Benefits company

The new face of long term care

As more employers grasp workers' concerns about LTC, John Hancock shows agents how to tap into this lucrative benefit opportunity

By Elisabeth Boone, CPCU

Chances are, when you hear the words “long term care,” you picture frail elderly people living out their last years in a sterile nursing home environment, beset by anxiety about the possibility that they’ll outlive their financial resources.

It’s true that people over 65 are the biggest consumers of long term care today, but concern about the future cost of care is growing among healthy younger Americans with many working years ahead of them. Many of these people also belong to the “sandwich generation”: in addition to working and raising their kids, they’re also responsible for the care of one or more aging parents.

Adding to their anxiety are the uncertain economy, inexorably rising health care costs, and the as yet unknown impact of recently passed health care reform legislation, many provisions of which are not scheduled to go into effect until several years from now.

What’s more, it’s not only senior citizens who may need long term care. Although people tend to require more care as they age, an individual need not be old to be severely injured in an accident; suffer a stroke or heart disease; be stricken with multiple sclerosis, Parkinson’s disease, or early-onset Alzheimer’s disease; or experi­ence some other form of cognitive impairment that requires them to receive costly professional care either at home or in a residential facility. In fact, one study has found that at least 40% of people who are receiving long term care are under age 65.

According to group insurance executives at John Hancock, a leading writer of long term care (LTC) insurance, these concerns are creating opportunities for agents and brokers to educate their clients about the advantages of offering LTC insurance as a voluntary employee benefit, particularly in smaller companies.

In a 2009 survey of benefits decision makers in companies with between 10 and 1,000 employees, John Hancock found that almost two-thirds of decision makers were aware of employees’ anxiety about long term care and one in four companies had been negatively affected by lost productivity or absenteeism as a result of employees’ long term care issues. Despite this finding, however, only 21% of the companies surveyed offered LTC insurance as part of their benefits package.

A key reason for this disparity, the survey report says, is smaller employers’ lack of in-depth knowledge about long term care insurance. Many respondents were unaware of the tax advantages of offering LTC insurance as a voluntary benefit, and almost two-thirds believed that implementing an LTC insurance offering would be too costly and time consuming. Almost three-quarters of those surveyed said their companies had other priorities at the time. Among the most significant survey findings: fully 57% of respondents said they had never been approached about offering LTC insurance to their employees.

Not just for seniors

As noted earlier, long term care insurance traditionally has been associated with people who are close to retirement or have already retired.

Scott Williams, vice president at John Hancock with responsibility for LTC insurance sales in the retail (individual) and small group market, observes: “Almost 20 years ago, when I first started working here in long term care, most LTC insurance was sold on an individual basis and the average age of buyers was about 72. They were seeing the product and choosing to buy it virtually moments before they needed it.

“Within about 10 years we saw that average age drop to about 65, and LTC insurance came to be viewed more as a retirement product, back when people were still able to retire at age 65,” Williams says. “It became part of the retirement planning checklist, along with signing up for Social Security and Medicare Part B and calculating your pension benefits.

“Today, even on the individual side, the average age of our LTC insurance buyers has declined to between 56 and 57,” he reports.

It follows, Williams says, that “If people this age aren’t buying LTC insurance in the group setting, they’re purchasing an individual policy as part of their pre-retirement planning process rather than at retirement or post-retirement.”

Offering an independent broker’s perspective is Frank J. Fimmano, CLU, senior vice president of elective benefits at Aon Consulting in New York City, whose 39-year insurance career encom­passes experience in both the property/casualty and employee benefits areas. Fimmano and his team work with John Hancock and other leading LTC insurers to market LTC insurance products to sponsored groups around the country, and Fimmano recently completed his tenure as president of the Professional Insurance Marketing Association (PIMA), whose members are direct marketing insurance provid­ers that serve the employer, affinity, and sponsored group marketplace.

