Recognizing A Need Employers Are Adding Long-term Care Coverage To Benefits Packages

Long-term care (LTC) insurance is a hot topic these days, especially among Baby Boomers who face their parents’ aging — and their own. It is also gaining the attention of employers who see it as a logical and valuable addition to the traditional employee benefits package.
At some point, experts predict, nearly 50{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of Americans will need LTC insurance, which protects against the high costs of extended illness or injury by paying benefits when people are unable to function independently. Most group LTC insurance carriers consider a person eligible for benefits if he or she is unable to perform any two of the six ‘activities of daily living’ — toileting, transferring (from one place to another), maintaining continence, eating, bathing, and dressing. The surprise may be that this coverage is not just for the elderly: almost 40{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of those who need help with everyday activities are working-age adults.

The cost of such help can be substantial. Telephone inquiries made to eight nursing homes — in Chicopee, Holyoke, East Longmeadow, Springfield, West Springfield, Longmeadow, and Wilbra- ham — found an average annual cost of $78,441.

Even if a person’s medical and financial circumstances warrant care in the home, that option is not inexpensive. Without insurance, it is unlikely that many people of average means could afford long-term care in any setting for long.

Given these facts, why is it that 70{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of workers save for retirement, but only 36{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of them have even thought about insurance for long-term or nursing home care?

In fact, some workers acknowledge the need to purchase long-term care insurance but just aren’t ready to take that step. The product may be too costly, the available options may be too confusing, or both.

Today, however, employers are stepping up to ease the financial burden of LTC insurance, and sort out the confusion around it, by offering group coverage as part of their employee benefits packages.

For employers who have 15 or more employees eligible for benefits, group long-term care insurance is available — and affordable. Like other group products, it generally offers more favorable premiums than an individual could obtain.

Here are some frequently asked questions about group LTC insurance:

How does it work? The employer purchases a base plan that covers all employees with a minimum, for example, of $2,000 per month. Employees then can ‘buy up,’ or purchase additional coverage, at their own expense. Since the national average for nursing home costs is $46,000 per year and the facilities polled in the Greater Springfield area reported rates nearly double that average, chances are that employees will want to buy up.

What makes this so attractive as an employee benefit? Most importantly, the coverage offered to the employees at the time of installation is ‘guaranteed issue,’ meaning that coverage is available to eligible employees regardless of their health at the time. This is an important feature for employees with health issues that might prevent them from getting LTC insurance on an individual basis. Group coverage also may be available to family members, although not on a guaranteed-issue basis, and depending upon the group carrier, LTC insurance can be extended to siblings, parents, grandparents, and in-laws.

What’s in it for the employees? The employee receives a base level of coverage provided by the employer, while buy-up options are offered, some without medical underwriting, which allow the employee to supplement the base plan in ways that suit his or her budget and needs. Premiums for buy-up options are based on today’s age, and the rates for working-age people are lower than those for people of retirement age. Also, portability features offered by some
carriers allow employees to take LTC insurance coverage with them when they leave employment.

What’s in it for the employer? Employers say that sponsoring a group LTC insurance plan shows concern about workers’ welfare, helps to build morale and loyalty, and helps to retain qualified, highly skilled employees. Long-term care insurance programs are easy to administer, they say. Moreover, employers who pay LTC insurance premiums for a worker can deduct them as a business expense, while the premiums need not be treated as income to the employee.

Simply put, in today’s competitive world, those companies that offer group long-term care insurance are distinguishing themselves as the employers of choice.

Victoria J. Owen is an employee benefit specialist for Northwestern Group Marketing Services Insurance Agency Inc. The agency participates in Strategic Employee Benefit Services, a nationwide group-marketing program that provides its specialized services exclusively through the Northwestern Mutual Financial Network.