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started up again mags and i a m number nine
on campaigner program second-quarter eventual work
that afternoon madam chairman recipients in and help that committing
agenda item number nine provides you with the second quarter financial report
for the long-term care program for the period indian december thirty first two
thousand eleven
and update cn yelled regulation of june thirtieth two thousand eleven
investment returns experienced in second quarter of the fiscal year were positive
but not sufficient to offset the negative investment returns for the
first quarter
the negative investment returns and had the greatest impact on the decrease in
the funding status since the annual valuation
also conversion of members of lifetime coverage to three insecure policies was
projected to be nine percent but actually less than two percent converted
given these results this lower level of conversion is assumed to continue
the current margin is thirteen point five six percent but this is based upon
a portfolio asset allocation with forty four percent invested in equities
and a discount rate of six point two five percent for the first ten years and
seven point six three years eleven and onward
yesterday the investment staff presented agenda item number five recommending
alternative be an attachment one with an immediate move to a fifteen percent
endpoint equity allocation which the investment committee approved
with the assumption that the long term care asset allocation for equities will
change from forty four percent to fifteen percent in the third quarter of
the calendar year
you send discount rate is expected to be closer to five point five percent
attachment one has the uh... second-quarter financial report and i
would like to refer you to table three on page four
which shows that the margin changes to a negative fourteen point four six percent
when the discount rate is graded to five point five percent
a revised discount rate will be recommended this fall which will reflect
the change portfolio mix
and any updates to the asset assumptions
turning to table four on page five
this table shows the level of premium increases needed in twenty fifteen to
reach a ten percent margin by july
two thousand thirteen
the assumption that the ongoing five percent increase will stop in two
thousand fourteen
and that the board will add a nine-year retained inflation policy
and that ten percent of the population will migrate
brett and uh... lowering the discount rate five-and-a-half percent
with the approval of yesterday's revised portfolio mix
an updated table four would look very similar to the results in the second
column
except that the eighty six percent premium increase with the estimated
amount to be eighty eight percent
it is important to remember that a significant migration of elke c_-one and
al casey to policyholders two three six
or the proposed nine year plan with retain inflation could make a
significant difference in the rate increases required for two thousand
fifteen
i would also like to answer the question that was raised during the investment
committee on whether reinsurance was considered as an option for the
long-term care program
it's important to recall that any potential re ensure is subject to
statutory reserving an investment requirements
the statutory reserve requirement would require additional margins for
conservatism
and the statutory recipies capital encourages conservative investing
therefore investment decisions and related premium increases that are
currently being being considered
with still need to be considered regardless of whether or not reinsurance
the soft
this concludes my report might have with me clark right camp and carl flowchart
long-term care actuaries
united health actuarial services who will sis me in answering any questions
regarding this agenda item and that concludes my report
thank you misjudgments
if we were to reach her
can understand where
why the re
the reinsurance on interstate sure reserve requirements stuff
why would we run into them
necessary
change
at clark a camper thank you for questioning and it's not necessarily net
helpers would
run into the issues but that wrist transferred to the real insurer
dan that reinsurance have to take that so that the charges that they incur of
having those more conservative assets
and those uh... uh... extra margins would have to be transferred back to the
program
and therefore it would
you incur those charges are higher fees tampering chins
you're right re-insurance wound
would cost money
that i don't see why it would force us to change the the asset allocation
so anderson i'm missing something
this is a coralville martin at health actuarial services in order for
reinsurance in a position to actually
assume the block
not a profitable basis
they would have to actually already taken over in a form that was that was
going to be profitable for them
so if
uh... if they were going to have to bring it over given the current asset
maximum current
breeds
uh...
uh... today
they would have
they would be coming because of the changes they would have to make to
investments
emirates they were going to be taking it over and over analyst position
so to speak
so they were anybody who would could be interested who would be interested in in
reinsurance lack of this nature
these changes would actually have to be made in advance
herbie significantly in process before them to consider that
the other thing i want to do this
uh...
