Education is Key, says EBRI on LTCI
Friday September 22, 2000
Why has long-term care insurance as an employee benefit been slow to take off? It should be popular. From an employer's perspective, LTCI could be a valuable new benefit that makes the difference in recruiting and retaining quality staff in a tight labor market. From an employee's perspective, LTCI may be less expensive and the underwriting may be less strict when purchased through an employer-sponsored plan. So what's the problem?
The Employee Benefit Research Institute's recent reports by EBRI Fellow Jeremy Pincus focus on group LTCI and recommendations to increase both employer sponsorship and employee participation. (Contact EBRI for these reports: phone 202-659- 0670, fax 202-775-6312, internet www.ebri.org).
The first report, "Employer-Sponsored Long-Term Care Insurance: Best Practices for Increasing Sponsorship" (EBRI Issue Brief Number 220, issued April 2000) summarizes current employer sponsorship of LTCI. Most employer-sponsored plans are similar to the plan or plans which will soon be offered to federal employees and their dependents in accordance with a new law signed by President Clinton earlier this week (For details on Public Law 106-265, visit the Washington Post online at http://www.washingtonpost.com/wp-dyn/articles/A40318-2000Sep19.html): the employer sponsors a plan, may negotiate special rates or guaranteed issue, but does not pay the benefit. To date, sponsorship is extremely low. "The LTC plan sponsorship rate for all U.S. employers with 10 or more employees [is] at 0.2 percent." (p. 1) Larger firms, which tend to be benefit innovators, have a slightly higher rate at 8.7%. (p. 1)
Why isn't employer sponsorship higher? "The data suggest that the primary barrier to employer sponsorship . . . is the same as the primary barrier to employee participation: widespread ignorance about LTC and LTC insurance." (p. 15)
The second report, "Voluntary Long-Term Care Insurance: Best Practices for Increasing Employee Participation" (EBRI Issue Brief Number 221, May 2000) addresses the employee. Employee participation in the plans offered is also low, suffering from many of the problems that plague private long term care financing on a national level: lack of awareness of LTC needs and options, an erroneous belief that LTC is covered under current medical benefits, and lackluster sponsor support.
"The most common objection to purchasing LTC insurance is that it is unaffordable. However, qualitative and survey research has consistently demonstrated that nonowners of LTC insurance significantly overestimate the actual cost of LTC insurance." (p. 16)
What should be done? Author Pincus recommends "significant investment in publicity and education on the part of the LTC insurance industry and government" (p. 15, 4/00) and for "employer-sponsors and their insurance carriers to form strong partnerships, with worker participation as their primary stated goal." (p. 28, 5/00)
The Center for LTC Financing stresses that the right public policy incentives must also be present--"you can't sell apples on one side of the street when they are giving them away on the other"--but we appreciate the need for strategies such as those presented in these two insightful EBRI reports to help Americans plan ahead for the risk of long-term care. Kudos to Jeremy Pincus for some very fine work.