Stacy Kahan, CLU®, RFC ®, President, Lang Financial Group
For most people, long-term care insurance is a must. According to the US Department of Labor’s Advisory Council on Employee Welfare and Pension Benefits Plans, long-term care is a potentially serious crisis for US workers. Per the US Census Bureau, today’s 65 or older population will grow to double (approximately 70 million) in 2030, and the 85 and older population will also double to approximately 8.5 million. The more the population ages, the greater the need will be for healthcare, especially for long-term care services.
Unlike traditional health insurance, long-term care insurance covers long-term support and services, such as custodial or personal care in different settings (e.g., assisted living communities, memory-care facilities, or at home). With health care advancing every day, the chances are that many of us will live through our 80s, 90s, and maybe even longer.
Without long-term care insurance, however, the burden of care falls on the family. The majority of the time it is working wives and daughters who are responsible for the care. As a result, according to a recent Genworth Financial study, 69% of family caregivers lose a job, need to change their shift, and/or miss out on career opportunities. They end up contributing financially, too.
The bottom line: employees who have caregiving duties and financial stress can’t perform as well as employees whose family members have long-term care plans in place. And that’s why more and more organizations are seeing the value of offering long-term care insurance for employees. Here’s why, and here’s what you need to know if you’re considering it.
Providing Long-Term Care Insurance for Employees: What You Need to Know
Long-term care insurance for employees covers a variety of services that traditional health insurance doesn’t. It includes assistance with a variety of day-to-day activities, such as bathing, getting dressed, getting in and out of bed, and so on. It also helps cover the costs of care an individual will receive if they are suffering from a disability, chronic medical ailments, or a disorder such as Alzheimer’s.
But long-term care can be expensive. According to the Alzheimer’s Association, the costs of health care and long-term care for individuals with Alzheimer’s or other dementias are substantial, and dementia is one of the costliest conditions to today’s society.
Most long-term care policies will reimburse the costs that are incurred while receiving care in a nursing home, a beneficiary’s home, an assisted living facility, or an adult day-care center. They also cover care coordination and home modification.
However, not all long-term care insurance policies are alike. That’s why it’s a good idea to work with your insurance partner to find a long-term care plan that best fits your employees’ needs.
Why Buy Long-Term Care Insurance?
According to a study conducted by the Urban Institute and the US Department of Health and Human Services, approximately 50% of 65-year-olds today will eventually develop a disability and need long-term care. While most will require services for less than two years, almost 14% will require services for over five years.
Buying long-term care insurance can provide you with the satisfaction that you’ll receive the care you need when you need it. You may be surprised to know that almost 14 million adults required long-term care services in 2018. Even Medicare doesn’t cover long-term care costs; it covers limited services like home health care and brief nursing home stays.
What Are the Types of Long-Term Care Insurance Policies?
Currently, there are two types of long-term care insurance policies organizations can select for their employees.
Traditional Long-Term Care Insurance
Traditional long-term care insurance is a standalone insurance policy. It provides long-term care services as and when the policyholder needs them.
The policy gets activated when you can no longer perform routine activities, such as bathing, dressing, eating, moving in and out of a bed or wheelchair, etc., or if you suffer from critical cognitive impairment. You can get the benefits after a waiting period of 30 to 90 days.
The median cost of assisted living per year is $48,600 and living in a semi-private nursing home room is $90,155 per year. Even home health aides’ charges are around $144 per day. This is why long-term care insurance is a better option; wherever you reside, you’ll have the money to bear your long-term care expenses.
Combination of Traditional Insurance and Long-Term Care Coverage
Another option is a hybrid policy that comprises both life insurance and long-term care insurance. If you end up not requiring long-term care services, your heirs will receive the full payout. (The hybrid policy is more expensive than traditional long-term care insurance as it provides you with the benefit of two insurance plans in one.)
What Are Insurance Providers Offering to Organizations?
Insurance providers are providing organizations with the following benefits at affordable premiums:
- Plans covering assisted living facility, home health care, nursing home care, hospice care, and alternate care services
- Care coordination services, medical equipment coverage, chore or homemaker services, home-delivered meals, bed reservation reimbursements, caregiver training, spousal discounts, and survivorship benefits
- Benefit eligibility criteria: Difficulty in performing routine activities and cognitive impairment
- Guaranteed renewal for all plans, coverage for Alzheimer’s disease, waiver of premium provision, and lifetime/unlimited nursing home maximum periods
- Protection from inflation and nonforfeiture benefits
Why Should Organizations Provide Long-Term Care Insurance for Employees?
Here are sound arguments for offering long-term care insurance to employees:
- You can retain and recruit talented workers
- It helps your employees protect their retirement savings
- A survey conducted by HIAA revealed that employees who have long-term care insurance feel more secure about their future
Organizations can provide their employees with customized long-term care insurance benefits at a relatively affordable cost. Plus, the federal tax code allows employers to deduct as a business expense both the cost of building a long-term care plan for employees and their contribution toward tax-qualified long-term care insurance premiums.
How Can Organizations Set Up Long-Term Insurance Plans for Their Employees?
When planning to offer long-term care insurance for employees, organizations should first assess the employees’ interests. Set up a brief survey to gauge their interest. (Actually, you should survey employees any time you are considering new benefits.) The information you collect from the survey can help you understand:
- Where your employees are in terms of their long-term financial planning
- What types of long-term care coverages your employees would like to have
Once you’ve determined your employees’ interests, talk to your insurance partner to discuss the long-term care insurance plan you’d like to offer. The right insurance company can design plans that best meet your employees’ needs.