Does Geographic Location Make a Difference? A Comparative Analysis of the Socio-Demographic & Attitudinal Characteristics of Active Buyers & Non-Buyers of the Federal Long-Term Care Insurance Program

U.S. Department of Health and Human Services

Does Geographic Location Make a Difference? A Comparative Analysis of the Socio-Demographic and Attitudinal Characteristics of Active Buyers and Non-Buyers of the Federal Long-Term Care Insurance Program

LifePlans, Inc.

September 21, 2004

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This policy brief was prepared under contract between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and Abt Associates. The brief was written by LifePlans, Inc. For additional information about the study, you may visit the DALTCP home page at http://aspe.hhs.gov/_/office_specific/daltcp.cfm or contact the ASPE Project Officer, Hunter McKay, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201. His e-mail address is: Hunter.McKay@hhs.gov.

I. BACKGROUND

One of the more ambitious proposals for encouraging growth in the private insurance market was passage of the Long Term Care Security Act (Public Law 106-265). This Act was passed in the summer of 2000 and was signed into law on September 19th of that year. It authorized the U.S. Office of Personnel Management (OPM) to contract for a long-term care (LTC) insurance program for federal employees. Coverage would be available to active federal employees and annuitants (civilian retirees), as well as active and retired members of the uniformed services. "Qualified relatives" of active workers and military personnel including spouses, adult children, parents, and parents-in-law would also be covered by the program. OPM expected that, like the health and life insurance programs it administers, the Federal Long-Term Care Insurance Program (FLTCIP) would become the largest employer-sponsored LTC insurance program in the nation.

The development of the program was in part meant to send a message to other employers around the country that a "progressive" employer is one that offers LTC insurance to its employees. Naturally it was expected that implementation of the program would spur additional interest and growth in the market. The program began in earnest in July 2002, which constituted the beginning of the open enrollment period. The carriers underwriting the program -- John Hancock and MetLife -- formed a joint venture called Long Term Care Partners, LLC, which is devoted exclusively to administering the program.

Long Term Care Partners conducted one of the largest LTC educational campaigns ever. More than one million people requested enrollment kits. As of August 2004, more than 300,000 applications had been received and more than 210,000 policies issued. About 64% of enrollees were active employees and spouses, 31% annuitants and their spouses, and another 5% surviving spouses, parents/in-laws and adult children. Thus, in relatively short order, the FLTCIP became one of the largest group programs in the United States. In part this was due to the significant marketing and enrollment activities including more than 2,100 educational meetings, briefings to human resources staff and outreach programs to affinity groups.

The large number of enrollments affords a unique opportunity to better understand the attitudes and perspectives of both working and retired individuals regarding LTC concerns, the importance of planning, and the role that insurance may (or may not) play in meeting the needs of disabled individuals. An examination of such attitudes can assist policymakers as well as insurers to better understand marketplace opportunities and barriers, and devise strategies to encourage growth in the market.

II. PURPOSE

This is the eighth in a series of data briefs based on the information collected from active buyers and non-buyers of the federal program. The purpose of this data brief is to determine the extent to which the attitudes, opinions and motivations of individuals who purchased and did not purchase the federal LTC insurance policy are in part a function of geographic location. We are also interested in knowing how geography is associated with their experience with LTC and opinions about LTC insurance. Relevant research questions answered in this brief include (but are not limited to) the following:

• How do the demographic and characteristics of active buyers and non-buyers differ across geographic regions?
• What are the attitudes and opinions about retirement planning among active buyers and non-buyers across geographic regions?
• What are the similarities and/or differences in knowledge of LTC and insurance among individuals in each of the geographic regions?
• Does the extent of exposure to marketing materials and messages vary by geographic region?

III. METHOD AND SAMPLE

Long Term Care Partners used mail surveys to collect information from active buyers and non-buyers. For purposes of this research, the active sample consists of employees who are actively working. A "buyer" is someone who has purchased the insurance plan and paid premiums beyond the free look period. A "non-buyer" is defined as someone who expressed interest in a program but had not purchased the plan at the time that the survey was completed.

