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Evaluating your Long Term Care Program

Is your corporate LTC benefit keeping pace with today’s marketplace? Are you unsatisfied with services of your LTC plan? Did your LTC carrier just announce a rate increase? Put your LTC benefit program to the test and consider the following:

1) Is the plan design adequate? 

Benefit Options.  Policies offer a choice of benefit amounts, benefit durations and some sort of inflation protection feature (Future Purchase Option, 5% Simple, 3% or 5% Compound).  If your plan does not offer these features consider a supplemental or replacement LTC plan with a new carrier.  Keep in mind if your plan was written a long time ago, the pricing might be tough to replace and sometimes bringing in a supplemental plan may be more beneficial.

Care Delivery Options.  The vast majority of consumers prefer the option to receive care at home.  Early LTC plans offered nursing home only coverage.  In 1996, the advent of tax qualified plans mandated home care be offered alongside with assisted living and nursing home care as an option.  Depending on the carrier, a plan might require care at home be delivered by a professional and/or licensed home care agency.  These plans do not provide for informal care from a family member or friend.  Home care is a core feature that LTC plans offer today and most  want it in their coverage.

Riders.  Features like Return of Premium, Shortened Benefit Period, and Shared Care are typically not a strong enough reason to replace your plan if they are not included in your current one.  

Keep in Mind. Many of the programs written 10 or 20 years ago could have plan features that are no longer available in today’s marketplace (e.g. unlimited duration, accelerated payment options, etc.)  Beware!  Cancelling a plan with these features could mean you will never see them again.  Evaluate the importance of those features for your group and consult with an expert before cancelling any plan. 

2) Did your carrier announce a rate increase?

Don’t Panic.  Often a rate increase does not necessarily mean that you will want to terminate the policy.  Carefully evaluate the premium rates for your plan against what the market offers today.  Plans that were written years ago still offer competitive pricing even with acceptance of the rate increase. 

You’re Older.  LTC premiums are based on the age of the policyholder at time of purchase.   The cost to replace a policy with a new policy with similar features and coverage is often not achievable if the person has aged considerably even after factoring in a rate increase.  For example, if an employee purchased a policy 10 years ago and is interested in replacing it with a new policy, they will need to price the replacement policy at their current age.  The cost difference across a 10 year period can be significant.  More importantly, their ability to pass health underwriting requirements might have changed. 

It’s Growing.  Don’t forget to calculate the growth of a policy if it includes an inflation protection feature.  A $6,000 per month policy purchased 14 years ago is worth almost double that today if it had 5% Compound Inflation. 

You Have Options.  Carriers implementing rate increases will offer several choices that allow employees to modify their plan and keep their premium relatively the same.   

3) Does your LTC plan allow new entrants (new hires, employees and family members)? 

Current Members Only.  Carriers like John Hancock, MetLife and Prudential (starting this summer) no longer allow new entrants.  This removes your ability to offer new and non-participating employees a LTC benefit. These LTC plans will most likely suffer from future block degradation.  With no new entrants coming into the risk pool the block of policyholders will age and create increased exposure for the carrier.  These carriers may face future rate increases. 

You’re on the List.  Some LTC carriers like Unum, have discontinued new group policies but will still allow new plan entrants on their group policies.  Allowing new hires, employees who have not purchased coverage and family members to still purchase policies with underwriting is a way of responsibly growing the overall risk pool while limiting rapid growth.
3) What type of employee participation do you have? 

The average participation in a group long term care plan is under 10%.  Engaging your employee population with a communication campaign and educational effort may help increase awareness about your program.  If you implemented your LTC benefit program 5 or more years ago you might be surprised how many employees might now be ready to purchase coverage.  

Focus. LTC is a complex benefit and requires a very strategic rollout.  The most successful programs focus on a LTC benefit rollout outside of core benefit open enrollment periods.  Pick a month far away from your normal benefit enrollment period and when other company initiatives will not interfere.  The key to success will be to educate your employees. 

Time and Money. Provide incentives for attending a session or make meeting attendance mandatory – it makes a world of difference.  Employees need to understand the issues surrounding this benefit and give it time to make the right decision.  Contributing towards a base “starter” LTC plan can also get the attention you need from your employees.

4) Consider expanding your program to more than just LTC insurance!

One of the biggest issues facing corporate America today is caregiving for our family and loved ones.  If you are not addressing this for your employees now, it will burn a hole in your productivity numbers, show up in your STD and LTD claims and cannibalize your wellness programs affecting your healthcare costs.

Consider a comprehensive program that includes proactive education and caregiving awareness as well as tools and resources to support your employees with family caregiving. 

5) Moving Forward.

Where do you start? LTC is a very specialized benefit. Start with finding a LTC specialist that can provide an analysis of your current program and make some recommendations.  Many specialists will offer this advice at no cost to your company and it will give you some valuable insight to help make a decision.

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