"The current economic climate simply isn't favorable enough to encourage insurers to offer the type of products and underwriting concessions that larger employers are used to," Slome said. He noted that whatever growth the group LTC product is experiencing is coming from small and mid-sized employers.

"Small and mid-sized employers are capitalizing on some significant savings opportunities available because insurers still offer unisex pricing on their multi-life policies. As a result, female applicants are able to pay between 40% and 60% less than they would pay in the individual long-term care market," Slome explained.

Listening to presentations at a recent conference of the American Association of Long-Term Care Insurance (AALTCI), it was hard not to wonder how long it will be before the employee benefits business figures out a way to offer long-term care more widely in the workplace. Isn't the benefits business the logical place to address a risk that is so closely linked to the success of a retirement plan? Long-term care expenses can quickly undermine a retirement plan built through decades of employer/employee contributions.

As Shawn Britt, CLU, director of long-term care initiatives at Nationwide Insurance, pointed out, "The final piece of financial planning is preserving the assets acquired-not just to pay long-term care bills, but to provide for a spouse, or leave funds to children or grandchildren."

Scott McKay, senior vice president for Genworth Financial, agreed. "The impact of a long-term care event not only undermines the retirement plan, but has an impact on the lives of the family for two generations beyond. We take that worry off people's backs."

There was scant reference to the group market at the AALTCI conference. Tim Kneeland, president of Transamerica Long-term Care, did say that part of the growth in long-term care sales over the next two to three years "needs to come from changes in the distribution force, including more from the worksite." But he and other long-term care executives from Genworth, John Hancock, Lincoln Financial Group and Northwestern provided no specifics for boosting group sales.

One impediment to group LTC sales growth undoubtedly is that employers are focused on adjusting their benefits menus to sync with the Affordable Care Act. And since the ACA has made the government a significant presence on the health care playing field, some may even be wondering what role the government might try to play in long-term care insurance. It tried once with the CLASS Act, and failed. But of course universal health care didn't make it off the ground in its first attempt in the early '90s either.

The discussion at the AALTCI meeting, attended by 500 people in Kansas City and 2,500 more via Webcast, centered on the individual market. Still, many of the opportunities and challenges for long-term care insurance are the same whether the product is sold individually or at the worksite.

Misconceptions and denial
It's a product that remains vastly undersold. "Less than 8% of all Americans have some type of long-term care coverage," Britt said, "and for those over 55 in their prime earning years, only 11% have coverage." Sam Morgante, a long-term care industry lobbyist, gave one explanation for this lack of market penetration by pointing out, "The polls show that the needle isn't moving on the public's widespread misconception that Medicare covers long-term care."

Britt noted that LTC sales also are restrained because consumers have a misconception about what the product covers-they think it only applies to nursing home expenses. "Actually 51% of long-term care claims industrywide are for home health care," she said, "and among some carriers the figure is 70%. The idea is to keep you in your own home as long as possible."

Another reason people often fail to purchase long-term care insurance is simply that they don't want to think about an unpleasant risk: the deterioration of their health. Despite statistical evidence weighing against them, consumers cling to the belief that "I'll never need it."

This mindset is so common that insurers have altered their long-term care product portfolios to capitalize on it. They have developed hybrid products that link long-term care insurance to life insurance or annuities, or include return of premium features. The hybrid products turn consumers away from thinking only about long-term care coverage, which many consumers rationalize they will never need anyway.

And it has worked. "Industry sales of hybrid long-term care products have achieved double-digit annual growth for five consecutive years," noted Steve Schoonveld, head of Linked Benefit Product Solutions, for Lincoln Financial Group (LFG). "For 2013, hybrid sales were up 17% over 2012," he said, quoting LIMRA statistics.

"Buyers aren't expecting to go on a long-term care claim," Schoonveld said. "You have to offer a product that pays for what people expect."

Despite the recent success of hybrids, the long-term care industry is not abandoning its traditional stand-alone products. "Stand-alones provide the most long-term care protection for the money," Britt asserted. Michael Doughty, president and general manager of John Hancock Insurance, said his company is currently developing "a stand-alone product that will be appropriate for the vast majority of Americans."

Schoonveld shared some of LFG's independently commissioned market data, which points toward both growth and change in the provision of long-term health care. "Baby boomers' care needs will double by 2040," he noted. "But where will that care be provided?" He pointed out that while traditionally a lot of it was spousal care, today "there's been an increase in the divorce rate and those who never married. In addition, male mortality is improving."

For those long-term care coverage prospects who are married, Britt provided some advice that may be overlooked by a lot of those independent-minded baby boomers who plan to "age in place" and maintain their lifestyle to the end. "They need to remember their spouse," she said.

"My father insisted he didn't need long-term care insurance because 'people in this family die after two days in the hospital or they die in their sleep.' For my father, that's what happened. But when you're married to someone for 60 years, you forget they aren't in your bloodline. So my mother didn't follow the family rule. We self-insured her long-term care for dementia for four years."

Britt said the longevity of long-term care claims is increasing as people are likely to live longer. "If a person is in care for at least a year, the average amount of time they'll be in care is 3.9 years. Claims exceeding five years have tripled in the past 15 years, to 15% of the total."

There are a lot of personal stories that might inspire some people to purchase long-term care insurance. But a lot of people choose not to listen to those stories that lead them to think about possible health problems they could face in their own future. Insurers are breaking down this barrier with the introduction of hybrid products.

Now, if long-term care insurance could gain some traction as part of employee benefits plans, the product might finally approach its potential.

The author
Thomas A. McCoy, CLU, retired in 2013 as editor-in-chief of Rough Notes magazine.