“It’s important to make the distinc­tion between individual or retail LTC and group LTC,” Fimmano says. “Our average purchaser of group LTC is about age 47, significantly younger than the average buyer of individual coverage.”

That’s held true at John Hancock until recently, notes Dennis Healy, vice president of group long term care. “Last year our average purchaser of group LTC insurance was age 50,” he says. “This year, in census files that come from employers, I’ve seen that the average age of the population in a file is higher than it was 10 years ago. To me that suggests that the overall working population in these groups is becoming older.”

One reason for this trend, Fimmano comments, is that the oldest members of the massive Baby Boomer gene-ration are approaching retirement age; another factor is that more employees are staying in the workforce past traditional retirement age because they can’t afford to stop working.

Untapped potential

According to Healy, interest in LTC insurance is growing across the spectrum of employers.

“We’re seeing a steady increase in the number of employers of all sizes that are willing to offer long term care insurance as a voluntary benefit,” Healy remarks. “There’s also been a steady increase in the different kinds of options that employers can use to offer the coverage.

“More important than the growth in interest,” Healy continues, “is the opportunity that still lies out there. There are some 5.7 million companies of all sizes in the United States today, and only about 10,000 of them actually have an employer-sponsored true group long term care plan in place. That represents a huge amount of unexplored territory for producers who already have relationships with employers.”

With more than 20 years’ experience in designing, marketing, implementing, and administering long term care offerings for the workplace, John Hancock has been able to create a detailed profile of the most desirable prospects for group LTC insurance.

The best prospects, Healy explains, are age 40 or over, are highly educated, earn a salary of $50,000 or above, and participate in their employer’s other voluntary benefits. Industries where employees are likely to possess these characteristics are law firms, engineering firms, accounting firms, colleges and universities, pharma­ceutical companies, technology and biotechnology companies, and energy and utility companies.

Product options

In the workplace, Healy explains, employers can choose to offer long term care coverage either as a true group product, where the employer is the policyholder, or as a multi-life product with each insured owning his or her policy. The true group approach, he says, works well for large employers and those with geographically dispersed operations. In a true group sale, it is usually possible to offer coverage on a guaranteed acceptance basis for employees who are actively at work, a feature that Healy says most employers in this category expect. What’s more, the enrollment process is handled by the insurer so that little extra work is created for the employer’s human resources staff.

“The over 1,000-life employer is most typically offering a true group LTC program, with occasional executive carve-outs,” Healy says. “For smaller companies, particularly those with fewer than 100 employees, it’s common to see employer subsidies for the purchase of LTC. This is quite likely to be the case in a family-owned firm.”

In the small to mid-sized market, Healy suggests that it may be more appropriate to offer multi-life LTC insurance with each employee owning an individual policy. Guaranteed issue coverage is not always available, but it may be offered in some cases. Because employees own their policies, they have greater flexibility to customize their coverage. This approach, Healy notes, works well for an agent or broker who likes to play a more hands-on role during the employee education and enrollment process.

The CareChoice Plan is John Hancock’s group long term care product for companies with more than 1,000 employees, or for employers with 500 or more employees with employer funding. Guaranteed acceptance is available for eligible employees who are actively at work. Benefits are offered at several levels and cover care provided at home, at adult care day care centers, in alternate care facilities, in nursing homes, or in hospice care at home or in a licensed facility.

In addition to the insured, coverage may be available for siblings and adult children. A respite care benefit helps provide relief for unpaid caregivers, and an informal care benefit covers custodial care and homemaker services that can be performed by a person without professional training, including family members.

Optional benefits include shared care, in which insureds and their spouses can use each other’s benefits after their own coverage has been exhausted; international coverage; and a variety of inflation protection options to help ensure that benefits keep pace with the rising cost of care.

The CorporateChoice Plan is designed for employers with 200 to 1,000 employees, or for employers with as few as 25 employees with employer funding. The plan offers benefits and features similar to those in the CareChoice Plan, except that guaranteed acceptance is offered only to qualifying groups.