acknowledge that
blues confuse on the sit at a one-page twelve
night twelve falling and i do appreciate
hostage this morning knowledge
investor jim
it
yet that they can enter
yet thank you for bringing this report back to you may recall that
uh... you know when this report with uh... presented initially it was so im
consenting
uh... i think that
indeed
report that's related to a
upcoming board decision should be on
deregulate calendars that can be discussed because it pat
would have significant value based on we did yesterday
soul out that was the purpose of requesting that
come back in
and i think uh... demand cure you admit to knowing and victor president also
mention that
d committee chairs may need to convene too
that have a discussion about what i didn't he and provide should be on a
regular him
to have a discussion as opposed to
uh... being on consent
because that believed that
for it's related to a decision that will be making a few changes should not be on
consent so that we have the opportunity
to to uh... get the education get the dialogue uh... but that upcoming persons
inside thank you for
bringing us back prashant
and did you have any questions on the end
and so in this
future this item will probably go back on consent course anytime any book
committee member can
pull it off cannot request helpful dot consent
i think that's from problem because the that's the case then
it's moved through the end of the agenda
and many times that the
end of the day
it's not an opportunity to really get into the discussion so the purpose was
to have if is related to an upcoming decision to happen
not on concert so i think this is a regular quarterly regularly current
quarterly purport it would always be in sync with other decisions passengers and
yet
in general in the future this will remain on consent uh... ninety two point
that if if it's relevant to the broader discussion on
a particular issue didn't even want to consider having that as a has for the
guideline uh...
and i'd and will continue specimen the chairs
okay if you were consistently detected here
an artist completed uh... interviews of the pc
bidders
uh... we had heads of some other types of of
from structures uh... for
benefits and for what is it
paying them and one member of the uninstall all suggested to me things
like
increasing their
period before the benefit cummock effective or
um...
pre what the other
or uh... continuing premium payment during
the character instead of having a great
uh...
its easy we should we we should
consider those types of artwork what's going to have options we have that uh...
some people come
afford to
uh... except that
uh... i system risk shipped in some
sensor harder for a trade-off in
uh... premium
yes we will be after the discount rate is brought to you will be coming back
to this committee
with comes for posts that very specific proposed changes to the structure of the
program on for an ongoing basis
and then enemy of the make decisions
cancers
at newsweek
thank you very much i think this question is for kathy so um...
he talked about that
the inability to meet our calls for conversion
instead of kind of
taking another run at with we now just
making a much slower assumptions four
conversion
wondering if
staff had given any thought to have
kind of pushing for a higher level of conversion
by adopting kind of from you
efforts or whether
you really kinda felt like it was an exhaustive
without public eye
the uh... the history on the conversions to the three and a six year from the
r_t_c_ one in elke seat to policies
which such that with course we thought the first year we had a ten percent and
then it went down to two percent but don't remember those policies are the
policy holders that are experiencing that ongoing five percent rate increase
so as we approach the anniversary of the next rate increases possible we could
see more uh... more conversions
obvi moved him adding a nine year as we've discussed uh... in prayer meetings
to add in the ninety year with retained inflation does offers a current policy
holders and option that might give them a little more comforting movin
from my lifetime policy to one that has that fixed period of time such as the
nine your policy
any it does the court arf report on
long-term strategies that we could employ i think we expected that
that the increase the cost increase would be the driver andy infected not
turn out to be financial driver that we had expected it to be to drive that
additional conversion
and students
mister toward sick
on the conversion i think we
need to recognize that we
are
market
views
probably more risk adverse them the population in general
and so i think we will spread restore you see is much of a lifetime coverage
uh... and i think
to get more aggressive in the assumption i think would be a mistake
uh... now obviously you can
jack the price is enough to
bludgeoned people and moving uh... but i think we need to
recognize our target market
on the
on these assumptions that are made
by campus to
the assumptions i realize you can't be very
specific
in general what happens if we re-open
the enrollment
uh... in the
uh... presentation certainly there
you know there's a big pitch
reopening enrollment i rehearse and we need to someone get stabilizer spit
what's the journal and back
re-opening
we've actually run uh...
