Growth in the long-term care market has been on the upswing the past several years. The turbulent economy and recent changes to health care have increased awareness of this valuable protection. Employers are taking this time to re-evaluate their employee benefits and many see LTC insurance as a product that can be easily added to a benefit plan without a lot of additional costs.
Health care reform, specifically the Community Living Assistance Services and Support Act, has given much-needed attention to the issue of long-term care and reinforces the need to plan for the costs of that care. Benefits from this new program are designed to pay for limited home care services. However, they may fall short in meeting the complete long-term care needs of many people - and is years away from actually paying any benefits. More employers recognize this, and as a result, are turning their attention toward private insurance.
Fill financial gaps
Enacted as part of the Patient Protection and Affordable Care Act in March 2010, the CLASS Act was designed to expand options for people who become functionally disabled and require long-term care. The CLASS program is expected to have plan provisions and rates finalized by fall 2012, with the first benefits being paid in 2017. These effective dates leave many U.S. workers without affordable options to finance long-term care - in the short term.
At its most basic level, the CLASS Act is a publicly sponsored long-term care plan that offers a level of guaranteed-issue coverage to working Americans.
While private LTC coverage offers many advantages, it can be out of reach for many people who live paycheck to paycheck. Although premiums for the CLASS program have not yet been established, the law calls for "affordable" coverage.
It also provides a plan without medical underwriting - no one can be turned away for coverage if they meet the eligibility requirements.
The CLASS Act brings the discussion of affordable LTC to the forefront, but it is not designed to pay the entire cost of long-term care. Benefits from this new program are designed to pay for limited home care services, not extensive home health care or nursing home care. That is why it's important to understand that private long-term care insurance is still needed to help fill in the financial gaps.
Here's how long-term care coverage can complement the coverage available with the CLASS Act:
* Benefit level of private plans can help cover the cost of assisted-living or nursing home care, an area that the CLASS Act does not cover.
* The CLASS Act plan won't pay a benefit until someone has paid premiums for five years. The most common private insurance plans do not have a vesting period but use an elimination period of 90 days before benefits can be paid.
* The CLASS Act does not provide coverage for any family members. Employees with private LTC plans have options to purchase coverage for relatives.
* Only private plans can customize coverage to meet employees' specific needs. Most private long-term care insurance policies provide a broad range of benefits not available with CLASS.
* Private plans rely on medical underwriting, limited guarantee issue and strict participation/enrollment requirements to protect financial viability. It is still unclear how the CLASS Act will address these issues and ensure long term financial solvency, although PPACA does require this.
Who benefits most
Long-term care insurance is certainly not the first benefit employers will think about. However, long-term care is a relatively inexpensive benefit for which employers can pick up the tab for all or some of the coverage. Unum is seeing its employer clients pay an average of $300 per person, per year for group LTC coverage. This provides a basic level of coverage for all employees. With basic coverage in place, employees can pay to buy up and customize their coverage by adding additional provisions like inflation riders. The total cost amounts to a very small percentage of the total compensation package.
LTC also offers these benefits:
* comprehensive coverage that includes care in nursing homes, assisted-living facilities, and home- and community-based environments
* a wide range of daily/monthly benefit amounts
* inflation riders (especially important for younger buyers)
* reduced underwriting, including, in many cases, guaranteed issue for actively at work employees
* portability
* straightforward administration
* ease of payroll deduction
* ability to cover spouses, parents and in-laws
However, LTC insurance is not for every employer. For companies that don't offer any type of medical insurance or retirement plan, the true value of LTC coverage is wasted. Employers with large contingents of workers in their 20s, with lower salaries, are typically a hard sell because this demographic simply does not view this as a priority.
Look for groups with a strong percentage of female workers, since they are normally the caregivers intimately involved with health care decisions for other family members.
Also, employers which make pension contributions or offer 401(k) matches have a vested interest in seeing their employees retain their assets for the long term. They will see LTC as a great way to preserve those assets that they have helped their employees accumulate and may be willing to spend a little extra to create a basic level of insurance.
Education and communication
Just how much the CLASS Act will impact the LTC coverage offered in today's workplace is yet to be determined. However, brokers and employers will need to work consultatively to determine the best long-term care strategy for each company and for its workers' individual needs.
Since the CLASS Act is not mandatory for employers, it is just one option for consideration. There may be cases where a private plan with a higher benefit maximum and more flexibility is more appropriate for a certain workforce. And, there may be times when an employer will prefer to offer both the public and private options, to appeal to workers at a variety of different levels of compensation.
As is true with all forms of employee benefits, education and communications will be key. As the CLASS Act shines the national spotlight on our country's need for long-term care coverage, employees will surely have more questions and need for information than ever before.
Bertsch is vice president of long-term care at Unum. He can be reached at
