CHAPTER TEN – SPONSORED & TRUE GROUP LTCI

WHAT IS THE VALUE OF EMPLOYERS SPONSORING LTC INSURANCE?

Employers are finding that sponsoring group Long Term Care Insurance shows concern for the welfare of their Employees and helps to build morale and loyalty.  Yet it is easy to administer and does not put pressure on employee benefit dollars.

 

With the passage of the Health Insurance Portability and Accountability Act of 1996, the federal government now provides special tax incentives for employers who offer Long Term Care Insurance. Employers may now deduct premium paid on behalf of Employees as a business expense, the same as they do for medical insurance.  Employers may also pay premiums for selected classes of Employees (i.e. as part of an executive compensation package) without being required to pay the premiums for all Employees.

 

The following points can be made to a group prospect for LTC Insurance:

 

1. Long Term Care Insurance enhances the attractiveness of your company as an employer and helps you to retain your most qualified, highly skilled Employees.

 

1. Long Term Care Insurance is easy to administer and implement.  It is also portable, so if an employee leaves, the policy becomes an individual one at no additional cost and the person is billed directly.

 

1. Long term care encourages Employees to focus on financial and retirement planning. It also eases the burden on Employees who act as caregivers for spouses or parents, resulting in increased productivity and decreased absenteeism.

 

1. The current cost to companies for lost productivity is estimated at $3,142 per employee according to a recent Wall Street Journal article, and USA Today estimates it is in excess of $17 billion a year.

 

1. An American Medical Association study estimates that long term care can cost a company with 1,000+ Employees as much as $400,000 per year.

 

1. 10‑ 15% of workers are struggling to balance the responsibilities of work with those of caring for aging, ill relatives.

 

1. A study by the Health Action Forum of Greater Boston reported that due to long term care demands, 33% of Employees missed work, 45% used vacation or sick days and 33% came to work late or went home early (Employee Benefit Plan Review, 1995).

 

1. By the year 2020, one in three workers will provide some kind of care for an aged parent or other relative.

 

HOW DOES ONE EDUCATE THE EMPLOYER?

In addition to the above-illustrated points, the education of the employer (or head of the Association, etc.) is the most important step in marketing these products.  Most insurers will furnish material that can be used for educational purposes, most prepared in a professional manner.  Some of the material that will be provided could be similar to the following:

SOURCES OF FUNDS FOR LONG TERM CARE?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The tax consequences should be fully understood by the Group principal (and the agent).  By “putting it in writing,” the tax benefits and consequences are more easily understood, and the written word always adds more authenticity to the statements.

HEALTH CARE REFORM

(The following information could be submitted to an Employer as it is abbreviated but furnishes the information that is needed by most Employers for their decision making.  Again, any tax information that pertains to their operation must be approved by their tax attorney.)

 

 

 

 

 

 

 

 

 

 

 

HOW SHOULD THE PROGRAM BE PRESENTED?

Presenting the program to the employees is where the work begins after approval from the Employer or approval authority.  The communication of the benefits is crucial at this point and the insurance company will provide most of the assistance.  The material to be used is designed to inform Employees about the need for Group LTCI coverage and educate them about the specific benefits selected.  The employer will inform the Employees of the employee benefits, and this material will work hand-in-glove with the announcement.

 

The success of any program depends on the strength of the employer or approval authority and most importantly, the employer’s support.  At this point many insurers will require a commitment on the part of the employer to develop a workable plan to communicate and administer the enrollment process.

 

The entire communication process includes, but not limited to:

1. An announcement letter, on the employer's letterhead, supporting the program, outlining key features and telling Employees of the enrollment process.
2. Posters and table tents to announce the open enrollment and/or meeting dates.
3. Articles, for newsletters, to establish the general need for long term care planning and coverage.
4. A separate brochure describing the need for specific coverage.

 

Other assistance from the insurer’s Home Office is usually provided.  Some companies have their own Enrollers, with others it is the responsibility of the General Agent.  A few (very few) companies have installed a computerized method whereby each enroller uses a laptop computer to enroll the employee.  The information submitted is sent electronically to the Home Office at the end of each workday, thereby allowing for immediate enrollment.  If underwriting is needed, this speeds up that process tremendously.  

 

A toll-free telephone number is important, and the Home Office should be ready to for numerous inquiries by employees and their relatives, both during the enrollment period and afterwards.  Most group insurance companies have such facilities available.  Since Long Term Care Insurance is relatively new, it is even more important that such facilities be made available.

EMPLOYEE LETTER

A sample of the wording that can be used in the initial letter that the employer sends to the Employees announcing the new Employee Benefit being made available to them is as follows:

 

 

 

WHAT IS TRUE GROUP LTCI?

