U.S. Department of Health and Human Services

Preliminary Data from a Survey of Employers Offering Group Long-Term Care Insurance to Their Employees

Executive Summary

Steven Lutzky, John Corea, Lisa Alecxih, Laura Marburger and Kathlyn Wee

The Lewin Group

June 23, 1999

This report was prepared under contract #HHS-100-97-0011 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and the Lewin Group. For additional information about this subject, you can visit the DALTCP home page at http://aspe.hhs.gov/_/office_specific/daltcp.cfm or contact the office at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, S.W., Washington, D.C. 20201. The e-mail address is: webmaster.DALTCP@hhs.gov. The Project Officer was Hunter McKay.

The opinions and views expressed in this report are those of the authors. They do not necessarily reflect the views of the Department of Health and Human Services, the contractor or any other funding organization.

Private long-term care insurance provides one of the few available mechanisms for individuals to protect themselves against the catastrophic costs of long-term care. Long-term care (LTC) insurance sold through employers has advantages over policies available through the individual market that may increase sales, including:

• Lower premiums due to:

  • More effective marketing to individuals at younger ages, when premiums are lower;
  • Administrative and agent commission savings;
  • Potential for employers to use bargaining power to reduce insurers' profit percentages;

• Increased access to coverage, due to less stringent screening criteria or absence of screening (i.e., guarantee issue);

• Increased ease and comfort of purchase, due to fewer coverage decisions required.

Because a majority of adults already receive some insurance benefits through the work place, the employer group LTC insurance market holds impressive potential for protecting millions more Americans from catastrophic long-term care costs. Proposed legislation that would make group LTC insurance available to federal employees could be a major stimulus for increasing the size of this market.

This interim report provides timely information about current practices in the employer group LTC insurance market that can inform federal policy makers and employers in deciding how to construct a group LTC insurance offering. The interim report summarizes data collected from a survey of employers offering group long-term care insurance to their employees. This survey is part of a study funded by the Assistant Secretary for Planning and Evaluation, Department of Health and Human Services investigating current products and best practices in the employer group LTC insurance market.

The preliminary data indicate that among employers offering the product, access to coverage is greater in the employer market than in the individual market. A majority of employers offered lighter underwriting or even guarantee issue policies (i.e., did not require health information) during initial offerings, to at least active fulltime employees. In addition, a majority offered coverage to at least one group in addition to full-time active employees (i.e., parents/in-laws, spouses, and retired employees), potentially extending the benefit well beyond the size of the employee population.

The survey also found that surveyed employers usually limited the number of benefit choices considerably. For example, a majority offered three or fewer benefit amount options. Nearly all employers used a single LTC insurer.

At the same time, the data suggest that the benefit features of employer group plans generally resemble individually purchased policies:

• Employers offer a full range of coverage for most recognized LTC services, with most including a 60 or 90 day elimination period (the deductible period between qualification for benefits and the first day benefits can be received).

• All surveyed employers offered inflation protection with half offering it as part of the initial premium and half providing the option to upgrade benefit levels in the future (future purchase option).

• Just over half of the surveyed employers' plans offered some type of "non-forfeiture" benefit that would provide the purchaser some level of benefits if he or she lapses (i.e., if the policy because they stop paying premiums).

• The vast majority of plans (all but two) required the employee to pay the entire premium.

Participation rates varied considerably by employer. While nearly 40 percent experienced participation rates below two percent, almost 30 percent had participation of 10 percent or higher, and one employer exceeded 40 percent participation.

While these tabulations provide important information about the range of approaches to LTC insurance that exist in the employer group market today, the data are preliminary. The findings are indicative of trends in the employer LTC insurance market, but the sample is not large enough to justify a claim that results are representative of all medium and large employers offering LTC insurance. The sample size (39 employers, reflecting a total eligible population of about 900,000 employees) is also not large enough to allow for detailed subgroup comparisons. (Note: the universe of large and medium employers offering long-term care insurance is itself small, estimated at about 825 in 1998.) However, pending congressional legislation necessitated release of preliminary information early, so that policy makers and administrators have as much information as possible about the features of a successful LTC insurance offering to employees. A more comprehensive report of the survey's findings will be released after September.