LTCi environment ripe for innovation

Long-term care is something 4 in 10 workers believe they will need at some point in their lives while 40% of U.S. households are projected to run out of money in retirement. It’s an environment ripe for innovation in long-term care insurance from both the public and private sectors.

The Employee Benefit Research Institute released some of the findings from its issue brief, “Employee Perspectives on Long-Term Care,” during a recent webinar.

Employees who said they believe it is likely they will need LTC have several characteristics, said Bridget Bearden, EBRI research and development strategies. Those characteristics include having a personal experience receiving care or having a disability. In addition, employees with higher education and income levels have a greater awareness of the possibility of needing future care.

Yet only 23% of workers said they had strong knowledge of how to access long-term care services and supports while 40% had only moderate knowledge, the findings said.

When LTCi is offered by an employer, few workers take advantage of it. The findings showed 9% of eligible workers enrolled in LTCi offered by their employer while 15% did not enroll.

However, among the 37% of workers who said they bought life insurance outside of their employer, 41% said their policy has a LTC rider or acceleration clause.

The top three features workers said would influence them to buy LTCi through an employer are the cost of the product, the benefits offered and the ease of accessing those benefits.

Workers concerned about loved ones' LTC needs

Workers are thinking about not only their own care needs but the care needs of someone close to them, the findings showed. More than half of workers said a parent or parent-in-law is most likely to need care, while 23% said they predict their spouse will need care. More than three-quarters of those workers said they will provide the care themselves. About half of workers said their future care recipient has a cognitive disability, while about 60% said their care recipient likely qualifies for Medicaid while 43% said they believe Medicare will pick up the tab for care.

Morningstar Center for Retirement and Policy Studies also looked at how long-term services and supports impact retirement income adequacy. The center found that 43% of baby boomers are projected to incur LTSS costs in retirement, with $242,000 in mean costs for boomer households with a simulated LTSS need. By age 95, nearly 60% of women and 51.8% of men have a LTSS need.

More states are looking at ways they can help their residents plan for future LTC needs, said Steve Cain, director at LTCI Partners.

Washington state created the first publicly funded LTC program – WA Cares. New York and Massachusetts have proposed legislation to create an LTC program, while five other states are studying the issue.

A great time for employers to offer group LTCi

This is a great time for employers to consider offering their workers group LTCi, Cain said. Better underwriting and better pricing make the product more attractive to employees. In addition, LTCi is gaining attention from younger workers, with the average purchase age at 47.

Combined life/LTCi policies are also gaining traction in the workplace, Cain said. In this situation, the employee selects a life benefit with benefit options typically ranging from $25,000 to $250,000. Coverage is available to employees on a guaranteed issue basis up to a specified age (usually age 70) and spouses/partners can be covered, usually on a simplified issue basis. Premiums are based on an individual’s age and selected benefit at the time of enrollment. Costs are locked in and do not change as the individual ages.

The life benefit determines the monthly and lifetime LTC benefit. The monthly LTC benefit is a percentage of the life benefit, and the life benefit is reduced as LTC monthly benefits are paid. Any unused death benefit would be paid to beneficiaries after the policyholder dies.

No matter how many options workers have to fund future care needs, “this problem is not going away,” Cain said.

“Whether it’s a state program or a federal program, the need for funding LTC will continue to grow. Private insurance might play a role along with public programs.”

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].