 

The discussion of Group LTC Insurance has been primarily on the individual policy sold on a group basis, with certain distinctions as discussed.  The following information pertains to Long Term Care Insurance sold on a (true) group basis.  The details are of a plan offered by a major insurance company and should not be considered as an industry “standard.”  Also, this plan has been offered for more than a year, so some changes will probably already be made, however, they should not be significant.

 

Also, please be aware that the plan outlined herein is a “Preferred” plan, which has somewhat more liberal benefits than another plan that is also available from this company.  The “Preferred” plan is discussed, as experience has shown that benefits increase and become more liberal as more experience in this field is gained and actuarial statistics are verified through actual claims experience, plus the ever-encroaching of the Federal government.

WHO IS ELIGIBLE FOR TRUE GROUP LTCI?

The eligibility criteria are typical of most companies in the group LTC Insurance market. The following individuals are eligible for coverage under an endorsed group Long Term Care Insurance plan.

 

Employees

Full‑time (30 hours minimum) Employees who are actively at work. Also, regular part-time Employees may be eligible for this benefit if other benefits are typically offered to them.

 

Spouses of Employees

Spouses of Employees may apply even if the employee does not participate.

 

Retirees and Spouses

Retirees and their spouses under 80 years of age may apply.

 

Children of Employees

Children of the employee or member are eligible to participate.

 

Parents, Parents‑In‑Law, Grand Parents and Grand Parents‑In‑Law

 

Parents, parents‑in‑law, grand parents and grand parents‑in‑law may apply even if the employee or spouse does not choose to participate.  (NOTE:  This is the most unusual feature of Group LTC Insurance, rarely, if ever, offered with any other type of insurance.)  This broad eligibility should create some anti-selection, as it would appear that any employee, who has an elderly parent or grandparent, etc., would want the insurance, especially since the employee does not have to participate.  Therefore, the premiums must be actuarially structured to compensate for this contingency.

 

WHAT IS THE BILLING PROCEDURE?

Billing is a little different than usual group health insurance, and is specifically stated as it is anticipated that the plans will be portable when the employee leaves or retires. The insurer provides direct billing for terminated Employees and their spouses, divorced spouses, retirees and their spouses, parents, parents‑in‑law and grandparents.  Employees on leave can also be direct billed. The insurance company bills quarterly, semi‑annual or annual modes. There is no charge for direct bill. A grace period of 30 days is extended when premium is not paid.

WHAT AGES ARE ELIGOBLE?

The insurance company typically would offer this plan to those ages 18 to 84, with some restriction of benefits for those ages 80-84.

WHAT IS THE BASIC COVERAGE?

1. Pool of funds concept.
2. All Levels of Care: Skilled, Intermediate and Custodial.
3. Nursing Home: 100% of actual expenses up to the daily maximum limit.
4. Home Health Care: Choice of daily maximum benefit of 50% or 100% of daily nursing home benefit. 100% of actual charges up to the daily maximum home health care benefit for Skilled Services. 100% of actual charges up to the daily maximum home health care benefit for Personal Care Services (example ‑ Home Health Care Aide).
5. Adult Day Care: 100% of the expense incurred up to the daily maximum limit. Based on Home Health Care benefit.
6. Alternate Care Facility: Pays the lesser of your daily nursing home maximum or 100% of the incurred expenses. Includes hospice, assisted living (not nursing home) community‑based care setting and adult congregate living

WHAT ARE THE MAXIMUM DAILY GROUP BENEFITS?

1. Daily Benefit Amounts ‑ ranging from $40 to $250 for nursing facilities.
2. Home Health Care Amounts: choice of 50% or 100% of daily long term care benefit amount.

HOW DOES THE EMPLOYEE QUALIFY FOR BENEFITS?

 

The qualification for benefits follows the HIPAA guidelines by offering the following two ways to qualify for benefits:

1. Inability to perform two of six specified activities of daily living (90 day certification required) eating, dressing, bathing, toileting transferring, continence or
2. Cognitive impairment

 

WHAT ARE THE BENEFIT PERIODS FOR GROUP LTCI?

As with most LTC Insurance policies, the Benefit Periods are expressed as days with explanation as to number of years.  This is typical of a “Pooled” policy, as the amount of the Pool is calculated as the number of days (Benefit Period) times the Daily Benefit.  Using a stated number of days eliminates any difficulty in calculations, such as providing for leap years.

 

Ages 18 ‑ 79: 730 times (2 years), 1095 times (3 years), 1460 times (4 years), 1825 times (5 years) the LTCI daily benefit amount  or Unlimited.  Ages 80 ‑ 84: 730 or 1095 times the LTCI daily benefit (1460 and Unlimited times are not available.)

WHAT ARE THE DEDUCTIBLE PERIODS FOR GROUP LTCI?