for the last
number of years difference in there is a different points in time for this
committee that included new business
uh... and in doing that we uh...
look at the current
because of the currently sold boom
most recently sold policies and rate levels
in combination with the current underwriting guidelines that we were
expecting to resulted in him profitable business a business that will contribute
surplus
so
in the projections that we're a m
will assume that
whatever business was written
was going to be written to contribute to the overall program
the question pick contribute positively financially to the overall program so
then the question just became how much of it
could you write
and we
looked at different scenarios
based on uh...
uh... sales statistics back
at the time that was more recent in two thousand five six seven eight
uh... and it did make a a modest increase
but the sales volumes were low enough that it really didn't change
the overall projection results very much
the if you were too
make the same assumptions about new business that it would be profitable
and through the program could find a way to market and sell enough of those
policies tactic
if you're going to do that that would make more of an impact the issue
isn't the fault wouldn't be the policies being written it would be the volume of
those policies need
certain so the best guess is that was impacted only the marginally wouldn't
get sufficient volume
within me
without
uh... i'm not a marketing person
but without changing how this
changing the offering changing how the policies are being marketed today
yes to that question is yes thank you have to be done differently
mister kyle
i'm sorry mister schwartz it wanting to position
as well
i'm not sure
what to me
lower than expected
conversion rate
mr jones posited in interesting terry i can't think of other explanations
i'd like to hear from you guys
uh...
maybe all of you stupid portion of your strong do you think
short of our protection conversion
all-star ends court began com
animal skin chime in but
my opinion is is that for one
i think in the than the rate increase letter you could be specified quite
clearly
that that ups is available at all leave that was
uh... in the letters but uh... not
as familiar with that
now also think young given credit to the members that they
motive had made their their decision at the point of the first rate increase and
they didn't change your mind at a later point
soltner maybe there's there's two
to criteria
i do think there's a chance that
maybe there will be a a slight uptick this next part time
uh... with uh... very clear letter
release the option of spelled out clearly
uh... handlers
uh... just like they have one comment to that and i i agree with everything clerk
to certain
targeting a population in this nature with instead of a one-time increase
ongoing increases
is not something that we've seen
it's something that we
developed given the needs of this program
uh... to to help address those needs from a financial standpoint
so
we didn't have a lot of experience to draw on when trying to you figure out or
what the assumption should be for that pattern of conversions
and as it turned out you know the first year was very consistent with the
ongoing five percent
at least at this point in the could certainly change as the numbers increase
it just doesn't have the same traction so the assumption that was adjusted was
the one just associate with an ongoing
to try to
burned more in line with how things are really cool
and folks
mhm
i guess that her thoughts here
by no means analytical
writes that even with the rate increases stone
the uh... lifetime coverage is still value and still
priced competitively
people know that
uh... i guess the other thought that i have is that people really want to
lifetime coverage in at this point
and their lives would find it hard to replaced with some other perhaps cheaper
product
and so they're sticking without lifetime coverage any other thoughts about
two ideas
i think i think that those observations are are correct in that
conversion has been as we've noted before two six-year
we are hopeful that there are
better alternatives that we can bring to you
when we come back
uh... and i i think that we have not i've
parental intersect don't think that we've necessarily done as good a job as
we could have done
and describing
what's going on and how long those will go on
what do you place and so on
so there's there's room i think in that area take improve the communication
around
were also working with our long term care constituents as we discussed the
nine-year retained inflation option
and we will be putting together some information at their request that's in
doubt how long and and and what types of uh... caregiving setting the members are
uh... right now so
we continue to look at not just the three and six years the same policy as
we did before to recommending the nine your policy we want it
have a comfort level with our constituents in terms of what they think
uh... they need and what do you think the impact is in terms of why members to
work you know convert
it does sound a bit inflation this year is awesome
big impact losing that inflation protection
for some individuals probably quite often
uh... particularly as their own fixed income
healthy and this whole thing happened
as following up on all these other questions
would we for example tasking and the dead now uh...
