Most employee benefit packages have a glaring coverage gap that is becoming increasingly harder to ignore as baby boomers become older and younger employees become caregivers. I’m referring to group long-term care insurance. This is coverage that helps employees protect their retirement assets and shoulder their responsibilities as caregivers should they or a family member need extended long-term care services.
Health insurance covers medical services such as doctor visits, hospitalizations and prescriptions. Life insurance provides a death benefit. Disability insurance provides supplemental income when employees can’t work due to illness or injury. And retirement plans help employees build a nest egg. But none of these types of insurance covers the cost of services and support that people need when they can no longer care for themselves because of an accident, illness or cognitive disorder.
That’s where group LTCi fits in. Group LTCi can be used by policyholders of all ages who are permanently or temporarily unable to perform at least two activities of daily living (eating, bathing, dressing, toileting, transferring and continence) or who suffer from a cognitive disability. If, for example, an employee is injured in an auto accident and needs help with bathing and dressing, and perhaps needs some home modifications, their group LTCi coverage likely would pay for that.
Long-term care services can be expensive. The cost of long-term care continues to rise year over year in most care settings, according to Genworth’s 2016 annual Cost of Care Study. These costs are increasing, especially for services in the home, which is where most people choose to receive care. Nationally, the median monthly costs for the services of a homemaker or an in-home health aide for 44 hours a week are $3,813 and $3,861, respectively. The national median monthly cost of a private nursing home room is $7,698; assisted living, $3,628 per month; and adult day care services, $1,473 per month.
Contrary to what many believe, long-term care is not for just older people. In fact, our Beyond Dollars Study found that long-term care is increasingly being used for younger policyholders. The percentage of care for recipients 65 years of age and older fell from 81 percent in 2010, the first year of the study, to 60 percent in 2015. This means that 40 percent of people requiring long-term care services are under the age of 65. That same survey also found more long-term claims stem from accidents than from illnesses.
Benefits for Workers
Purchasing group long-term care insurance through an employer has significant advantages for workers:
» Affordability. There is a cost advantage to workers buying long-term care insurance when they are healthy, especially when they can add coverage through a future benefit option.
» Portability. According to the consumers we surveyed, portability — the ability for workers to take the coverage with them when they change jobs or retire — is the most attractive feature of group long-term care insurance.
» Fewer underwriting requirements. Because group long-term care insurance is, in part, underwritten at the group level, fewer underwriting requirements may be needed at the individual level for employees during initial enrollment. However, this depends on the plan and benefits the employee chooses.
» Family coverage. Underwriting requirements generally are more stringent for employees’ relatives. However, workers’ spouses, parents, grandparents and adult children also may be able to take advantage of the group pricing, even if the worker chooses not to enroll.
That’s an important benefit, considering that people are becoming caregivers at younger ages. Our Beyond Dollars Study showed that 60 percent of caregivers are between the ages of 25 and 54. In fact, the average age of caregivers has decreased from 53 to 46 since 2010, according to our study.
» Online enrollment. Our study showed consumers like the idea of being able to go online to learn more about long-term care insurance, estimate costs and apply for coverage.
» Easier payment options. Employees can pay premiums via payroll deduction, if offered by the employer, or via electronic funds transfer or direct bill.
Benefits for Employers
Group long-term care insurance also can provide significant benefits for employers. Chief among them is helping prevent lost productivity due to workers’ caregiving obligations.
Six in 10 caregivers reported being employed at some point in the previous year while caregiving, according to the report “Caregiving in the U.S.” Twenty-five percent of those caregivers were millennials and half were under the age of 50. Among them, 56 percent worked full-time. Six in 10 caregivers reported having to cut back their working hours or having received warnings about their on-the-job performance or attendance. The
bottom line is that when employees are consumed and distracted by their obligations as caregivers, productivity can suffer.
According to the 2014 Gallup-Healthways Well-Being Index, 13.4 percent of caregivers are employed full time. What does that mean in terms of lost productivity? Let’s look at a hypothetical example. In a company with 500 workers, 65 (13.4 percent) likely are providing care for a loved one. On average, each of them misses about seven hours per week to do so, according to our Beyond Dollars Study. That adds up to 455 hours per week missed due to caregiving. If each of those workers averages $54 an hour in salary, that’s equal to $24,570 a week, which equates to an annual cost of $1.27 million in lost productivity.
Brokers as Advisors
For employee benefits brokers, group long-term insurance is an opportunity to deepen their portfolio of existing relationships by offering a benefit that not only provides the missing piece of the puzzle but can also elevate their clients’ benefit packages from a competitive standpoint.
The need for long-term care is not going away anytime soon. If anything, it will escalate. Brokers are in a unique position to present a solution that provides as many benefits for employers as it does for their employees and their families, who stand a good chance of dealing with long-term care as a care recipient or as a caregiver.
Brian Harrington serves as leader of Genworth’s group long term care insurance business and distribution leader for Genworth’s U.S. life insurance division. Brian may be contacted at email@example.com.