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An aging population and changing employee demographics continue to have a major effect on how employers manage their benefit offerings. Whether for themselves or for aging parents, employees have shown a slow but growing interest in long-term care insurance coverage. As a result, a growing number of employers have begun offering long-term care coverage as a voluntary benefit that often provides more advantageous group underwriting and rates than individuals can get on their own.
According to the 2008 National Compensation Survey conducted by the U.S. Department of Labor’s Bureau of Labor Statistics, the percentage of workers in private industry with access to long-term care insurance through their employers has doubled since 1999, from 6 percent to 12 percent. However, the prevalence of this coverage is much greater among firms with 100 or more employees. Currently, 20 percent of workers have access to long-term care insurance.
However, interest in long-term care insurance does not always translate into action. “Employers can’t expect huge enrollment,” says Jack Burke, benefits director at Boston College in Chestnut Hill, Mass. “It’s prudent to offer long-term care coverage, but it will not appeal to everyone. The question is, do you get enough inquiries to justify offering it?” Since Boston College began offering long-term care coverage, Burke estimates that 11 percent of the college’s 2,000 employees purchase the coverage.
There are several reasons why employees fail to follow through on their interest in long-term care insurance. For one thing, this coverage is expensive. Because these benefits are voluntary, employees pay all or most of the premiums. Another key barrier to getting employees to sign up for long-term care insurance is the nature of the coverage itself. After all, people don’t want to consider the possibility that they or one of their loved ones might require long-term care, such as a nursing home stay.
“This is one benefit that you hope you never have to use,” says Jennifer C. Loftus, SPHR, national director at Astron Solutions, an HR consultancy based in New York. Loftus’s firm has been offering long-term care insurance to its 11 employees for two years. However, “it is important to emphasize that employees have a responsibility to think about this possibility from a financial planning perspective,” says Loftus.
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The current economic and financial environment could make employees more open to buying this coverage. “As individuals become more fearful of what is happening, they try to protect what they have and become more willing to consider buying long-term care coverage,” says Jim Glickman, a member of the board of directors of the Society of Actuaries and president and CEO of LifeCare Assurance Co. in Woodland Hills, Calif. This is particularly true for employees who are becoming interested in long-term care coverage for their aging parents and, in the process, might consider obtaining coverage for themselves. Fortunately, many long-term care plans offer coverage for an employee’s extended family, including parents, spouses and children.
Selecting a Carrier and Plan
One of the most important decisions employers make when offering long-term care insurance is choosing an insurance carrier. Because many employees will be purchasing coverage when they are young and healthy under the assumption that the coverage will be there when they are older and frailer, it is essential that the chosen carrier have certain attributes.
Around for the long haul. Judge whether the carrier will be in it for the long haul, not necessarily who is offering the cheapest plan, says Burke.
Glickman recommends focusing on carriers that rely on an underwriting-driven approach to issuing policies rather than a marketing-driven approach that focuses on signing up as many people as possible. “Although there is more paperwork and a more in-depth application process to qualify for coverage in an underwriting-driven approach, the pricing is likely to be more stable,” he says.
Value vs. cost. Overall, “when choosing a carrier, you need to consider plan design, pricing, quality of operations, financial stability and a demonstrated commitment to offering the coverage,” says Frank J. Fimmano, senior vice president with Aon Consulting in New York. When choosing a plan, it is important to consider what is being offered relative to the cost. For example, it is important that a plan have some sort of inflation adjustment built in so that benefits keep pace with health care inflation.
The Face of Long-Term Care
While most people associate long-term care insurance with nursing home care, “The vast majority of benefits paid today cover care at home or in an assisted living community,” explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance. Over 97 percent of long-term care insurance policies sold provide some form of home care benefit (86 percent did in 2000 and 67 percent in 1995), according to a study by the association.
In 2007, the average purchase age for individual coverage was 58, a decline from the average purchase age of 67 in 2000. The study found that while just over half of all individuals receiving benefits from their long-term care insurance policies are age 80 or over, 11.5 percent were between ages 50 and 69.
The most common reasons for a long-term care insurance claim, according to the association, are Alzheimer's disease, stroke, arthritis, circulatory issues and injury.
Women receive just over two-thirds of all long-term insurance claim dollars. "Women, especially those who are divorced, widowed or living alone, need to plan for the risk," Slome advises. "More than 70 percent of nursing home residents are women, and almost two-thirds of home care recipients are women."
Communicating the Benefits
Because long-term care insurance is a relatively unfamiliar benefit program, it will be up to HR executives to communicate these plans to employees. Employees might be uncertain what long-term care insurance covers and why this coverage is necessary. “Long-term care insurance is not just nursing home coverage,” notes Fimmano.Communication and repetition are crucial, says Loftus. She recommends having an insurance broker or other representative hold individual meetings with employees to explain the plan’s pros and cons and how it might fit into that employee’s circumstances. If the employee population is too large to allow for one-on-one interaction, group meetings or brown bag lunch seminars can be effective.There is a fine line for employers when it comes to communicating about long-term care coverage. “We are careful to make sure we do not try to sell it,” says Burke. “We focus on providing clear explanations and information so that individuals can make an informed decision about whether to buy coverage.” For example, to show employees the relative costs and benefits of various inflation protection options, the college has set up a web site that shows how this coverage might play out in terms of costs and benefits. Burke makes sure that someone from HR attends these meetings to answer employee questions and to make sure that insurance company representatives do not cross that line.
More Bang for Fewer Benefits Bucks
From the employer’s point of view, offering long-term care insurance as a voluntary benefit is a relatively low-cost way to send a powerful message to employees that the organization cares about them and their future security. It can be a good attraction and retention tool. “If your competitors for talent already offer long-term care coverage, chances are good your employees know that,” says Loftus.
Joanne Sammer is a New Jersey-based business and financial writer.
Young Workers Must Face Realities of Long-Term Care, New York Times, October 23, 2008
What Is Long-Term Care Insurance?, SHRM Online Tools and Templates, November 2009
Long-Term Planning, HR Magazine, May 2007
Voluntary Employee Benefits Series: Long-Term Care Insurance, SHRM Research, December 2005
Long-Term Care: Why HR Should Care, SHRM Online Benefits Discipline, May 2004
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