November is long-term care awareness month. That makes it a good time to educate your employees on long-term care … and offer them coverage for this costly need.
As the oldest boomers reach retirement age, now is the time for them to plan for their long-term care needs. According to the Centers for Medicare & Medicaid Services, at least 70 percent of people over age 65 will need some sort of long-term care services during their life.A year’s stay in a nursing home now costs a median of $77,380, according to an annual survey by Genworth, a long-term care insurer. Depending on your location, your employees’ costs could be much higher.
Unfortunately, many Americans know very little about long-term care. One in four baby boomers falsely believes he/she has coverage for long-term care expenses. According to America’s Health Insurance Plans (AHIP), an insurance trade organization, 54 percent of boomers surveyed believe Medicare will pay for long-term care, while 44 percent believe “other health insurance” will pay.
The fact is that Medicare only covers medically necessary care. It does not pay for non-skilled assistance with the activities of daily living (ADL), which make up the majority of long-term care services. Long-term care services and supports help individuals meet their personal care needs. Most long-term care is not medical care. Rather, it is assistance with the basic personal tasks of everyday life, sometimes called activities of daily living (ADLs), These include:
- Using the toilet
- Transferring (to or from bed or chair)
- Caring for incontinence
Medicaid does cover long-term care services, but individuals must spend down nearly all their assets to qualify for assistance. Voluntary long-term care insurance (LTCI) can help employees pay for the cost of nursing home care and other long-term care services.
Why should employees buy long-term care insurance on a voluntary basis?
- First, it costs less to buy coverage when you are younger. The average age of people buying long-term care insurance today is about 60. The average age of those purchasing policies offered at work is about 50.
- You might qualify for a group plan, depending on the size of your organization and participation rates. Otherwise, the insurer will individually underwrite policies. This could disqualify employees with certain health conditions from coverage.
- Long-term care insurance can be expensive, but insurers will often give a discount to members of a group.
- Employees cannot pay for long-term care insurance through a cafeteria plan or premium-only plan, but they can pay for it through payroll deduction.
What LTCI Covers
Today’s long-term care insurance (LTCI) policies cover more than just nursing home care. They cover a variety of services and supports for individuals in a variety of settings. Having the right coverage could mean the difference between an individual being able to stay at home or having to go into a facility.
Most policies today are comprehensive. They typically allow you to use your daily benefit in a variety of settings, including:
- Your home
- Adult day service centers
- Hospice care
- Respite care
- Assisted living facilities (also called residential care facilities or alternate care facilities)
- Alzheimer’s special care facilities
- Nursing homes.
In the home setting, comprehensive polices generally cover these services:
- Skilled nursing care
- Occupational, speech, physical and rehabilitation therapy
- Help with personal care, such as bathing and dressing
- Homemaker services, such as meal preparation or housekeeping, are covered by many policies as long as they are provided in conjunction with the personal care services you receive.
A voluntary LTCI program can help your employees obtain coverage while they’re still relatively young and healthy. For more information, please contact us.
The Importance of Inflation Protection in LTCI Policies
A good LTC policy should include some type of inflation protection. Why? If healthcare costs continue to rise about 6 percent a year (a modest estimate), a bed in a nursing home that currently costs $225 a day will cost more than $700 per day 20 years from now.
LTC insurers offer two basic types of inflation protection: an “automatic benefit increase” or a “future purchase option.”
- The automatic benefit increase guarantees that a policyholder’s benefits will grow automatically each year. Purchasing the feature at a policy’s outset is a one-time decision.
- A future purchase option gives policyholders an option to buy extra coverage at selected intervals, usually every two or three years.
Here’s the catch: Policies with an automatic benefit increase cost more to begin with, but premiums typically remain fixed. Policies with a future purchase option start with much lower premiums, but costs can rise sharply, since premiums for additional coverage are based on a policyholder’s age at the time the increase takes effect.
These big jumps come when policyholders likely can least afford them — during retirement, when many people have limited income. Of course, employees with future purchase options can decline to buy extra protection, so their premium would remain fixed. But then the daily benefit would remain fixed as well.