Advisers finding new opportunities with long-term care benefits
In the early 2000s, the long-term care market was robust, with many carriers offering products. More recently, that has changed. Many group carriers have exited the market and employers stopped sponsoring such programs. But they haven’t disappeared entirely, and that’s good news for advisers.
While many carriers still aren’t offering group coverage, employees do have access to long-term care through their employer as a voluntary product, says Sharla St. Rose, director of voluntary benefits at NFP.
Plans are offered as individual policies, which is a win-win for employers and employees, she says. Employees have access to long-term care at no cost to the employer, St. Rose adds. “It’s more flexible underwriting,” she says.
One reason that carriers left the market was due to a prolonged period of low interest rates, says Zack Pace, senior vice president at CBIZ Benefits and Insurance Services.
“It’s hard for insurers to make their targets when the interest rates have been so low for so long,” he says.
The exit of carriers from the group market wasn’t all bad news. It created an opportunity for advisers to educate clients about what long-term care products are currently available, St. Rose says. Many employees don’t understand their plan, she says, and others can take the opportunity to re-evaluate their coverage.
There is a lot of misinformation concerning long-term care, St. Rose says. Many believe Medicare will cover those costs, however, that’s usually not true. “Most long-term care isn’t medical care, but rather help with basic personal tasks of everyday life, sometimes called activities of daily living,” according to Medicare.gov. “Medicare doesn’t cover long-term care if that’s the only care you need.”
“It’s hard for insurers to make their targets when the interest rates have been so low for so long."
Other people think Medicaid is the answer. “The reality is most working employees will not qualify for Medicaid,” St. Rose says. Such misinformation can lead employees to spend down their nest eggs in order to pay for long-term care, she says.
The cost of long-term care is another area where advisers can educate clients. “Everybody just assumes insurance is expensive,” St. Rose says. However, the cost for each plan is unique to the individual, she says. A healthy 45-year-old and a 65-year-old with health issues will have vastly different prices.
That’s why consulting with a professional is so crucial. “It definitely comes down to that individual education session,” she adds.
That’s also the reason why many people are purchasing long-term care through an adviser outside of the workplace. “Long-term care is a pretty complicated product,” Pace says. “To buy any insurance you have to be able to visualize the risk.”
No one wants to picture needing long-term care, Pace adds. So when an individual is discussing finances with an adviser, it gives the adviser the opportunity to encourage that person to consider such coverage, he says.
That might be one reason why long-term care hasn’t been too popular as a voluntary product purchased at the workplace, Pace says. The current practice of employers offering long-term care as individual, voluntary policies is likely to continue, he says. “It took a long time for the wheels to fall off the bus, and it will take a long time to get them back on.”
Despite the fact that group plans are scarce, employees still have access to long-term care, St. Rose adds. “It’s not the same,” she says. “It is different, but different still works.”