The centerpiece of both the CareChoice and the CorporateChoice plans is a care coordination program in which registered nurses or licensed social workers help individuals manage their long term care needs and concerns. In addition, a caregiver support program makes resources, advice, and discounts available to both claimants and their uninsured family members.

The decision to incorporate this feature into its products, Healy explains, was based on his company’s recognition of a phenomenon that has become known as “presenteeism.” As opposed to absenteeism, when an employee is physically away from the workplace, presenteeism describes the situation where the employee is at work but is less productive as the result of stresses and distractions related to taking on responsibility for a loved one who needs care because of illness or injury.

“The support network is an invalu­able component of our CareChoice and CorporateChoice products that can greatly reduce the stress of caregiving for employees and reduce the impact of decreased pro-ductivity on the employer,” Healy says.

Another product, Corporate Solutions, is designed for companies that would like to offer employees access to individual LTC coverage via payroll deduction. At least 10 eligible employees must participate, or seven employees if the plan is employer funded.

Sponsored Group LTC is available for associations, affinity groups, and small companies that want to offer members or employees access to individual long term care coverage with a 5% discount.

Premium comparison

As in any line of insurance, numer­ous factors affect the calculation of premiums for long term care insurance. Key determinants include: the profile of the prospect with respect to the insurer’s target market; the type of product (true group, voluntary group, or individual); and the size of the workforce and the level of employee participation in the LTC insurance plan.

“The larger and more attractive the prospect, the greater the likelihood that competition for the business will drive the cost down for the employees in that group,” Healy explains. “For example, a 30,000-life employer with highly paid employees will be offered very low rate structures, and the voluntary group LTC premium typically will look highly favorable in comparison with the premium for an individual product. As you move down to the 700- or 800-employee level, the premiums for the group and individual products get much closer together,” Healy says.

For the multi-life product that John Hancock offers to organizations with fewer than 250 employees, where employees own their policies, Williams says, “We use an individual product that is packaged with some underwriting concessions and some discounts for being part of the group,” which helps offset the higher premium charged for an individual versus a group product. “In some of the smaller groups that have favorable demographics, like law firms, engineering firms, and medical practices, we’re able to offer a preferred rate,” Williams says.

Adds Aon Consulting’s Fimmano: “My sense is that by and large, group LTC is less expensive than individual, as it might be modified by the factors that Scott and Dennis mention. However, we also have to consider the issue of commissions. Typically, in the individual or retail environment, the first-year commission is something north of 50%, whereas in the group environment, the prevailing commis­sion might be 15% and sometimes below 10%. The counterpoint to that in the group environment is that the carrier has to factor in the added exposure of guaranteed issue to employees,” Fimmano comments.

Support for brokers

Through its nationwide sales and installation support team, John Hancock offers agents and brokers a high level of sales support, as well as carrier-driven enrollment and admini­stration once an LTC insurance plan is in place.

The insurer recently launched a long term care multi-life site for brokers and consultants in the small to mid-sized employer market (www.GetMoreWithMultilifeLTC.com) to help them explore and establish LTC insurance plans for businesses with up to 1,000 employees. The site features tools for evaluating prospects, strategies for initiating discussions with decision makers, talking points and collateral sales materials for use with employers, explanations of LTC products and funding options, and strategies for maximizing group enrollments.

Once offered only by the very largest employers, long term care insurance is becoming an increasingly attractive option for organizations of all sizes whose decision makers gain awareness of the many advantages of offering LTC to their employees.

“For agents and brokers who want to enhance their client relationships and build a profitable volume of LTC business, a key consideration is the choice of a carrier partner,” Healy says. “At John Hancock, we have the experience, commitment, and product quality to be a strong partner now and in the future.”

For more information:
John Hancock
Website: www.johnhancockltc.com