Three geographic segments are analyzed: (1) the "DC Area", which comprises the District of Columbia, Maryland, and Virginia; (2) "The East" which comprises all states to the east of Minnesota, Iowa, Missouri, Arkansas and Louisiana; and (3) "The West" which includes all states west of Wisconsin, Illinois, Kentucky, Tennessee and Mississippi. As shown, about 3,300 individuals participated in the various surveys of active and retired buyers and non-buyers. Table 1 below summarizes the sample sizes by market segment and geographic regions.

IV. FINDINGS

A. Demographic and Employment Characteristics

Figure 1 summarizes important demographic characteristics of the aggregate active sample of buyers and Figure 2 shows similar characteristics for active non-buyers. Across each of the regions the majority of buyers are married, male, have children living nearby and are highly educated. The average age of buyers across the regions varies between 52 and 54 years. There are statistically significant differences on three variables: income, assets, and education status. Buyers in Washington, D.C. are more likely to be college graduates and to have higher incomes and assets. In fact, the average income of buyers in the D.C. area is $98,261 compared to $81,710 in other regions of the country. Asset differentials are even greater; the average value of liquid assets of active buyers in D.C. is about $226,000 compared to roughly $186,000 in other areas of the country.

Figure 1: Demographic Characteristics of Active Buyers by Geographic Region

Source: Analysis of data from the FLTCIP, 2003.

As shown in Figure 2, the same pattern of results holds true for non-buyers. Again, the only significant demographic differences across regions are education status and income and asset levels. Non-buyers in Washington, D.C. are more likely to be educated and have significantly higher levels of income and assets -- $92,000 compared to $70,000 (income) and $180,000 compared to $158,000 (assets).

While there are no significant age differences between buyers and non-buyers across the regions, buyers tend to be more educated, wealthier and less likely to be married and have children living nearby. This could suggest that buyers may view having the insurance as compensating for their perceived lack of family support, which is still the largest contributor of long term care services.

Figure 2: Demographic Characteristics of Active Non-Buyers by Geographic Region

Source: Analysis of data from the FLTCIP, 2003.

The patterns observed for the active sample of buyers and non-buyers also holds true for the retired sample. In both cases, retiree buyers and non-buyers in Washington, D.C. have higher incomes and are better educated than those in the East and West. There are, however, no significant differences in asset levels. Again, retired buyers tend to be wealthier and more educated than non-buyers across all of the regions. Finally, in contrast to the sample of actives, there were no significant differences in the marital status of buyers and non-buyers by geographic regions. Retired buyers in the west, however, are the least likely to have children living nearby. (See Appendix for more detailed information on retirees.)

B. Attitudes and Experience with Retirement Planning and Long-Term Care

Previous briefs have established that federal employees tend to be active in planning for their retirement and understand the potential LTC risks associated with later life. Their life experiences with relatives or friends may also influence their decisions regarding the purchase of insurance. We asked a series of questions designed to illuminate key differences between buyers and non-buyers across the three geographic regions.

There are few differences across geographic regions among buyers regarding attitudes and opinions about retirement planning. Most (80%) have at least a general sense for how much to save to live comfortably in retirement, have thought about how to pay for LTC (96%) and believe having the insurance is important to retirement planning (97%). Geographic region is also not associated with non-buyers' attitudes about these issues. However, across all regions non-buyers are less likely to have thought about these issues or believe that insurance is an important part of a retirement plan. By and large, these same patterns hold true for the retired sample.

