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Adding Long-Term Care Benefits
Changing workforce demographics generate demand
for LTCI
By Murray Gordon
From
Compensation & Benefits Review, May/June 2004
Long-Term Care
Insurance is emerging as the benefit of the 21st Century, as
an aging population looks for ways to finance quality health care and
protect their nest eggs.
The country’s 70
million baby boomers are now between the ages of 39 and 57, and they
represent a quarter of the population. As baby boomers enter their
“retirement years,” every segment of society will be affected –
including the workplace. One way employers are responding is by adding
Long-Term Care Insurance (LTCI ) as a benefit.
The federal
government, the nation’s largest employer, added voluntary Long-Term
Care Insurance in 2002. The U.S. Office of Personnel Management
envisions this federal program to be a “national model,” and both AARP
and the Health Insurance Association of America (HIAA) believe this
program will pave the way for companies and employees working for state
and local governments, as well as those in the private sector.
Increasingly, LTCI
is popping up on the benefit rosters at Fortune 500 companies as a way
to attract and retain top employees. Some include LTCI as part of a
package of corporate elder-care benefits for employees and their
families.
And, in today’s
challenging economic environment, adding LTCI is a simple, no-cost way
for employers to add value to the benefits package. The effects of a
jittery economy and double-digit increases in health insurance premiums
have required many employers to contain costs by trimming benefits or
boosting employee co-payments. Employees view neither very favorably.
Offering LTCI is a way to add something back that benefits the employee
and positions the employer in a positive light. Another perk is that the
employer can offer LTCI not just to employees, but to extended family
members (including parents and parents-in-law) and retirees and their
families.
Adding a voluntary
employer-sponsored LTCI plan does not cost the employer, but it can
yield significant gains in employee well being, peace of mind, morale
and productivity. Medical advances have made it possible for us to live
longer, though not necessarily better. Consequently, millions of
Americans today – many of them your employees ‑ are performing the role
of primary caregiver for an aging or ill spouse, parent, friend or
sibling. Health insurance does not foot the bill for a nursing facility
or in-home care, and Medicaid and Medicare coverage is very restrictive.
Without LTCI, an aging or ill person must rely on family for help, but
at what cost?
Working caregivers
often have to come in late to work, leave early, take time off, decline
promotions, choose early retirement or leave work altogether. Estimates
are that such workplace accommodations by employees cost employers from
$11.4 to $29 billion annually in lost productivity.1
Adding LTCI as an
optional benefit carries numerous advantages, for employer and employee.
The following guide covers the top reasons your company should consider
adding LTCI to employee benefits:
First, a primer
on LTCI
Long-term care
refers to the assistance provided to an aging, ill or disabled
individual who needs help with the daily tasks of living, such as
bathing, dressing or eating, for an extended period of time.
A large segment of the population has failed to
plan financially for such care because they wrongly assume that Medicaid
or Medicare will foot the bill. Medicaid assists the very poor. In the
past, many individuals have gotten around this by transferring assets to
a family member in order to qualify for Medicaid assistance. However,
new restrictions now effectively prevent such last-minute transfers.
Medicare also is restrictive, is not designed to address long-term needs
and offers a limited choice of care. A loved one may not qualify for
long-term care or may qualify for a short period of time, leaving a gap
in coverage. The average nursing facility stay is two-and-a-half years.
Long-Term Care Insurance, then, has emerged as a
viable away to accomplish the dual goals of protecting assets and
ensuring quality care. LTCI reimburses most or all of the costs
associated with skilled or custodial care. But perhaps what brings the
most peace of mind is the choice and quality of care that having LTCI
guarantees. Long-Term Care Insurance provides benefits for nursing
facility care, assisted living, adult day care and personal services
needed in the home and hospice care. Policyholders also have a range of
benefit options.
The climate is ripe to talk about LTCI
Although LTCI has
been in existence for 35 years, the industry has blossomed in the last
decade. Twenty years ago, mention of LTCI might have drawn a blank, but
today’s consumers are far more savvy about it and more willing to talk
about and plan for the ramifications of aging.
