State budget pressures Finally, 2010 was a year of reckoning for many states as their budgets are being severely impacted by Medicaid, the biggest payer for nursing home costs.

Trends for 2011
With that background, we anticipate several trends for group LTCI in 2011.

Expect lots of news stories on LTCI and increased awareness. LTCI will be seen as an answer to two problems. First, as boomers experience the impact of caring for aging parents and the high cost, they’ll start planning for their own possible future care and look to LTCI as an answer. A natural place to look at buying this coverage is at the workplace. Also, as news stories discuss the impact of Medicaid LTC costs, federal and state governments will look to LTCI to help pay claims.

Employers will learn about the CLASS Act and group LTC options. Employers, looking at the impact of caregiving on their employees and facing the January 1, 2013 start date of the CLASS plan, will investigate solutions for LTC planning. Employers will look at LTCI as something that impacts two major employee benefits. First, it helps pay for extended care costs not covered by Medicare or health insurance. Second, it will help protect assets in 401(k) and other retirement plans from being spent on LTC costs.

Carriers will insist on more health underwriting in LTC programs. Because of some poor claims experience with simplified issue and guaranteed issue programs, expect that carriers will try to be more selective in underwriting LTCI. This may mean changes such as increasing the number of participants necessary for simplified underwriting programs or basing underwriting on group demographics.

In the past, a complicated paper enrollment process or the inability to ask health questions online limited the appetite for more health underwriting—that is changing because of new enrollment websites discussed below.

More comprehensive enrollment websites for groups of all sizes. For the most part, online LTC enrollment has been geared towards guaranteed issue large group LTC plans. Now, however, new technology will allow more customized websites for a variety of groups, from small to large. Underwriting will be included with some of the voluntary and small plans with reflexive health questions to make the process easier.

A growing comfort with online enrollment. A recent Eastbridge study showed that satisfaction with online benefits enrollment is often equal to face-to-face. Webinars and on-demand education tools give employees a chance to learn, and then they can enroll either online or using a call center at a time convenient to their busy schedule.

Many employees actually prefer not having to do a face-to-face meeting, where they may feel pressured to enroll in a benefit. In addition, many companies are hesitant to allow for mandatory meetings on company time. Additionally, with group LTCI it is often difficult to get both the employee and spouse and sign up. By offering more virtual enrollment assistance convenient to employees, there should be a higher percentage of spousal coverage.

Increasing need for in-force policy review and advice. A January article in the Journal of Financial Service Professionals shows that in a survey, 32.2% of those with investible assets of over $100K plan to use a private policy to pay for LTC. However, what do those policies cover? Do they cover home and assisted living care? What is the inflation benefit and benefit maximum?

What is the current financial condition of the carrier? Offering advice on current policies would be a big benefit for employers and their employees. This will help them with decisions on what to do with current coverage and whether to look at adjusting it, supplementing it, or in a rare instance replacing it.

The return of executive carve-outs. The economy is improving, and with that comes higher company profits and renewed interest in executive benefits. As states raise corporate tax rates to plug budget shortfalls, an executive LTCI plan makes great sense. Premiums are deductible to the C-corporation, not considered income to the employee, and benefits are received tax free. Look for a big upswing in these plans. LTC Insurance has had plenty of challenges, but it’s important to realize it is still a young product.

However, for policyholders the benefits are dramatic. According to the American Association of LTC Insurance, carriers are paying claims at a rate of over $4 billion per year. This number will increase, and word of mouth about the benefits of LTCI will increase interest as well. Of course, timing is everything.

Experience shows that adding LTCI to a cafeteria list of other employee benefits at open enrollment time will not work. LTCI needs to be a standalone benefit offered off the open enrollment cycle. With proper planning and assistance, it can be an important offering for benefit advisors.