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Long Term Care Insurance

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As the population ages and becomes more aware of the high costs of care, the demand is increasing for innovative solutions to long-term care problems. Furthermore, disabled employees are looking for care options that allow them to lead more independent lives. Savvy employers are finding flexible ways to meet the needs of their employees and their dependents, and to provide financial protection for the catastrophic effects of long-term care.

Major American insurers are offering a valuable insurance product for employees - with reasonable cost and minimal effort for employers. Offering group long-term care insurance programs for employees is rapidly gaining popularity as a new addition to employee benefit plans. For example, in Guarding Your Gold II, author Ron Iverson found that in July 2003 an estimated 300,000 employers were considering adding group LTCI to their benefits package, at least as a voluntary benefit program. Iverson compares to this to the end of 2002, when only 5,000 US employers offered an LTCI option to their employees.[1]

Employer Benefits from Purchasing Group LTCI

• Purchasing LTCI helps in building morale and loyalty among employees. Employers are finding that sponsoring a group long-term care insurance plan shows concern for the welfare of their employees and their dependents.
• Long-term care insurance coverage enhances the attractiveness of your company as an employer and helps you to retain your most qualified, highly skilled employees.
• Long-term care insurance coverage encourages employees to focus on financial and retirement planning.
• Long-term care insurance programs are easy to administer.
• Long-term care insurance programs can ease the burden on employees who act as caregivers for spouses or parents, resulting in increased productivity and decreased absenteeism.

Group LTCI Addresses Employee Concerns

Employees are growing more aware of the need for long term care as they look to the future and consider themselves and their families. Several concerns are prominent:

• The population is aging.
• The number of people over age 65 has grown by 44% in the last two decades.[2]
• Of all the people who turned 65 in 2005, 18% are expected to spend at least one year in a nursing home.[3]
• Of all the elderly who die, 93% have spent time in a nursing home during their last year of life; and for every person living in a nursing home, there are four others receiving care at home.[4]
• Younger people also need long term care.
• The fact is that at age 65, the average American faces at least a 40% risk of spending some time in a nursing home. [5] Unfortunately, Medicare pays only a small percentage of the nation's nursing home care expenses. [6]
• Planning for retirement is a key financial goal for many employees.
• Long-term care costs are rising. Nursing home care is expensive: today, the national average cost of a semi-private room in a nursing home is $68,255 annually.[7] Depending upon where you live and the type of facility that you would prefer, costs can be significantly higher.
• Home health care is expensive, too: the national average annual cost of licensed non-medicare home health care is certified over $24,000 (that's $19/hr, [8] five hours per day, five days a week for a home health care aide).
• Nursing home costs have been going up about four and a half percent a year. If that continues another 30 years, the cost of nursing home care (for a semi-private room) in 2030 is expected to be about $207,000 a year. [9]

Don't my employees' other plans cover long term care?

• Medical plans and Medicare are designed to primarily cover skilled, not custodial care.
• Disability plans are designed to replace income, not cover extraordinary long term care expenses.
• Since accelerated benefits under life insurance reduce the death benefit, the goals of providing life insurance are not met if the death benefit dollars are used for long term care expenses.

Tax Advantages

The Kassebaum-Kennedy Bill, passed by Congress and signed by President Clinton in 1996, provided several tax advantages related to long term care for Americans. The law, known as the Health Insurance Portablility and Accredibility Act of 1996 (HIPAA) provided advantages to the individual who is insured, as well as to employers who contribute premium for their employees.

• Long term care insurance premiums are deductible as a medical expense for those who itemize deductions.
• Long term care insurance benefits received by a claimant are tax-free if a tax qualified policy is used.
• Long term care expenses that were not covered by insurance will be deductible for those who itemize deductions.
• Employers who pay long term care premiums on behalf of an employee are entitled to deduct those premiums as a business expense.
• Long term care premiums paid by an employer on behalf of an employee need not be treated as income to that employee.

2008 LTCI Tax Deduction Limits

According to Jesse Slome, president of Sales Creators and author of The Accountant's Guide to Long-Term Care Insurance, "the fastest growing segment of long -term care insurance sales has been to business owners and others who can now deduct the cost of this valuable protection."

"Many accountants and CPAs are unaware of the rules and limits pertaining to the deductibility of long-term care insurance premiums," Slome notes. "Successful LTCi specialists find they can be an outstanding source of referrals once they understand the benefits to their clients and, now is the ideal time to connect before the tax season gets underway."

For 2008, the deductible limits as published in IRS Revenue Procedure 2007-66 will be:

Group Long Term Care Insurance Tax Advantages

2008 Tax Summary

Company Advantages with Group Long Term Care Insurance

Many employers and employees have similar interests when it comes to affordability and flexibility in a group long term plan. The best plans begin with a core/buy-up design concept:

• An affordable employer-paid core plan provides a base level of coverage for all employees.
• Buy-up options allow employees to supplement their core plan in ways that fit their own budgets and perceived needs.
• Guaranteed Benefit Increase options allow the insured to increase their current benefit levels at periodic intervals.
• Premiums for working-age individuals are much lower than premiums for retirement-age individuals.
• Portability allows employees to take long term care coverage into retirement at low rates.

If properly designed and implemented, the employer-paid core premium is calculated by using group 'discounted' rates to arrive at a single, per-employee rate. This 'one-price-fits-all-ages' concept ensures ease of understanding and administration, as well as straightforward budgeting for the employer. This rate is based on a group census gathered at the time of plan initiation. The core premium must be reviewed through a new census every five years under normal circumstances, or when the head-count of the organization changes by more than 20% -- whichever comes first.

A quality group LTCI program for most employers provides the following advantages:

• Pays for all levels of care in a nursing home
• Pays for comprehensive home care, including skilled and custodial care (personal care and homemaker services)
• Pays for adult day care, adult foster care and assisted living facilities
• Benefits paid regardless of prior hospital or nursing home stays
• Selection of daily benefit amounts
• Choice of lifetime maximums
• Benefits provided on an expense incurred basis or on an indemnity basis
• Temporary bed holding benefit
• Hospice benefit
• Caregiver training benefit (including informal caregiver benefits)
• Care management services
• Inflation protection (Guaranteed Benefit Increase options and/or automatic benefit increases)
• Home health agency discounts

If your firm is interested on exploring your options with one or more of America's finest and largest long term care insurers shown below contact us to have one of our customer support representatives work with you.

Footnotes

1.  July 2003 LIMRA study cited on p. 227 of Guarding Your Gold II by Ron Iverson. www.guardingyourgold.com
2.  National Center for Health Statistics, Health, United States, 2007, Older Population Age 65 Years and Over, Table 1
3.  "Nursing Homes" Houser, Ari, AARP Public Policy Institute, October 2007, Page 1
4.  U.S. Senate Special Committee on Aging, 2006
5.  U.S. Department of Health and Human Services, National Clearinghouse for Long-Term Care Iformation, "Understanding LTC", 2008
6.  U.S. Department of Health and Human Services, National Clearinghouse for Long-Term Care Iformation, "Paying for LTC", 2008
7.  Genworth Financial 2008 Cost of Care Survey, April 2008, Page 1
8.  Ibid
9.  "Long Term Care Insurance, Protection For Your Future", American Council of Life Insurers, 2008, Page 1