In today’s still
uncertain investment environment, baby boomers and their elderly parents
are taking stock of their options. They don’t fully trust Medicare,
Social Security and even private pension plans to meet their needs. And
they acknowledge that the one financial risk for which they haven’t
planned is the spiraling cost of long-term care. So, it’s no wonder,
then, that Long-Term Care Insurance is creating a buzz.
The interest in
LTCI has spilled over to the workplace. A survey of more than 500
human-resources professionals in 2002 revealed that 48% of their
companies are offering LTCI as a benefit, compared to 33% in 1998.2
In 1990, only 1.9
million held LTCI policies. Just 13 years later, more than 8 million
carry Long-Term Care Insurance. As LTCI sales increased, so did benefit
utilization. According to the Health Insurance Association of America (HIAA),
annual claims surpassed the $1 billion mark for the first time in 2002.
There are numerous contributing factors. People are living longer, and
the cost of health care is rising (Nursing home care now averages
$61,000 annually and will double in the next 10 years).
Many employers have
the misconception that their employees are too young to be interested in
LTCI. In fact, over the last three decades, the average age of
applicants has dropped significantly. In the employer/employee sector,
the average age of an applicant is 43. It’s the ideal time to enroll
because eligibility is more assured and premiums are lower. Also, new
payment options make it possible for policyholders to pay up the policy
in as little as 10 years – during their prime earning years.
Employees have
watched investment earnings plummet or have been affected by decreased
employer contributions to retirement plans. Others are concerned about
job security and their future earning potential. The financial strategy
for many has shifted to one of preservation. Families want to hold on to
what they have. Long-term care costs can eat up a lifetime of savings in
as little as two years. By adding LTCI as a benefit, employers are
acknowledging this reality and giving employees a viable tool for
protecting assets.
LTCI can increase employee
well-being, productivity
Caregiving is
another significant factor affecting the workforce and driving the
interest in LTCI. According to a 2000 survey, more than a quarter of the
adult population provided care for a chronically ill, disabled or aged
family member or friend during the previous year.3
Working caregivers
are juggling their own families and careers while caring for an aging or
ill relative. Many of them are your employees, especially if the largest
segment of your workforce falls between the ages of 40 and 65.
Caregiving while working can profoundly affect the mental and physical
health of employees and therefore impact employers. Studies, for
example, have found that caregivers carry significant risk for
developing depression.
One way to address the issues affecting working
caregivers and to protect your employer from losses, such as decreased
productivity or turnover (from working caregivers exiting employment),
is to offer Long-Term Care Insurance.
The MetLife Study of Employed Caregivers: Does
Long-Term Care Insurance Make a Difference? (2001)
found that LTCI plays an important role
in keeping caregivers in the workplace and reducing certain workplace
disruptions and social stresses. For example, the study cites4:
·
Those caring for disabled elders with
Long-Term Care Insurance are nearly two times as likely to stay in the
workplace than are those caring for non-insured disabled individuals
(It’s important to remember that employer-sponsored LTCI policies can be
extended to employees’ relatives, such as an aging parent – relieving
the burden on your working caregivers);
·
A family caregiver caring for a
privately insured severely disabled elder is less likely to have to work
fewer hours than desired than if the recipient had no LTCI;
·
LTCI relieves Sandwich Generation
caregivers – those with children under the age of 18 – from having to
take as much time off of work without pay;
·
Premium discounts for spouses, groups,
partners and good health;
·
Long-Term Care Insurance can reduce
certain “social” stresses among working caregivers, i.e. the feeling
that caregiving interferes with their emotional/social well being or
health.
Helping employees
manage their burden at home benefits not just the employee and his or
her family, but the employer, too. The employee will come to work more
rested, in better physical and mental health and better able to focus on
the job.
