Chris?
CO: Well, that’s for sure, and it’s happening, and it’s getting a lot of attention with agents. It’s getting a lot of attention in the press. You know, there’s constant press interest in what we’ve been doing here. Consumers are catching on. Providers of long-term care services, the people who work in assisted living, Elder Law attorneys, they’re paying attention to this. Now here we are where what we’ve been doing and playing such a lead role in is on the table in Washington DC as we speak today is in the tax reform debate.
JS: And correct me if I’m wrong, but is that coming from your home state? Is some of that coming from the great senator Susan Collins?
CO: That’s right. That’s right. Senator Susan Collins, who’s from Maine, where I am, and live, and work out of.
JS: Lucky you.
CO: Love Maine, and I encourage anyone who’s listening, come visit. I will buy you a lobster. Susan Collins is the chair of the Senate Aging Committee, and is one of the most influential senators in congress today because she has been a key swing vote. Getting her vote, because the majority that the republicans have is so narrow that they can’t afford to lose more than a couple of republican senators on any vote, considering that you would just decide no democrats are going to probably vote on what you’re doing, you need all your republicans together. She’s positioned herself as, she has certain priorities that are healthcare related, senior related, and this happens to be one on her list of priorities that she feels needs to be addressed as part of tax reform.
JS: Super cool, you know, I mean really interesting stuff, and bottom line, good for consumers.
CO: It is.
JS: So go Susan, and go innovation–
CO: Absolutely.
JS: For consumers and their needs.
CO: The more opportunities we can give them, the more options we can give them, the better they are, and the better we all are.
JS: Right on. Chris is an avid chess player too.
CO: Yes, I am. I’ve played all my life. All my life.
JS: Here at GWG we like to have active chess games, and Chris and I have had two really intense games in the last 24 hours.
CO: Yes. I hate to admit that I am on the short side of both those games, but revenge is sweet, and revenge is coming.
JS: (laughs) Well, I think that covers it for today’s episode. We always appreciate you, Chris, and really your leadership in the industry. It’s thoughtful. It’s long-term, consumer oriented. It’s regulatorily compliant, and it’s just things that should happen, so we’re happy to be supporting that, and look forward to it being realized here in 2018.
CO: Absolutely, Jon. Thank you. I’m definitely looking forward to what 2018 appears to be holding for.
JS: Alright. Everyone have a great day. Talk to you soon.