With few exceptions, geographic region is also unrelated to active employees' experience with LTC and attitudes about risk. Active buyers in Washington, D.C. are, however, somewhat less likely to know someone who has experienced financial hardship as a result of caring for an elderly relative. (Note that this population also is has higher levels of income and assets than buyers elsewhere.) Regarding retirees, buyers in the east are the most likely to have had caregiving experience -- 39% compared to 26% -- to have experienced financial hardship as a result of caring for an elderly relative -- 7% compared to 3% -- and know someone who has experienced financial hardship as a result of caring for an elderly relative -- 42% compared to 35%. There were no significant differences in experience across regions among non-buyers.

In past research, one factor that has distinguished buyers from non-buyers is their knowledge of potential payment sources for LTC. The insurance industry has invested heavily in educating consumers about LTC financing and there was an extensive educational campaign for the federal program. In order to gauge the effectiveness of that education, we asked buyers and non-buyers who they believe would pay for LTC if they ever needed it. There were no significant differences in responses among buyers. Among active non-buyers, however, there was an important geographic difference regarding knowledge of payment source for LTC services. Figure 3 summarizes results among active non-buyers and shows that those in the Washington, D.C. area are more likely to understand that they will have to use their own income and assets to pay for care if it is needed.

Figure 3: Active Non-Buyers View of Who Will Pay for Long-Term Care if it is Needed by Geographic Region

Source: Analysis of data from the FLTCIP, 2003.

Non-buyers in Washington, D.C. are also most likely to understand that Medicare or Medicaid will not pay for their LTC expenses. Finally, the further away from Washington, D.C. one gets, the more likely is there to be uncertainty about how LTC costs would be paid if services were needed. This finding may suggest that at least with respect to payment source knowledge, the education campaign in the Washington, D.C. area was more effective than in other parts of the country. Alternatively, it may be that given the higher levels of education, this is knowledge that these individuals had even before the marketing campaign began. These trends were not evident among the retiree sample.

Non-buyers of the federal program were also asked whether or not they currently had LTC insurance and whether they bought the insurance after they heard about the federal program. As shown in Figure 4, non-buyers of the federal program in the Washington, D.C. area are twice as likely to purchase LTC insurance as non-buyers in other geographic regions. Moreover, they are the most likely to have bought the insurance after hearing about the federal program. Somewhat surprisingly, of those non-buyers in the East and West who had insurance, a meaningful proportion of them -- between 17% and 25% -- had not heard about the federal program. This finding again suggests that the education and marketing campaign was either heavily targeted or particularly effective in the Washington, D.C. area. It also suggests that other carriers benefited from the wide net cast by the campaign: between one in five and one in ten non-buyers actually purchased a non-federal policy.

Figure 4: Active Non-Buyers Purchase of Long-Term Care Insurance by Geographic Region

Source: Analysis of data from the FLTCIP, 2003.

C. Experience with the Application Process and Exposure to Promotional Materials

Given some of the major differences in education level and the fact that the program was national in scope, one might have expected differences across geographic region in peoples' experience with the application process. In a prior brief, we demonstrated that non-buyers had a more difficult time understanding the application materials and getting their questions answered than did buyers. This finding holds true across all geographic regions. However, among active buyers, those in the Washington, D.C. area seemed to have an easier time understanding the application and also found it easier to obtain answers to their questions about the program (see Figure 5).

Figure 5: Active Buyers Experience with Application Process by Geographic Region

Source: Analysis of data from the FLTCIP, 2003.

The program sponsors -- Long Term Care Partners -- invested significant resources in the marketing and education campaign. They did so through sponsorship of a variety of promotional activities such as educational meetings, satellite broadcasts, advertisements, articles, brochures, web sites, toll-free numbers, and more. This was done to assure maximum exposure to the program. As outlined in a previous brief, we found that non-buyers were less likely to have actively engaged in activities designed to educate and reinforce the need for insurance protection against the cost of LTC. This is fairly typical across the geographic regions. The extent of non-buyer exposure to educational activities does not vary by geographic region except when it comes to visiting the website and reading articles about the program; non-buyers in Washington, D.C. are far more likely to have visited the website (62%) than are non-buyers elsewhere (34%). They are also more likely to have read newspaper articles about the program than non-buyers elsewhere -- 57% compared to 29%.