Adding LTCI as a
benefit is hassle-free
Adding Long-Term
Care Insurance as an optional benefit is a very simple process.
Most companies opt
to work with a LTCI professional, for several reasons. The primary
reason is that LTCI policies offer a variety of features and benefits
and must be specifically adapted to each individual to accommodate
personal circumstances and financial constraints. A LTCI professional is
best able to assess individual needs and then craft a customized policy.
Some of the
features each policyholder must consider include:
·
Benefit Periods, the amount of time the policyholder can
expect to receive coverage, normally ranging from two years to lifetime
(though lifetime coverage may soon be disappearing as the LTCI industry
looks for ways to contain costs. More on this and other changes later);
·
Coverage,
community care and home care is
generally available;
·
Daily Benefit Rate, payouts range from $50 to $500 per day;
·
Eligibility; coverage is generally available to
individuals between the ages of 18 and 84;
·
Facility Care Services, provides benefits for charges while staying
in a qualified skilled care or assisted living facility, as well as a
bed reservation benefit that pays for a room while temporarily away from
the facility, as in the case of a hospital stay;
·
Home Care Services, which may include nursing services,
physical, speech, respiratory and occupational therapy, audiology
services and medical social services, as well as personal care and
homemaker services;
·
Adult Day Care and Caregiver Training also are covered, as is the installation and
monthly allocation for an emergency response system;
·
Waiver of Premium, if the policyholder is receiving home care
or facility care benefits, premiums are waived while these benefits are
being received.
The LTCI
professional will make workplace presentations to employees, family
members and retirees, with minimal involvement required from the
employer. The LTCI professional also can prepare articles for corporate
newsletters, Web pages or email communications to update or inform
employees about the LTCI benefit.
Once the benefit is
added, the employer has the choice of allowing employees to pay for a
LTCI premium through a payroll deduction or of having employees take
care of the cost privately.
Essentially, the
employer is a liaison, connecting employees with a LTCI professional who
can explain the advantages, costs and options offered by the major
insurance providers. The employer is providing valuable information that
is of interest and benefit to employees but does not have to incur a lot
of costs to do so.
Tax advantages
for employers and employees
Many employers
elect to have employees pay the full cost of LTCI policies. However,
similar to health insurance premiums, any cost paid by an employer
toward the cost of LTCI is fully tax deductible. Employees benefit, too.
Individuals may deduct up to 100 percent of the cost of tax-qualified
long-term care insurance protection. Benefits are received tax-free.
Rather than pay the
costs for all employees, employers also can choose to “carve out” a
group of employees to receive LTCI coverage paid for by the company.
It’s a popular option for companies looking for a way to enhance the
benefits package for a select group of employees.
Guaranteed renewable and portable attractive
Two other key features of LTCI make it attractive
to employers and employees. First, coverage is available in all 50
states and D.C. This is important for employers who operate numerous
facilities in several states.
And, unlike other kinds of insurance, LTCI is
portable – which makes it easier for employees to accept transfers. If
an employee transfers to a facility in another state, for example, the
LTCI policy goes with the employee. And, no matter where the employee is
working, the same plan and premium remain in effect.
Secondarily, policyholders like the fact that
LTCI is guaranteed renewable. Insurance companies cannot change benefit
levels, reduce benefits or cancel policies.
Speaking of plan
benefits, better to act now
However, to take
advantage of the best plan benefits, the current advice is to act now
rather than later to enroll employees.
Due to the growing
popularity of LTCI, a number of the industry leaders are taking
aggressive action to contain costs. Top carriers are abandoning old
policies and adopting new ones that reflect tighter underwriting, a
trimming of benefit and higher rates. More health conditions are being
excluded. For example, some companies are not even considering
insulin-dependent diabetics or applicants who have had a stroke.
