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July 12, 2017
In 2016, the U.S. unemployment rate ticked down to 4.7%, a vast improvement from 2009, when unemployment peaked at 10% after the financial crisis1. Therefore, it shouldn’t come as much of a surprise that, when asked what their biggest challenge will be in 2017, a large majority of our clients answered that it will be attracting and retaining their best professionals. The fact that what most employees want from their employers varies greatly based on age only compounds this issue. So, what can an employer do to attract and retain the employees they need? In helping our clients design optimal benefit programs, two strategies have recently come up in conversation. One is a benefit that has been around for years and can be very valuable to older employees. The second is a relatively new benefit and one that can be very attractive to younger employees.
In this Part 1 of 2, we will take a look at long-term care (LTC), a benefit that can be considered of great value to your older employees, but isn’t getting much attention these days due primarily to challenges in the LTC marketplace.
Some common reasons for needing
[LTC] include injury, illness, aging,
or a cognitive impairment.
LTC is custodial care received in an assisted-living facility, nursing home, or in your own home, should you end up with a physical impairment and need assistance with daily living and/or suffer from a severe cognitive impairment. Some common reasons for needing this type of care include injury (e.g. a car accident), illness (e.g. cancer), aging, or a cognitive impairment (e.g. Alzheimer’s disease, dementia, or effects of a stroke). At least 70% of people over age 65 will require some type of LTC at some point (Centers for Medicare and Medicaid Services, 20152). Nearly 40% of those receiving LTC today are between the age of 18 and 64. Without a strategy to pay for LTC, the burden may have devastating financial consequences for your employees and their loved ones. Just one year in a nursing home costs an average of $84,000 per year in the United States3.
Because there isn’t coverage for LTC costs through traditional medical insurance or Medicare, and qualifying for coverage under Medicaid is available only to those with low income and extremely limited personal financial resources, we believe looking at some solutions in the form of a group benefit is worthwhile. Over the past 20 years, the insurance industry created attractive group products to insure this LTC risk, but soon found that the terms were too rich, the insured held onto their policies longer than expected, and the premiums were too low. As a result, premiums costs have increased significantly and fewer products have been available in the marketplace, but today there are programs available that can be offered as group benefits.
LTC insurance policies reimburse policyholders a specified daily amount for care services they receive to assist them with daily living activities, such as bathing, dressing, and eating. These policies generally cover home care, assisted living, adult daycare, respite care, hospice care, nursing care, and memory care facilities. Today, there are two solutions for planning for your LTC insurance needs: standalone LTC insurance, and combo or hybrid products that combine life insurance with an LTC rider. Both solutions offer easier underwriting, group pricing, and portability for employer groups. Policies aren’t “one-size-fits-all;” there are many different coverage levels to select from that can fit within your budget. The value of purchasing such a policy during your work years is that the premium rates are based upon your age and health. You’re the youngest and likely the healthiest you will ever be, so your chances of getting approved for a policy are higher now than they will be tomorrow.
Considering the rising cost of healthcare, longer life spans, and the increase in cognitive diseases such as Alzheimer’s, employees are becoming increasingly concerned about their ability to fund their retirement and LTC needs. An LTC policy can help protect assets, minimize dependence on family members, assist with career or partnership transition, and ensure that individuals retire with the knowledge that they have a plan to maintain the quality of life they desire. We would be happy to discuss with you how a LTC benefit can be structured for your company.
The views and opinions expressed within are those of the author(s) and do not necessarily reflect the official policy or position of Parker, Smith & Feek. While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.