to also contact the members and educate them about what our new options were
just so that in fact
we could
incurring che
uh... conversion right and could that be
potentially
one of the goals that they are supposed to
to really
get them engage in the marketing of
these different options
okay see no further questions committee hearing is request from the audience
speak uh... mister quiet sleep like you could come forward
identify yourself there
day and a builder
also do you make your way to the front you'll speak after mister kleck
good afternoon caffeine
kinda short a sleeper ever so slowly
and uh... concerning the disk if you don't like is for uh... addressing
yeah she reviewed you're looking for a weight
and then i think if you see your name in the philly estate colliding q r_p_a_
and now the official unofficial assistant to the area directors
period seven
i kinda had i've had a couple dreams last night uh... wondering was uh...
assaults but just senior citizens ah... standing on a table
and uh...
a group of people came in and day
pulled one lake off the table so that they were holding stand you know and
related tables
with the four corners
so it made it very difficult for them to uh... maintain your position on the
table
and unfortunately some of the part seniors
fell off the table
i had another dream uh...
i dream that my wife uh...
paid a higher percentage of their income taxes
uh... to the federal government and and romney
uh... when i uh...
when i woke up
my wife wanted to know uh...
why we have to pay so much for doing contracts
and uh...
there was an agreement
she has to pay her
fifteen point five percent
of her income to defense
and i believe uh...
in romney only as payback fourteen percent
so uh... anyway
i suppose one of them was a dream in one of them was a nightmare
and that's what we're doing to our com
texted income retirees
and i realized yesterday
that it's not just those retirees
dev retired prior to uh... uh... d
effective date of espy for under it
it also includes some of the retirees are retired
since july first of
nineteen ninety-nine
uh... speaker yesterday who who preceded me
he'd retired recently
and uh...
you know it made me realize that uh...
even those who have retired recently
may not have as has generously rig retirement as i do because they don't
have as many years the surface
guilt because
we did our pensions are based on your service
as well as h
and of course he has to uh...
full time in order to
uh... that uh... that speaker had to pass to work full time in order to make
ends meet
so obviously it was
convite more greatly affected and me
so i'm like you know i'm looking at these this situation that we're in
i read that little bit of uh... item five in today's agenda uh... helen
milliken is
uh... proposing a twenty-year fees and other stuff
change in the discount rate
for the pension funds
twenty years
to uh... adjust for
effectively uh... what is it five percent up half of the percent
so there's a little bit a heart somewhere in this building
uh... we kill for the county's aka into contracting agencies we feel for the a
state of california
you know because obviously we're going to we're going to get them twenty years
to uh...
fully paid the uh... about that's determined that's to be needed
but you know i turning the course of time
as attested as always happened
you interrupt the period of robust economy
uh...
the local agencies and state of california law
will uh... start uh... enjoying increased
income
and sold the the the impact of this
smoothed out uh... increase our increase in their in their cost because of the
lower end of bizarre discount rate
will not be so great
in the mean time we have uh...
retirees who are too high
locked into rates uh...
fifteen years ago ur web whenever they had a role
we lock it in you know we we had to hurry up to get into lock it in
and now persuaded really lockett and weekly we didn't realize that uh...
there was no lock
but
they have no we're not going to enjoy
anything brought up from a robust of economy
they can't tax they don't have a tax out there to attend that's going to bring in
more
uh... revenue from the property tax
or whatever
they're still going to be somewhere close to where they are today
as long as they have the p_p_h_ for state employees
because they have a cost of living adjustment for the social security
recipients
and i just wish it we would
show some consideration to some of the humans out there
that are going to be affected by
uh...
