Long-Term Planning

By May 8, 2007
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Long-term-care insurance available through employers is broadening its reach.

Long-term-care insurance is acquiring a higher profile. Year after year, this specialized coverage for people who need care in nursing or assisted living facilities or at home has been gaining visibility on employers’ lists of benefits offerings, and workforce trends suggest it will continue doing so.

Certainly, as baby boomers move toward retirement, more and more are likely to see advantages in having such coverage for themselves, particularly if they can get group-discount prices through long-term-care (LTC) plans arranged by their employers. Now the market for employer-sponsored LTC insurance is broadening to include employees’ family members—particularly parents.

While LTC coverage does not extend to health care expenses, it does cover—when needed—professional help with the tasks of daily living, such as bathing, dressing and taking medications as directed. People who are diagnosed with Alzheimer’s disease, a progressive illness that commonly leads to severe dementia, typically are covered. Care may be provided in the beneficiary’s home or in a nursing home, an assisted living facility or a hospice.

Prices for long-term-care coverage vary, depending on several factors. LTC premiums are based on the beneficiary’s age and condition at the time of application for the coverage. The average annual premium for individuals under 65 is $1,337, and for those over 65 it is $2,862, according to the American Association of Homes and Services for the Aging, based in Washington, D.C. A policy purchased by a 65-year-old and held until death pays out 82 cents for every dollar, the organization says.

Benefits generally are paid as a specific amount per day for up to a maximum number of days. For example, under the employer-sponsored LTC coverage at Detroit-based Henry Ford Health System, a network of hospitals and other health care facilities in Michigan, the LTC benefits “can cover three to five years,” says benefits manager Patti M. Janus. Premiums are discounted in accordance with a volume-purchase arrangement, and “there are three different levels” of coverage “offering benefit amounts ranging from $100 up to $200 a day,” Janus says.

The Business Case For Supporting Caregivers

While employers’ costs in sponsoring group LTC insurance generally are minimal, the business gains can be substantial through reduction of productivity losses.

Employer sponsorship typically means arranging for premium discounts based on the number of employees signing up. Although some employers pick up a substantial portion of the premium—at least for employees if not for other family members—they generally offer LTC as a voluntary benefit, meaning employees pay the cost and employers pick up only the administrative expenses.

Productivity pluses can accrue when employers offer LTC insurance not only for employees but also for their family members. Amy Pollock, an Atlanta-based LTC specialist with LTC Financial Partners, describes a scenario that can result when an employee finds he or she must provide care for elderly relatives: “First, the employee’s productivity goes down because their mind is focused elsewhere,” Pollock says.

Subsequently, she continues, “employers may see behavior problems due to mental stress, including irritability and attitude problems. Finally, [employees] often need to take time off from work”—whether part of the time or with extended leave—or they may quit so they can devote all of their time to the family member’s care.

With LTC coverage available at discounted premiums, employees could be more inclined to have their parents, for example, sign up for it, and thus “it could free employees up from having to spend time away from work dealing with a parent’s care problems,” says Nancy P. Morith, president of the N.P. Morith insurance sales and consulting firm in Princeton, N.J. “In some cases, even grandparents” are now eligible for some employer-sponsored LTC plans, she says.

In addition, Morith says, LTC can be particularly helpful for both employee and employer when distance is a consideration. If an employee is responsible for the care of, say, an elderly relative in another city, having LTC coverage for that person can help reduce absenteeism because the employee “will be able to get professional services by consulting long distance with care managers,” she says.

A Growth Industry

In recent years there has been a significant increase in the purchase of long-term-care policies. By the end of 2004, more than five million individuals in both the private sector and in government had long-term-care coverage, according to the American Council of Life Insurers, an industry group in Washington, D.C.

A council spokesman cites research from LIMRA International, a financial research and consulting firm based in Windsor, Conn., that illustrates the growth of employer-sponsored LTC coverage. Last year, LIMRA reports, 8,000 employers offered group LTC coverage, up 11 percent from the previous year.

Also helping to fuel LTC growth is the practice among employers of allowing those who have left the company to join the employer’s group to get group-discount premiums. “A large percentage of Fortune 500 companies are now making long-term-care insurance available for their retired employees,” says Scott A. Beck, national director of distribution and account management in Westport, Conn., for the long-term-care business of Metropolitan Life Insurance. In addition, he says, federal retirees and their qualified relatives have access to discounted group LTC coverage, as do those still on the government’s payroll.