Another big change
in the works is the elimination of lifetime benefits. This feature still
exists in many policies, but it may not for very long. In March, 2003,
CNA, the recognized industry leader, introduced a new policy with a $2
million lifetime benefit cap, which was offered in 23 states. CNA was
the first to eliminate unlimited benefits, but other carriers are
expected to follow suit. In October of 2003, CNA withdrew from the LTCI
market and will no longer offer policies.
On the plus side,
inflation protection is still offered with many plans, and additional
payment plans have been added – such as lump-sum payments or accelerated
payment plans to pay up in a shorter amount of time.
LTCI: The new accommodation for
employees
As baby boomers
age, they not only will be caring for older parents but for themselves
and aging spouses. It’s the new reality - affecting not just families,
but employers as well. And, indications are that the message is getting
through loud and clear. Growth in employer-sponsored LTCI plans is
increasing at a rate of 32% per year, according to the Health Insurance
Association of America.
Here are some final
considerations to weigh if your employer is talking about adding LTCI:
·
First, don’t avoid the topic because you
think employees are too young or not interested. If your employer is not
ready to commit to a LTCI plan, you can still consult a specialist and
ask him or her to conduct no-cost informational sessions to gauge
employee interest. You might be surprised to find out how much your
employees already know about the topic.
·
Assess how many employees may be caring
for an elderly, disabled or ill loved one and how that may be affecting
productivity, well being, morale and turnover. Two-thirds of caregivers
are employed. And the average age of working caregivers for non-insured
individuals is 48.5 How does that fit with your
workforce demographics?
·
Consider whether adding LTCI would
enhance relations with employees and retirees, particularly if benefits
have been reduced or co-payments have been significantly increased.
Flex time, paternal leaves for a new baby and
employer-based daycare centers all have resulted from shifting demands
in society and changing family patterns. In 2004, one of the biggest
work-life issues is how to care for elderly, disabled or ill relatives.
With a booming
population of 34 million older Americans, as many as one in four working
families are also struggling to meet the needs of their aging parents
and relatives, cited the Harvard Public Health Review in its Winter 2002
edition. The article addresses the mounting pressures on families
struggling to balance work with care responsibilities at home, raising
these salient points:
·
According to the Families
and Work Institute, 85 percent of this country's almost 142 million wage
and salaried workers live with family members and have immediate
day-to-day family responsibilities off the job. Work is the foundation
upon which real-life households are built. It is the economic font from
which we nourish, clothe, and house our family members.
·
Data shows that employees are not just taking time off to care for
children, but also
for themselves, their parents, elderly family members, spouses, nieces,
and nephews. Care is not just a “parents’ issue,” it’s a “family issue.”
·
According to a 1998
nationwide survey of the National Partnership, one of the original
proponents of the Family Medical Leave Act’s passage,
the majority of Americans
say that both employers and government should do more to help ease
mounting pressures on working families; nine out of ten say that
employers should do more while nearly three out of four say that
government should do more. Remarkably, these views span all facets of
society ‑ Republicans and Democrats; working women and homemakers; baby
boomers and seniors; whites, blacks, and Hispanics.
By addressing
the critical work/life issue of elder care and long-term care, employers
send a powerful message and enable employees to be more productive and
successful - on the job and at home.
____________________________
-
Metropolitan Life
Insurance Company (1997). The Met Life
Study of Employer Costs for Working Caregivers.
-
Society for Human
Resources Management (2002).
-
National Family
Caregivers Association. (2000). Random
Study of 1,000 Adults, funded by CareThere.com.
-
National Alliance for
Caregiving and LifePlans, Inc. (2001).
Findings from national study.
-
National Alliance for
Caregiving and LifePlans, Inc. (2001).
Findings from national study.
______________________
Murray Gordon, President of MAGA, LTD., is a
nationally recognized Long Term Care Insurance (LTCI) specialist.
Since founding MAGA in 1975, Mr. Gordon has played a vital role in
the evolution of LTCI, working with industry pioneers to develop
features and benefits that are now standard policy offerings. Mr.
Gordon may be reached at 800-533-MAGA, www.magaltc.com.