this big adjustment eighty eight percent
you know that brings the uh... totally increases since two thousand into two
over two hundred percent to those people did better that have inflation
protection and unlimited coverage
i know they don't deserve it they probably don't deserve it you know
because they use up our benefits the use of my
the bunny i put into the pool
but it is our pull
and that's the way it was established
i believe that that uh... eighty percent
is a significant change in the plane
the total of two hundred percent
is a significant change in the plan
it's not the plan that we've we got into
how are we gonna get and our people doing the brawl with if uh... we hit
we get them with the current rates plus eighty eight percent
it could if your if the intent is to kill the polls kilduff uh... plan
it appears that's where we're going
i don't have placed a lot of time but i just want to say that
uh...
i think we should consider instead of uh... worrying about uh...
conversion
of some of them some of the seniors out there
to uh... lower
coverage period
or dropping inflation protection
i think we ought to think about
recommending that
the long term care program
be moved to another agency not to a private company
but you another agency office aging
i believe that the uh... date
they provide uh...
support for
or people with concerns about long-term care
uh... or depart department that sure it's because they're usually run by a
politician who
cares about their image
and i don't think they'd want uh... a bunch of us old folks air picketing in
front of your building
uh...
that this
these decisions that had been impacting this fertile ask for yesterday and
and his gun intact
our premiums
they're terrible
thirty inhuman
they show a lack of concern
i are brought to you applications for organization i do want to
i gave all the way hope hope hope hope in that
digital drawing
but i can't see offering
want to any of you on the board care because
you know i think
art r_p_a_
were an organization that cares about people and we we
fight and supported uh...
uh... support them with fight for them
and uh... i just don't see that any of you belong in orbit organization thank
you
cancer quiet
i recognize this is extraordinarily painful for you and i
tell you that this entire committee in the sport
agonized over these decisions
but but the worst thing that could happen
would be for you
to god
god forbid if you should need these benefits
and there not be enough funding left
that provided that
imperative that we ensure that the pool insufficiently funded
that all of those
signed up for a long term character and
have the care available when they need it
it's terrible red-headed
to financial crises in the past
decade that seriously impacted this fund
and i'd buy which is a different situation and i wish the outlook for the
next decade
were rosier than it is
uh... but we're faced with the fairy
sobering reality of and economy that is
facing fairly slow growth
and uh...
sadly that that does have an impact on
insurance product that is not backed by
by game players
but have players products is no backstop
was we're is is it
the coolest is is what it is
funds ran out
were also out and that is
something that we
must avoid situation we
absolutely must avoid
and
it is it is awful
contemplating these
potential rate increases
that
but it's it's three A gave weeks every right now
if any
to retirement funds to persons
they haven't gear down
as much as we had maynard i think you're down as much as we do
why can't are fine
be treated
and have the same aggressive investment strategy
as the the retirement funds
and and i realize you know that did addicts then deeper conservatism
but you know we're not talking about joe nation here
we're talking about joe california
and uh...
joe nation doesn't
recognize
the long-term performance of the of that hers retirement funds
we know about chris retirement funds here we know about the two
the to reset are
economic crisis is everything endured we've actually injured three in the last
twenty two years
we bounced back
you bounced back
and then somebody else takes your money
and then you bounced back again
you know and and that's what we can and we know that's going to happen
in twenty years
twenty more years you may have
four five more these bubbles burst i mean who knows what they're working on
now
but we do bounce back
so give us the same
consideration
as the city of sacramento
or
that legislators
pension fund
because
you know
what we think we can injure week you know we can we might be able to call it
color anymore if there wasn't such a
substantial change in investment strategy
and instead of calling that
that
committee that met yesterday d investment committee maya my impression
was after dat their their dad died vestich are committee their di testing
our
are investments in equities and moving us to savings and savings and loan funds
and
you know i mean
good grief eileen
that shipment if we if that was that's the case we ship that's where the the
long term care program should have started
but you know you're changing as to uh... of minimal
growth fund now
it's just ridiculous that we have to we happy
we have to pay make we have to pay
because of these studies and
analysis of the market and all this stuff but
why doesn't everyone have to pay for the same biochim everyone
everyone moved down like that why don't we just had a ball with eighty eight
percent
cities would fall
but you know humans we don't fault we just
get sick and back
thank you for sharing your coming
mister elder
can you hear me now yes thank a point of personal privilege of yarns i think the
dissident yourself and as a villain former state assemblyman i served
fourteen years in the assembly
and uh... i did not receive a legislative pension because it takes
fifteen
in order to get it
this is one of the perils of reapportionment
so uh...