More than 11 percent of all workers in private industry now have access to long-term-care insurance, according to the U.S. Bureau of Labor Statistics. And in the 2006 Benefits Survey Report by the Society for Human Resource Management (SHRM), 43 percent of the HR professionals who responded said their companies offer LTC insurance, up from 39 percent in 2005 and 38 percent the previous year.

The Issue of Age

While the size of a company’s workforce doesn’t appear to have any effect on whether LTC insurance will be a valued benefit, age may be another matter. “We’re finding that it is often hard to get employees’ attention focused on long-term care when they are in their 30s and 40s,” says Beck of MetLife.

With premiums based on the beneficiary’s age, notes Janus of Ford Health System, “the younger you are, the less you pay.” But younger employees, she continues, “often feel they will never be subjected to a serious illness, or accident, and have trouble envisioning any future need for long-term care.”

It’s an unwarranted assumption, of course, and the key to rebutting it is education, Janus continues, “because a serious illness or accident can occur at any age, and victims could end up needing long-term care.”

In fact, attitudes may be starting to change. A Washington, D.C.-based organization of health insurers, America’s Health Insurance Plans, says LTC insurance is becoming more popular among younger workers. And insurance consultant Morith says, “The average age for individuals buying long-term-care insurance is now down in the 50s; for groups, it’s down in the 40s.”

Judging value, Interest

Notwithstanding the growing interest in LTC coverage, it has its critics. “I don’t think the benefit has been fully demonstrated,” says Jerome L. Mattern, SPHR, an HR manager with a Midwest printing company and a member of SHRM’s Total Rewards/Compensation and Benefits Special Expertise Panel.

“If you are going to put money away for long-term care, a lot of variables can come into play, such as the rapid rise in costs,” Mattern says. “What I’ve seen that has been marketed,” he says, “isn’t really enough as a stopgap.”

When an employer is spending money for employee benefits, Mattern says, “the question is asked: Is this a benefit our people will really appreciate?” He thinks the jury is still out on LTC coverage.

One way to check employees’ interest, Mattern suggests, “is to ask them if this is something they really want.” It’s a question of particular interest, he adds, if your workforce has considerable turnover.

Going Forward

An employer who decides to offer LTC coverage will find there are many providers willing to set it up and offer premium discounts.

“Your best bet,” says Dallas Salisbury, president and CEO of the Washington, D.C.-based Employee Benefit Research Institute, “is to check with your current insurance provider, and, if this coverage isn’t available, try asking for someone in customer service to aim you in the right direction.”

Benefits manager Janus of Ford Health System says, “There are a number of insurance companies that offer this product. We worked with a broker who solicited bids from several companies.” After checking references, she continues, “we selected the long-term-care insurance provider who we felt best fit our specific needs.”

Besides selecting a provider, employers may want to consider how to best offer LTC. “We’re finding that there is a pretty strong take rate for long-term-care coverage,” Beck says, but he suggests that the traditional benefits-enrollment period, usually late in the year, may not be the best time. When employees are selecting life, health, dental and liability coverage, he explains, “long-term care can get overlooked.” When it is offered on its own, apart from open enrollment, it “definitely gets better attention and acceptance.”

Technology giant Lockheed Martin Corp., based in Bethesda, Md., has established “a special enrollment window where employees and new hires can get the coverage without proof of good health status,” says Amy L. Schartner, PHR, senior staff employee benefits representative. New hires, Schartner says, “have 31 days to enroll, and the age of the employees and their health status are the major attractions for signing up.”

Lockheed Martin’s LTC program, administered by John Hancock Long-Term Care Insurance in Boston, has enrolled 2,563 employees—plus 491 spouses and 42 parents or parents-in-law. In addition, about 1,400 people who have left the company have maintained their coverage through the Lockheed Martin plan. Schartner says she doesn’t consider it a large enrollment, “even though all employees get fliers that explain the benefits for themselves and members of their families, including spouses, parents, grandparents and grandparents-in-law.”

Middle-aged employees show the most interest, while young college graduates in perfect health “don’t even inquire, not even for their parents,” Schartner says. “To make this long-term-care insurance coverage work,” she adds, “you need a lot of education.”

Peter Weaver is a freelance business and consumer-affairs journalist in the Washington, D.C., area.
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