Benefits of Long Term Care

Long Term Care Insurance companies are exiting? According to recent news as reported in the Wall Street Journal “Is this the end of Long-Term -Care” it appears that Prudential is following a  long list of premier insurers who have left the state of NY – MetLife, Guardian, Unum, Travelers, Unum and AIG.

According to the article “Prudential Vice President Malcolm Cheung says the company decided to stop selling long-term-care coverage to individuals because of the uncertainty surrounding future claims and persistently low interest rates. The insurer plans to continue offering group long-term-care coverage through employers.”

It’s hard for insurance company actuaries to accurately project how many people will need long-term care and the cost of that the care. Most insurers allow a little wiggle room in their risk calculations by preserving the right to raise premiums for entire classes of beneficiaries, rather than just individual policyholders. But clearly that wiggle room is too constricting.

Long-term care (LTC) insurance is a benefit that seems ripe for the needs of today’s workforce. Yet, when employers offer staff members the chance to purchase long-term care coverage through the workplace — generally as a voluntary benefit which the employee pays for entirely — the participation tends to be low. One study contracted by the U.S. Department of Health and Human Services found that, while purchase rates varied considerably among the group of surveyed employers, 40 percent saw participation rates below two percent. Overall, employee participation rates are below 10 percent, according to a study published by the Employee Benefit Research Institute (EBRI).

Even though, with a voluntary benefit employees pay the premiums, there are advantages to purchasing LTC through the workplace. The larger the group, the greater the purchasing power, therefore premiums are usually lower. Underwriting may be less stringent. Information comes to the employee, who does not have to take the time to seek out information. Enrollment will be easy and payment convenient through payroll deduction. Given these advantages, why don’t more employees opt to enroll when offered the chance?

An AARP survey concludes that one reason for low participation may be misconceptions among Americans about long-term care needs, costs and services. According to this survey, “Americans age 45-plus know less about long-term care than they think they do.” Some specifics from the survey indicate a sobering lack of knowledge about issues involving long-term care:

• Only eight percent of respondents correctly estimated the monthly cost of a nursing home within 20 percent of the national average cost, and only 23 percent made a similarly correct estimate for the monthly cost of an assisted living facility.
• Nearly a quarter didn’t know the cost of an in-home visit from a skilled nurse or an aide.
• A majority (59 percent) thought Medicare pays for extended nursing home stays, and 52 percent thought Medicare covers assisted living costs.
• Almost 30 percent said that they have purchased LTC insurance, a figure considerably higher than industry estimates about the number of policies that have been sold.

Clearly, more work needs to be done to educate individuals about the issues involving long-term care. Employers that make LTC coverage available agree with this assessment. The study from the Department of Health and Human Services cited above reveals that employers found educating employees about the LTC benefit to be very important, but also very challenging. When asked what they would have improved about their LTC offering, most named education and communication during the initial offering period.

Looking back at the employee misconceptions about LTC, overcoming them indicates several key communications components:

• The cost of long-term care services. According to a 2011 study from Genworth Financial, a private room in a nursing home runs more than $213 a day or about $77,745 a year; a stay in an assisted living facility costs more than $3,261 a month; and hourly rates charged by home health agencies for licensed home health aide services average about $19.
• The funding sources for long-term care services. As noted above, many people think that, once they hit age 65, Medicare will pay for any long-term care needs that may arise. However, Medicare does not cover extended long-term care stays.
• The chances that long-term care services will be needed in one’s lifetime. According to figures from the government, currently, about nine million people over the age of 65 need assistance with their long-term care needs. By 2020, this figure will likely rise to 12 million. According to one government study, individuals who reach age 65 have a 40 percent chance of entering a nursing home, and about 10 percent of people who do enter a nursing home will stay there for five or more years.
• The advantages of purchasing coverage through a voluntary workplace-based offering. Listed above.

The EBRI study cites surveys showing that communication is the most important determinant of participation in a long-term care program; one survey found that 38 percent of employers making LTC coverage available wished, in retrospect, that they had communicated the plan more effectively. Thus, when contemplating an LTC offering — or when looking at an existing program — realize that employee education and communication will play a key role in the success of the program.