This is the second of two Issue
Briefs (April and May 2000) on long-term care (LTC)
insurance. The previous Issue Brief addressed the
problem of increasing sponsorship, while this report
addresses the issue of increasing employee participation.
Participation rates in group LTC
insurance plans tend to be low. A potential watershed
event for the development of the employment-based group
LTC market is the proposed LTC program for federal
employees and retirees (a program that would have to be
enacted by Congress). The perception of a successful
offering to federal employees could provide an enormous
boost to the group LTC insurance market.
Employee communication and
education are seen as critical to the success of LTC
enrollments. The importance of support shown by an
employer for a new LTC plan offering cannot be
overstated. Unlike 401(k) plan participation trends, LTC
participation rates are highest among large companies.
Insurers tend to view the
40–60 age range as the primary target for group LTC
insurance, and employee salary as the best predictor of
LTC insurance enrollment. Higher educational levels also
are associated with higher levels of LTC participation.
Perceived need for LTC insurance is perhaps the biggest
barrier to the purchase of LTC insurance by employees due
to competing financial priorities and the fact that LTC
issues are generally off the “radar screens” of
Plans with skilled nursing home and
home care benefits experience higher participation rates
than plans lacking these benefits. The availability of
lower-cost and long duration benefit options can be an
important factor in determining participation.
Most sponsors have chosen to offer
noncontributory (i.e., fully employee-paid) LTC plans.
Employer reluctance to make contributions may be caused
by HIPAA's prohibition on the inclusion of LTC insurance
in cafeteria plans.
One of the major advantages of
group LTC plans is the availability of guaranteed
issue (i.e., issuing coverage without requiring
evidence of insurability) for employees, which is not
available in the individual LTC market.
It is easy for enrollment to be
derailed by the presence of any of a number of harmful
conditions, such as employer-sponsors who distance
themselves from the offer, ineffective communications, or
difficult enrollment processes. Achieving consistently
strong levels of participation in LTC plans will require
employer-sponsors and their insurance carriers to form
strong partnerships, with worker participation as their
primary stated goal.