i did not receive a legislative pension despite what
to the previous speaker man suggested
i had some thoughts in terms of how we might go forward
with this program
in a little less draconian manner
and up i'm gonna suggest some initiatives that can be on a voluntary
basis
for example i think the
provisions providing for a waiver of premium when someone goes into an
institution
uh... it may not be necessary for a lot of folks because
their cost of living probably goes down where were they were before because
there now
institution in their food and everything else is
being taken care
so optional bases so the waiver of premium
might be something to look at
in my case the premiums two hundred eighty dollars a month
with the increase uh... it'll be over five hundred a month
and uh... is as uh... nice is it would be not to have to pay that
if i could see where my premium would not
be escalated to the extent that it is if i opted for
the elimination of waiver premium
that might be something that uh... can help the for financial circumstance of
the fun
also on voluntary basis would be the elimination period which is currently as
i understand six months
and for those people who are in a financial circumstance where they can
handle it
allow them to rule that out to one year so that uh...
uh... they would not receive any benefits uh... from
long-term care program for twelve months rather than six which is to current
arrangements i understand
then the third thing out that also no voluntary basis although this woman's
pretty minimal
all you have to die in order to collect it which seems like a
on women
help yourself
uh... elimination
the premium the return of the premium
uh... which is i understand it goes down from a hundred percent eighty percent to
sixty percent to forty percent to twenty percent based upon
what your you expire
uh... maybe somewhat lower cost of
uh... life insurance
policy would be a better way to handle that keep those monies in the fund for
those again who elect to do that
that was something that i think might
work better for everybody because not everyone would receive
any
return premium because they would have expired
uh... too late
uh... also another thing which i think uh... kinda
falls on steve's comments
uh... placing investments with the au pair upon which i understand is doing
better
and then the purpose
uh... i maybe wrong about that the last time i looked at the numbers
they're not a pretty good job over there with these of
post retirement cost for health care
uh... and it seems to me that there might be some kinship with respect to
post retirement healthcare uh... liabilities
and the need for long-term care for those of us who
uh... survive long enough to
make it to long-term care
palm
also uh...
another
may be a pretty basic thing and this might be you know
you know when it came out of this message to
simply authorize writing a check for those of us who want to bail out of this
whole
operation
five ten thousand dollars if you wanna go south with so
you know although
money that you've been putting in there for all these years and i've been in
this program for
a long long time
i think i got some like thirty thousand dollars in this game this point
and maybe somebody writes me a check for five or ten thousand won't go on a final
cruisin jump off the back of the ship that occurs
to allow the fund to invest in covered calls
you know i was to make
upwards of twenty five percent
on
selling call options against my stocks
and i think that uh... this would be
really to refer to it
to enhance the earnings not only you know
just four billion dollars but
might one think about that in terms of
the other two hundred and forty billion that you folks are in charge of covered
calls i think are very safe way to invest
and can result in a substantial
increases in rates of return that's about all i have to say uh... except to
say that uh...
again i would remind everybody that loesser forty years or so it sure i did
not receive a legislative pension
that may have been methods fincher career appearing on just what disabuse
everybody that notion
thank you for the opportunity to speak thank you for your applicants
okay this is disinformation item so we're going to move on
seen over the request speak to agenda item number ten
workload inventory
nightclub