Deductible Periods follow those in Individual policies.  This particular insurer has restrictions on Deductibles at the older ages, and with the 730-day (2 year) policy.  The employee may select the number of consecutive days at the beginning of their covered stay and before the benefit payments actually begin.

1. Ages 18 ‑ 79: 0 days, 30, 90, 180 or 365 Days.
2. Ages 80 ‑ 84: 30, 90, 180 or 365 Days.
3. Deductible periods of 180 or 365 days are not available with 730 (2 years) times daily benefit period.

WHAT INFLATION BENEFIT CAN GROUP PLANS COVER?

The Inflation Benefit is Optional, using either Simple or Compound increase calculations.

WHAT SPECIAL PLAN IS DESIGNED FOR “CONDO” RESIDENTS?

One insurer specifically offers “Condominium” based care benefits, attractive to many elderly retired persons.  Under this provision, the insured can begin receiving benefits without the requirement of prior care in a hospital or a skilled nursing facility (which is legally dictated provisions in most states).  Benefits are payable when any of the qualification criteria are met:

1. Inability to perform two of six specified activities of daily living, or
2. Cognitive impairment

Covered services are those that are provided by a licensed or accredited home health care agency and adult day care center, and follow a plan of treatment established by the physician. 

WHAT HOME HEALTH CARE SERVICES ARE COVERED?

1. 100% of the expense incurred for occupational, physical, respiratory or speech therapy or nursing care services provided by a registered nurse or a licensed or vocational nurse.
2. 100% of the expense incurred for services provided by a medical social worker, home health aide, homemaker or similar services.
3. 100% of the expense incurred for each day of care in an adult day care center. The total The insurer will pay for each day of such services and care is limited to the home and community‑based care maximum daily benefit amount selected (50% or 100% of the nursing home daily benefit).

WHAT IS THE ALTERNATE PLAN OF CARE BENEFIT?

Under the insurer’s Alternate Plan of Care provision, if the insured, their doctor and the insurer agree, then the insurer will pay for medically appropriate services and supplies in another setting when a nursing home confinement would otherwise be required. It should be emphasized the Alternate Plan of Care is a completely voluntary program.

WHAT IS THE ALTERNATE CARE FACILITY BENEFIT?

If the insured is confined in an alternate care facility, the insurer will pay the insured 80% of the expenses incurred (100% in Maryland), up to the nursing home daily benefit amount, for each day for care received in an alternate care facility, which occurs after the long term care elimination period, and before the specified lifetime maximum dollar amount is reached.

WHAT BED RESERVATION BENEFIT IS AVAILABLE?

If the insured is hospitalized or temporarily leave during a covered stay in a nursing home, the insurer will continue to pay the insured’s benefits or credit their elimination period for up to 21 days per year to cover charges or to reserve the insured’s accommodations. Unused days cannot be carried over into the next calendar year.

WHAT IS THE RESPITE CARE BENEFIT?

The Insurer will pay up to the nursing home daily benefit for respite care in a nursing home or alternate care facility, and up to the home and community‑based care daily limit for respite care in a residence or adult day care center.  The Insurer will pay for up to 21 days in a calendar year and benefits will be payable during the elimination period.  After the insured reached their elimination period, respite care will not be paid in addition to the daily benefit amount

DOES THE POLICY COVER EXPENSES FOR MEDICAL HELP?

The Medical Help Benefit is a newer benefit, and offered by only a few of the major insurers.  The insurer will pay the actual expenses incurred, up to 25% of the home and community-based care daily benefit amount for the rental or lease of a medical help system for the insured’s home during a plan of treatment.  This benefit is limited to a system installed in the home while the policy is in effect and to a maximum of 12 months during the insured’s lifetime.

DOES IT COVER CAREGIVER TRAINING BENEFIT?

Basically the same as with the individual policy.

IS IT GUARANTEED RENEWABLE?

Basically the same as with the individual policy.

WHAT IS THE PRE‑EXISTING CONDITIONS CLAUSE?

Follows this provision in the individual policy except that many group plans provide that preexisting conditions not disclosed on the application may be covered if confinement begins at least six months after the start of coverage under the policy.  However, if important medical information is omitted from the application, the policy may be voided.

IS WAIVER OF PREMIUM AVAILABLE?

The Waiver of Premium is more liberal with the “Preferred” plan as it does not require that the insured be confined in a Nursing Home.  Waiver of Premium begins when the insured receives 12 days of covered care or services (Long-Term Care Facility stay and/or Home and Community‑Based Care) ‑ in a quarter.  The initial 12 days need not be consecutive, but must be incurred within a 90‑day period.

POLICY PREMIUMS?

Same as with the individual policies.

SPOUSAL PREMIUM DISCOUNT?

