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By Joel Berg

Scenario: The venture capitalists agreed to another Sunday evening conference call with the biotech researchers they were funding. Skeptical, the investors braced for bad news. What fresh setback would they be discussing? How much more money would it take? Could it wait until Monday?

It was obvious as soon as the call began, however, that the payoff was closer -- and bigger -- than the investors imagined. The researchers had spent the last decade at a New Jersey biotech lab toiling over a patented gene therapy that promised an additional 30 years of human life, and that gave people increased vitality into their 70s. After an all-night session studying the results of the latest clinical trials, they had cleared the biggest hurdle. The path to approval from the U.S. Food and Drug Administration was clear, meaning the therapy could soon be commercialized. All that was left was convincing insurance companies to cover the cost, and planning a record-setting IPO.

The groundbreaking therapy, which inhibited the genes responsible for aging, proved even bigger news than the cloning of Dolly the sheep, and it was just as controversial.

Optimists envisioned a paradise of personal growth. Older people, buttressed by savings and other assets, would launch new careers and apply their wisdom for the improvement of communities around the country. Companies imagined being able to hold onto their best and most experienced workers, while advertisers swooned over what they saw as a lengthening stream of disposable income.

On the other hand, concerns about people outliving retirement savings sharpened. So did fears that impoverished seniors would have no choice but to work at whatever jobs they could find -- and that they would block career advancement for the next generation. Some commentators warned that "boomerang kids" wouldn't be able to leave home until they were 40. Who knew if they would ever have children of their own.

Disputes about Medicare, Medicaid and Social Security intensified, as fear of government deficits mushroomed into alarm over potential bankruptcy. What would happen as legions of elderly people sought another decade or two of care for chronic conditions such as diabetes and heart disease, not to mention the additional knee and hip replacements needed to keep people active?

The hopes and fears of both camps failed to materialize immediately, and the clamor died down within a year of the IPO. A decade later, however, the pros and cons of a longer life-span were growing harder to ignore.

Suddenly, older people were everywhere.

Some, primarily the affluent and educated, were making the most of their extra years, cutting down on work, going back to school, gentrifying urban neighborhoods and volunteering in their communities. Their children fretted about whether any money would be left in the estate or groused about parents unwilling to cede control over the family business. But for the most part, they were happy their parents could spend time with grandchildren, great-grandchildren and even great-great-grandchildren.

Others, with less savings, few skills and even fewer assets, had few good options. Many tried to raise cash by selling their homes, depressing a real estate market that had not fully recovered from the financial crisis of 2008. At work, they faced employers increasingly panicked about health care costs and leery of Alzheimer's disease. The United States had not found a reliable way to determine whether the elderly should continue driving, much less operate a forklift. Who was responsible if an accident's cause was traced to an employee's declining cognition? Could employers be held liable for not identifying the decline sooner?

Pension plans, which had long been trying to transfer the risk of extended old age, were in deep trouble, as were a host of other financial products, from annuities to reverse mortgages, that had been designed for shorter life-spans.

Even marriage contracts began to change as people reconsidered the meaning of "till death do us part."

Analysis: Whether or not a pill suddenly extends human life, the future in the United States already looks grayer.

The costs for health insurers, pension plans and government benefit programs will only pile higher if people live longer, as has been the story for the last 100 years.

In 1912, a baby girl was expected to only live into her mid-50s. Thanks to advances in health care and living conditions, many children born then are still alive. And they have company. According to U.S. Census estimates, centenarians are the fastest growing segment of the population, with numbers expected to triple over the next two decades, from around 80,000 today to 235,000 in 2035.

Extreme longevity is not so far out.

"We think about it as the future, and it definitely is the future. But it's also right now," said Maddy Dychtwald, co-founder of Age Wave, a consulting firm in Emeryville, Calif. Historically, estimates of the American life-span have been low, said Larry Rubin, a partner with consulting firm PricewaterhouseCoopers in New York.

Long-term care insurers are among those feeling the pain of underestimation, Rubin said. "That whole business is in crisis because people are living a lot longer," he said. The situation is a precursor for age-based financial services and products in general.

"There are two risks," Rubin said. "One is that longevity is greater than expected. Two is, you have to expect that it's wrong."

Pension plans in the United Kingdom have hit on a solution: transferring the risk of extended longevity to insurers, said Alan Bossin, counsel with Appleby, a Bermuda-based law firm. Others may follow, as companies seek to hedge against extreme longevity much as they began hedging against weather in the 1990s, Bossin said.

"If there's a real risk because people could live longer, a risk that can be in some way quantified or analyzed, then there can be an insurance solution for it," Bossin said.

Indeed, longevity-based products could feed growth for the insurance industry, said executives at Griffin Risk Capital Partners, a consulting and brokerage firm in Philadelphia.

If longer lives lead to delayed childbearing, for example, fertility treatments could become more common, said Nemo A. Perera, Griffin's CEO. Reinsurers have been considering products to help individuals and families bear costs they've historically borne alone.

"We are looking high and low for these types of products," Perera said.

The cost of longevity depends, in part, on a big unknown: whether medicine can enhance quality of life along with quantity.

Advancing age is one of the chief risk factors for Alzheimer's and other forms of dementia. It's possible that extreme longevity could lead to more people in need of care for longer periods.

"The health costs associated with a population living significantly longer, even five to 10 years, let alone 20 years longer with Alzheimer's?is simply astronomical and unsustainable," said James Canton, chairman and CEO of the San Francisco-based Institute for Global Futures.

A true game-changer would be a medical breakthrough that allowed 75-year-olds to enjoy the same vitality as today's 55-year-olds, said Jamais Cascio, a research fellow at the Institute for the Future in Palo Alto, Calif.

The results would not be apparent for a generation, he added, and they might scramble predictions. "Things that seem bad will have unexpected benefits, and things that seem good will have unexpected problems," he said.

One side effect of longer lives could be a delay in intergenerational transfers of wealth, whether through inheritance or estate taxes, Cascio said. Younger people might spend more time living under their parents' roofs than they already do. But they also might take a more entrepreneurial turn, especially if a workplace stocked with older people offered less room for advancement.

In all likelihood, companies will try to retain skilled workers past the traditional retirement age of 65, said Kathleen Langner, a senior vice president and worldwide workers' compensation practice leader for the Chubb Group of Insurance Companies in Whitehouse Station, N.J.

But companies will face higher costs, she said. Older workers, especially those with chronic conditions like arthritis or diabetes, often take longer to recover from workplace injuries.

Companies with a higher share of older workers are taking several preventative steps already, making signs more visible, for example, and establishing hearing conservation programs.

"I think it really boils down to what costs are going to be incurred and by whom," Langner said. "Is it going to be workers' comp? Is it going to be group health care? Is it going to be government?"

JOEL BERG is a freelance journalist and college professor. He can be reached at riskletters@lrp.com.

April 13, 2012

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