As baby boomer workers grow older and employees of all ages worry about their economic security, it might be time to consider offering long-term care insurance as a voluntary benefit. More employers are, even as the number of carriers offering the insurance shrinks.
According to new research by health care benefitsfirm HighRoads, 51% of large employers make long-term care (LTC) insurance available to employees, up from 48% two years ago.
LTC insurance helps defray costs for people who need assistance with daily living. It covers skilled and custodial care in insureds’ homes, adult day care centers, assisted living facilities, nursing homes or hospice facilities.
Most employers that offer LTC insurance do so on a voluntary basis. That is, employees pay the premiums, so it costs employers nothing to provide.
HighRoads found that more than 90% of the employers that offer LTC do so as an additional benefit to their employees. The rest offer LTC insurance as part of their overall health care strategy or because a union contract requires them to offer the benefit.
Note: Some large employers roll LTC coverage into group health plans, a move that offers tax advantages to both the employer and the employee. However, this “qualified plan” coverage is relatively expensive, and the number of firms offering it as an employer-provided benefit has been falling, according to HighRoads.
Growing need, fewer carriers
According to data from surveys conducted by the Health Policy Institute at Georgetown University, more than 10 million Americans annually need long-term services and support to assist them in life’s daily activities. That number is growing as the population ages and people live longer.
Yet options for obtaining LTC coverage have been shrinking.
The number of companies selling LTC insurance peaked in 1989 at 143, and has been declining ever since. Now, fewer than 50 insurance companies write LTC policies. Blue Cross/Blue Shield organizations are among the most active providers.
“It is a serious issue when insurers no longer are willing to provide this” coverage, says HighRoad’s CEO, Michael Byers. “Millions of Americans will be left without a safety net should they become disabled.”
LTC insurance is attractive to many employees because they worry that they won’t be able to pay for care on their own. (See “Long-term care insurance by the numbers” in box below.)
The high cost of long-term care doesn’t only affect the individuals who need it. It’s bad for employers’ bottom lines, too. Employees’ long-term caregiving responsibilities cost U.S. employers $25 billion a year.
How to decide on LTC coverage
LTC insurance isn’t right for every employee. Experts say about 10% of eligible employees can be expected to sign up for voluntary coverage.
Premiums are age-rated, so younger employees pay relatively less. A 30-year-old in good health might pay $90 per month for usual coverage, while a similarly healthy 60-year-old might have monthly premiums of more than $150.
If you decide to offer LTC insurance, work with your broker, who has access to information about a variety of plans. These guidelines can help you make a good choice:
- Find a carrier with a strong track record. The LTC market shakeout has left mostly well-established insurance companies. Still, this is insurance for the long haul; you want a carrier that will be in business for decades.
- Don’t focus too much on premium cost. Your employees will have to decide if they can afford LTC insurance. Your task is to assess the real value of the coverage. Look for the highest-quality coverage per premium dollar.
- Benefits communication is key. Plan to spend lots of time explaining the value of LTC insurance, the life circumstances that make it important and why coverage may be beneficial. Your broker can provide information to help employees assess whether LTC insurance makes sense for them.
Because LTC insurance is a voluntary benefit, don’t oversell it. Give employees the information they need to make informed decisions about their needs.
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