The Spousal discount with this plan differs from the plan earlier discussed and is more typical of individual and group policies inasmuch as both insured and spouse must be approved for coverage.   If both the insured and spouse apply for a Long Term Care Insurance policy at the same time with the insurer, and are both approved for coverage, the insured will receive a 10% premium discount on both policies. 

WHAT ARE THE EXCLUSIONS WITH THIS PLAN?

The Long Term Care Insurance plan from the insurer does not include benefits for the following:

1. Losses resulting from war or any act of war, or
2. Losses for which benefits are payable under Workers' Compensation or Occupational Disease Act or Law, or
3. Losses due to mental, psychoneurotic or personality disorders without evidence of organic disease. (Alzheimer's disease or similar organic brain syndrome is covered.)
4. Benefits under the policy will not duplicate benefits available under Medicare.

DOES ANYONE OFFER NURSING HOME ONLY POLICIES?

Some insurers also offer s a plan that covers nursing home care as well as care in alternate care facilities.  The plan does not cover Home and Community Based Care, Respite Care, Medical Help System or Caregiver Training.

 

 

STUDY QUESTIONS

 

1.  One of the advantages given employers who adopt an LTCI plan for their employees by HIPAA, besides the ability to deduct premiums paid on behalf of employees, is

      A.  that employers can discriminate by offering LTCI just to certain employees.

      B.  the guarantee that the IRS will not audit their tax returns for the next 3 years.

      C.  that the government pays 15% of all group LTCI premiums in lieu of taxation.

      D.  all employees of every company must be covered, so if the employer cannot afford to take the plans, the employees will automatically become eligible for Medicaid if they have to go to a nursing home, with no other eligibility required.

     

2.  Among the reasons that an employer should consider an LTCI benefit program for its employees is

      A.  that a company of more than 50 employees that installs such a plan, can share in the commissions paid to the agents.

      B.  that the Social Security withholding for each employee will drop by the amount of the :LTCI premium.
C.  recent studies have shown that about one-third of all employees either missed work, came to work late or left early, or used vacation or sick time, because of long-term care demands.

      D.  there is absolutely no administrative costs involved as the insurance agency handles all enrollment and claims.

 

3.  The most important step in marketing LTCI to employers is

      A.  the amount of commission rebate required.

      B.  to educate the employer on the advantages of having such a plan installed.

      C.  to make sure that all premiums are paid directly to the agency.

      D.  nearly daily calling on the company until they agree to such a plan.

 

4.  Once the employer has agreed to accept the proposal for LTCI for its employees, then

      A.  that is all that an agent has to do.

      B.  presenting the program to the employees is the next step.

      C.  the insurer will send a claims manual to the company Human Resources Dept.

      D.  an announcement of this acceptance should be published in the local paper.

 

5.  Once the LTCI program with an employer has been accepted, the success of the program

      A.  is assured with no more work.

      B.  depends upon the strength of the employer and the employer’s support.

      C.  hinges entirely upon the employer’s human resource department.

      D.  depends upon how rapidly an employer will start to receive benefits.

 

6.  On a true group plan, the eligibility criteria typically states that employees are eligible for coverage if

      A.  they are part-time, full-time, or on a consultant or contractual employment basis.

      B.  they are not eligible for any other benefits.

      C.  they have been with the employer for 5 years.

      D.  they are actively at work on a full-time basis, of part-time if they are eligible for other benefits also.

 

7.  Perhaps the most unique eligibility feature of group LTCI is that

      A.  only spouses of full-time employees are eligible.

      B.  children of the employees are eligible.

      C.  officers and directors are eligible.

      D.  parents, parents-in-law, grandparents and grandparents-in-law may apply in most plans.

 

8.  A true group plan usually does not have as wide a choice of benefits and coverage as an individual plan. For example, when home health care is covered

      A.  the employee must accept only 50% of the daily benefit for home health care coverage.

      B.  the employee usually can pick 50% or 100% of the daily benefit.

      C.  by law it must always be the same as the daily benefit.

      D.  the employee must state that in case of disability, the individual that the employee names would be the only one that could be paid for home health care services.

 

9.  Many group LTCI policies are of the “pooled” approach basis, therefore if the employee is under age 80 (typically), their benefit period may be stated as 1095 days, which means

      A.  the maximum benefit period is 5 years.

      B.  the maximum benefit period is 4 years.

      C.  the benefit period is the length of time it takes for the benefits to equal $1095.

      D.  the total amount of insurance in the pool is the daily benefit picked times 1095.

 

10.  Another unique feature of group LTCI offered by at least one company that is attractive to many elderly retired persons, is

      A.  home and condominium-based care benefit.

      B.  restoration of benefits.

      C.  bed reservation benefits.

      D.  waiver of premium.

 

ANSWERS TO STUDY QUESTIONS

1A     2C     3B     4B     5B     6D     7D     8B     9D     10A