The same can be said of buyers: for the most part, exposure does not vary by geographic region. The exception is that compared to buyers in the West and in the D.C. area, those in the East are the least likely to talk to federal colleagues about the program. On the other hand, they are more likely to have read newspaper articles than non-buyers elsewhere. There are few significant variations in exposure by geographic region for the retiree population. Again, retirees living in Washington, D.C. are far more likely to have read newspaper articles about the program than retirees elsewhere.

V. CONCLUSIONS

For the most part, there are few geographic differences in the attitudes and opinions of buyers and non-buyers of the federal program regarding retirement planning and LTC. There are, however, a number of important socio-demographic differences (i.e., those living in the Washington, D.C. area tend to be more highly educated and wealthier), as well as those relating to experience with LTC, especially among retirees. Retirees in the D.C. area have more experience caregiving and are more likely to either know someone who has had, or to have personally experienced, financial hardship as a result of LTC.

Non-buyers in the Washington, D.C. area are also more likely to have purchased a LTC insurance policy not sponsored by the Federal Government than non-buyers in other areas of the country. Moreover, the fact that a meaningful proportion of non-buyers in the East and West who had purchased other policies had not even heard of the federal program, suggests that the marketing campaign may not have been as effective in these areas. This is somewhat supported by the finding that non-buyers outside of Washington, D.C. are also less likely to have been involved in certain promotional activities.

The analysis presented here has focused to a large extent on observed differences between geographic regions on selected variables. It is important to note that on the vast majority of parameters examined, geography is not a particularly important variable.

APPENDIX

Notes for Tables

All significance tests are based on 5% level or better. Notations for significance are as follows: If one category out of three contains the symbol (*), then the category starred is statistically different from each of the other two categories, but the non-starred categories are not different from each other. If two categories out of the three contain the symbol (*), then those two categories are statistically different from each other, but each of those categories is not statistically different from the third one. If all three categories contain the symbol (*), then all three are statistically different from each other.

Unless otherwise specified, only the response category that has a notation of significance was tested against all other categories. In some cases, it was determined that a combination of categories would be tested. These are indicated in the footnotes. It also may be the case that if categories were or were not combined, it could change the results of the test of significance.

Unless otherwise indicated, the first response category (i.e., strongly agree, very important, very likely, etc.) or the yes response was tested. Therefore, if there are no notations for significance, the test was not significant at the 5% level.

