RSM Resources

Over the next 25 years, the U.S. Census Bureau estimates that the number of Americans age 65 and older will double, meaning that millions of workers will face increased pressure to provide care for aging loved ones. For that reason, experts say midsized businesses can help increase employee productivity and peace of mind by adding long-term care insurance( LTCI) to company benefit packages.

Currently, 12 million Americans are receiving long-term care, according to the Health Insurance Association of America. The vast majority of those people receive care in their home or local community from working family members or friends — many of whom must find creative ways to merge job demands with care-giving needs. Such workplace accommodations can cost companies billions annually in lost productivity. That may be one reason why the percentage of companies offering long-term care as a benefit option increased from just 3 percent in 1995 to 11 percent in 2003.

Because LTCI reimburses for such costs as nursing home care, assisted living, adult day care, in-home services and hospice care,it enables employees to better care for their families. In addition to boosting productivity, retention and morale, there are tax advantages to offering LTCI, since plan set-up costs and corporate premium contributions are deductible.

Designing plans that encourage participation

A recent Kaiser Foundation study reported that a semi-private room in a nursing home now costs an average of $52,000 per year. By 2030, the foundation estimates that annual cost will skyrocket to over $190,000. Even home health care,  the least-expensive alternative for someone who needs regular medical attention, can cost more than $1,000 a month. Currently, none of these costs are covered by Medicare, Medigap, disability or private health insurance plans. While Medicaid does cover long-term care services, many older Americans qualify only if they have minimal assets or after they have spent much of their estate to reach a proscribed income level.

To help workers address these issues, experts say midsized companies should consider designing a comprehensive LTCI benefit package that includes long-term care services, a high daily benefit and inflation protection. Additional incentives, such as payroll deduction for premium payments or an employer contribution to reduce a worker’s out-of-pocket insurance cost, can make the benefit even more attractive. However, even without an employer contribution, a company-sponsored plan may cost less than an individual LTCI policy.

Group LTCI policies commonly provide a benefit expressed as a daily dollar amount, such as $75 per day for nursing home care. In some plans, employees can select a coverage level, which is typically payable for several years or up to a maximum dollar limit. Benefits may be adjusted for inflation, but most plans cap such increases at a fixed percentage.

Under a group-sponsored LTCI plan, employees are provided a minimum benefit with no proof of insurability. Workers may then choose to purchase a larger benefit or extend coverage to family members. This so-called "buy-up" of LTCI coverage typically requires the completion of a proof-of-insurability questionnaire.

Selling the benefit to younger workers

While LTCI has strong appeal to older employees, many younger workers may question the value of such an investment when they are in their peak physical years. However, debilitating illnesses or serious accidents can occur regardless of health or age, which explains why 40 percent of all Americans receiving long-term care are between the ages of 18 and 64.

Since LTCI premiums are based on workers’ ages at the time of application, waiting to seek coverage can be a costly mistake. Studies show that if an individual waits until age 79 to purchase a policy, premiums will cost six to 10 times more than if the policy was purchased at age 50. Once an individual has purchased LTCI, an insurer can raise premiums on a class or group basis only — not because of an individual’s age or health.

The choice to offer a long-term care benefit — or counsel employees on individual policies — should not be taken lightly. Andrea Lutton, director of consulting services for RSM McGladrey Employer Services, suggests executives keep several key points in mind, including:

Determining that a policy is"qualified." Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), companies and policyholders may take tax deductions when participating in plans that meet the following provisions:

• The policy must be guaranteed renewable. The carrier can cancel the policy only for nonpayment of premiums.
• The policyholder must be certified as a "chronically ill" person within the prior 12 months and must have a written plan of care provided by a licensed health care practitioner.
• The need for long-term care assistance must be expected to last for at least 90 days.
• The chronically ill certification must be based on an inability to perform, without substantial assistance, at least two of six activities of daily living, or the need for substantial supervision in order to protect the individual from threats to health and safety due to a severe cognitive impairment.
• The offering of non forfeiture and inflation protection options must be available at the time policies are sold.
• The notation that LTCI benefits cannot duplicate Medicare benefits.

Researching the duration of "elimination periods." Similar to a deductible, elimination periods refer to the length of time an employee must wait before receiving paid LTCI benefits. These periods can range in length from a few days to one year, with 90- or 100-day periods being the most popular.

Evaluating the range of coverage levels. By designing plans that include home health care, skilled intermediate care and custodial nursing home services, you can ensure that workers maintain benefits across a range of treatment needs. This evaluation should also include a review of dollar benefits for facility versus home-based care, coverage to train informal caregivers and benefits for respite care.

Determining what conditions trigger benefit payments. Generally, a solid LTCI plan will cover cognitive impairment of any kind, including Alzheimer’s disease. Other triggers should include the inability to perform two of six daily living activities, which include eating, bathing, dressing, using the toilet,continence and unassisted movement.

Ensuring that employees can purchase inflation protection. Most long-term care insurance providers offer policy riders, or amendments, that adjust benefits for inflation over the life of the policy. Inflation protection can be the difference between a policy that performs very well when care is needed, and a policy that falls short.

Documenting how the carrier’s claims process works. In this step, executives should ask prospective providers for a step-by-step review of how claims are documented, filed and processed. Additionally, the company should ask insurance carriers to provide data illustrating how fast legitimate claims are paid.

By offering LTCI as an optional employee benefit, a company can increase productivity and peace of mind for older employees — or those who are primary caregivers for aging or ill loved ones. This benefit can be a useful tool to help retain valued employees as labor markets continue to tighten.