A 'Good' Strategy for Long-Term-Care Benefits

Long-term-care coverage offers some difficult challenges for employers -- and for insurance companies as well. Even though LTC plan designs are sorely in need of an overhaul, HR leaders must find a way to offer their workers access to a benefit that can offer the financial assistance many employees will require.

by Carol Harnett, Human Resources Executive Online

In 2006, I was researching strategies for changing people's behaviors. One of my approaches involved interviewing religious leaders from a wide spectrum of beliefs. My key question was: "Can you bring people to epiphanies about maximizing their health?"

A megachurch pastor responded to my inquiry with a question of his own. "How good is good enough?"

As a first-born child, "good enough" almost never works for me. I'm always looking for perfection.

The pastor's question resurfaced while I explored the topic of long-term-care insurance -- a subject that is a natural follow-up to my column on caregiving.

And my epiphany regarding long-term-care protection is that a good-enough benefit design may be our best -- and only -- option.

When I consider the associated topics of LTC insurance and caring for loved ones -- especially elderly parents and grandparents -- I always turn to my friends and colleagues in Hawaii. Hawaii is a harbinger for what's to come in both caregiving and LTC since it is the nation's leader in the number of intergenerational households.

Kevin Sypniewski, president and CEO of AGIS and the AGIS Network, was a long-time Hawaii resident and one of my go-to resources on caregiving. He is a long-term-care insurance expert as well.

Since the last time Kevin and I talked, more insurance carriers have reduced their LTC offerings or moved out of the market completely.

This exodus -- coupled with double-digit premium increases -- has made human resource executives uncomfortable with offering LTC benefits.

What events got us to the place we are today? Sypniewski offers a series of observations.

"Long-term care insurance is not like life insurance," Sypniewski says. "It is not easy to sell and is more of a morbidity than a mortality product."

Actuaries who priced the original LTC products didn't expect miniscule enrollments, nor lapse rates fewer than 1 percent or 2 percent for those who did enroll, he says. (When there are so few insureds who let their policies lapse, that puts the insurance company on the hook for more possible claims than they had envisioned when pricing the plan.)

Jesse Slome, executive director for the American Association for Long-Term Care Insurance, adds three factors to explain LTC's "bump in the road."

"The industry never anticipated low interest rates, which made it difficult for insurance companies to make a profit," Slome says, "and regulatory issues -- at a state level -- that didn't allow for rate increases amplified insurance-carrier exposure."

But, the real challenge for LTC insurance is the plan design itself, he says: "Long-term-care product design is a SUV chassis in a new world where many consumers favor a hybrid car."

Insurance companies created LTC insurance in the 1980s for senior citizens as a nursing-home supplement product, he says. LTC coverage is anything but that now.

So, how can human resource leaders resolve the conflict between offering a benefit that is sorely in need of an overhaul but is one that could offer the financial assistance many employees will require as they age or experience a catastrophic event?

Bonnie Pang, a vice president and benefit consulting manager for Honolulu-based Atlas Insurance Agency, Inc., says organizations should first partner with an ancillary assistance vendor, which provides eldercare services.

"Personal-health-services partners allow employees to stay at work and keep mom at home," Pang says. "They can attend doctor's appointments with the employee's parent, report the results of the visit and help the employee take the necessary steps to assist their parent."

Pang also advises negotiating individual LTC coverage with a group discount as a voluntary-benefit offering for employees.

Another approach companies take to address LTC needs is to present asset-based long-term care insurance, including life insurance with a LTC rider.

Carol Egan, second vice president of marketing and product for Trustmark Insurance Company's Voluntary Benefit Solutions, says the carrier offers three voluntary universal-life products with embedded LTC riders.

One of the more interesting plan designs presents the worker with an affordable product, which is a combination of term and universal life insurance.

The life-insurance benefit drops to one-third of the original face value when the retired employee reaches age 70, but the LTC rider remains at the original amount.

Employees can tap into the LTC payment -- if they've lost the ability to perform two or more activities of daily living -- at the rate of 4 percent a month, for up to 25 months.

Once the company has a LTC benefit in place, the next step to tackle, Slome says, is the way you communicate the advantages of such insurance -- which often is associated with scare-tactic marketing, beginning with the enormous costs of nursing home care.

"Long-term care does not equal nursing-home coverage," Slome says. "Long-term-care insurance is nursing-home-avoidance insurance. It allows you to stay at home when you need assistance."

Sypniewski says HR executives should start the LTC enrollment process by offering caregiver workshops first. He also recommends that sometimes employers subdivide will need to employee meetings based upon income levels.

Companies can provide the same information packets to all employees, but tailor group meetings toward what is most reasonable for specific worker demographics. Universal-life policies with LTC riders and critical-illness policies grant a baseline benefit for lower-income workers while group or individual LTC policies provide more coverage for higher-paid employees.

"There is nothing worse than having an employee get excited about a benefit and then presenting a program he can't afford," he says.

His final piece of advice for employers is to provide some level of base benefit.

"An employer contribution of $5 to $10 per employee each month can bring enrollment rates of 25 percent to 60 percent," Sypniewski says, compared to an industry rate -- without employer contributions -- of 5 percent to 7 percent.

Now that I understand the myriad of challenges around long-term-care coverage, I am somewhat comfortable with structuring an employee LTC benefit that is simply "good enough."

As all the experts agreed, good enough is better than none at all.

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Carol Harnett is a widely respected consultant, speaker, writer and trendspotter in the fields of employee benefits, health and productivity management, health and performance innovation, and value-based health. Follow her on Twitter via @carolharnett and on her video blog, The Work.Love.Play.Daily.

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