TABLE A-1: Socio-Demographic Characteristics of Active Buyers and Non-Buyers by Geographic Location (D.C. vs. East vs. West)
Socio-Demographic Characteristics	Active Buyers DC		Active Buyers East		Active Buyers West		Active Non-Buyers DC		Active Non-Buyers East		Active Non-Buyers West
Average age	53		52		54		52		54		54
Less than 50	27		31		22		40		30		32
50 to 54	26		23		26		24		26		23
55 to 59	27		26		25		18		20		20
60 to 64	13		15		18		8		9		13
65 and over	7		5		9		10		15		12
Gender
Male	46		50		53		57		60		58
Female	54		50		47		43		40		42
Marital status
Never Married	22		17		13		11		9		9
Married	57		61		59		70		66		73
Divorced/separated	15		15		24		16		20		14
Widowed	4		5		3		2		4		3
Domestic Partner	2		2		1		1		1		1
Presence of children living within 25 miles
Yes	41		43		42		53		63		59
No	59		57		58		47		37		41
Education level
Less than high graduate	0		0		0		0		1		0
High school graduate	4		9		4		7		17		12
Technical/ trade/ business school	2		4		7		5		7		4
Some college	15		20		25		23		28		37
College graduate1	36	79*	34	67	39	64	20	65*	29	47	29	47
Graduate degree	43		33		25		45		18		18
Average income2	$98,261*		$81,714		$81,709		$92,386*		$70,692		$69,603
Less than $15,000	0		0		0		0		1		1
$15,000 to $24,999	0		1		1		1		1		1
$25,000 to $34,999	3		3		3		3		4		7
$35,000 to $39,999	1		2		2		2		7		7
$40,000 to $49,999	2		11		10		5		15		16
$50,000 to $59,999	3		12		11		8		15		12
$60,000 to $69,999	10		10		12		7		10		11
$70,000 to $74,999	7		8		8		5		7		7
$75,000 to $99,999	21		23		24		20		22		18
$100,000 to $124,999	17		15		13		23		10		14
$125,000 or more	36		15		16		26		8		6
Average liquid assets2	$184,919		$190,856		$225,833		$180,920		$162,053		$153,378
Less than $10,000	4		9		7		13		18		17
$10,000 to $19,999	3		3		4		5		10		7
$20,000 to $29,999	5		6		4		3		8		8
$30,000 to $49,999	10		8		12		9		13		12
$50,000 to $74,999	7		12		19		8		14		11
$75,000 to $99,999	8		10		5		6		7		9
$100,000 to $124,999	8		9		9		7		7		8
$125,000 to $149,999	4		7		5		8		4		6
$150,000 to $199,999	13		6		9		3		5		4
$200,000 to $249,999	10		10		9		2		3		6
$250,000 and above	28		20		17		36		11		12
Home ownership
Yes	90		91		90		87		83		89
No	10		9		10		13		17		11
Here, having a college degree or better is tested for significance against not having a college degree. Averages were calculated by taking the midpoints of the ranges.

A total of nine Data Briefs are available from the Office of Disability, Aging and Long-Term Care on this subject:

• A Comparison of Demographic and Attitudinal Characteristics Among Active and Retired Buyers, Non-Buyers and Non-Responders to the Federal Long-Term Care Insurance Program [http://aspe.hhs.gov/daltcp/reports/charcom.htm] Posted June 2005
• A Comparative Analysis of the Socio-Demographic and Attitudinal Characteristics of Active Buyers and Non-Buyers of Long-Term Care Insurance in the Federal, Private and Public Sectors [http://aspe.hhs.gov/daltcp/reports/LTCIchar.htm] Posted February 2006
• A Demographic and Attitudinal Profile of Buyers of the Federal Long-Term Care Insurance Program [http://aspe.hhs.gov/daltcp/reports/buyprof.htm] Posted June 2005
• A Demographic and Attitudinal Profile of Non-Buyers of the Federal Long-Term Care Insurance Program [http://aspe.hhs.gov/daltcp/reports/nonbuyprof.htm] Posted September 2005
• A Demographic and Attitudinal Profile of Non-Responders of the Federal Long-Term Care Insurance Program [http://aspe.hhs.gov/daltcp/reports/nonresprof.htm] Posted September 2005
• Does Geographic Location Make a Difference? A Comparative Analysis of the Socio-Demographic and Attitudinal Characteristics of Active Buyers and Non-Buyers of the Federal Long-Term Care Insurance Program [http://aspe.hhs.gov/daltcp/reports/FLTCIloc.htm] Posted February 2006
• Marketing Activities: A Comparative Analysis of Engagement and Participation Among Buyers, Non-Buyers and Non-Responders of the Federal Long-Term Care Insurance Program [http://aspe.hhs.gov/daltcp/reports/markact.htm] Posted July 2005
• Multivariate Analysis of Buyers and Non-Buyers of the Federal Long-Term Care Insurance Program [http://aspe.hhs.gov/daltcp/reports/FLTCIanal.htm] Posted September 2005
• What We Know About Buyers and Non-Buyers of Private Long-Term Care Insurance: A Review of Studies [http://aspe.hhs.gov/daltcp/reports/LTCIlr.htm] Posted September 2005