Long-term care protection at work is back (and better than ever)

Let’s get one thing clear from the start.  Notice in the title that I used the phrase “long-term care protection,” and not the phrase “long-term care insurance” (LTCI).  LTCI refers specifically to stand-alone LTC products that are filed as such.  The use of the phrase “long-term care insurance” is regulatorily restricted when referring to or marketing traditional LTCI.  For example, you cannot use “long-term care insurance” when referring to linked benefits products that have LTC benefits, or when referring to LTC acceleration riders usually connected to life insurance policies, if those LTC benefits have been filed under IRC 101(g).  That restriction applies to most of the LTC linked benefit products being offered today.

A new long-term care industry

Back when I started selling LTCI in 1991, the only LTC solution available was traditional LTCI, with or without home care benefits.  As the LTC industry steadily grew throughout the 1990s, it became defined by the performance of LTCI.  The sales of traditional LTCI products peaked in 2002 and has been declining since.  However, many still consider LTCI to be the driver of the industry.  It isn’t.  The LTC industry, until recently, has been a product driven industry.

With the advent and steady growth of linked benefit product sales, the LTC industry has changed.  It is no longer product driven.  The LTC industry is now officially a solution driven industry.  Traditional LTCI is simply one of the solutions.  Those of us who specialize in providing LTC solutions are product agnostic.  Even though sales of traditional LTCI are waning, the LTC industry is growing through rapidly increasing LTC linked-benefit product sales.

So, when referring to offering a long-term care solution, it is time to sunset the phrase “long-term care insurance.”  Instead, use the phrase “long-term care protection.”  That phrase includes all forms of long-term care funding available, including LTCI, and will keep you compliant with the regulators.

A convergence of trends

There are three trends that have converged to provide a tremendous opportunity for sales of long-term care protection to employees through their workplace.  The first trend is the rising prices of traditional LTCI; the second trend is the continued development of LTC linked benefit products; and the third trend is the continued development of technology enabling virtual or electronic means of communicating with and enrolling customers.

Rising LTCI prices

Lower lapse assumptions, lower interest rate assumptions, and changes in LTC claims utilization experience have forced carriers offering traditional LTCI to increase pricing.  Also, most LTCI carriers have implemented gender-based pricing, resulting in significantly higher prices for females.

The consequence of higher LTCI prices is that the delta, the difference in pricing, between LTCI and a LTC linked-benefit plan written on a life insurance chassis has closed significantly.  In fact, a 40-year old can now purchase LTC benefits in a linked benefit plan, comparable to a stand-alone LTCI plan, at a lower premium than the stand-alone LTCI plan.  And the rates for a 50-year old are almost the same for each program.

LTC linked benefit plans offer a death benefit if no LTC services are required, which is a compelling value proposition improvement for the client.  Also, many LTC linked benefit plans provide guaranteed pricing either through the use of a whole life insurance or guaranteed universal life insurance product chassis.

Lower or similar pricing, a death benefit if no LTC services are required, and guaranteed rates are significant improvements within the LTC linked benefit product design.  These product design enhancements provide greater appeal to the client seeking quality long-term care protection.

Continued product evolution

The LTC linked benefit revolution started with products filed on an individual product chassis, many with state variations and some not being available in all states.  However, now they have evolved into the true group product chassis arena.

Group products are filed and regulated differently from individual products.  Many of the positive aspects of group coverage have been incorporated into the new platform of group-based LTC linked benefit products.  We now have LTC linked benefit products, on a true group chassis, that provide:  uniform coverage in virtually all states, unisex pricing, and guaranteed issue underwriting for both employees and their spouses/domestic partners.  Also, whereas most individual life products enable acceleration of the death benefit for LTC services, some of the new group LTC linked benefit products also offer extension of the LTC benefits beyond the original death benefit.

These new LTC linked benefit group programs can be offered on an employer-paid basis, a 100 percent voluntary basis, or a combination of the two, for example, a carve-out paid benefit for key executives with a voluntary offering to remaining employees.  And some programs require only groups as small as five full-time employees that are eligible for coverage.

Technology developments

Most of us today are used to shopping and buying products online, and that includes insurance products.  The days of sitting down face-to-face with an agent to buy a policy are going the way of the dinosaur.

The use of screen sharing, conference lines, webinars, and electronic applications are part of the normal course of business for many insurance professionals today.  This process has also reached the offering of group benefits, including LTC linked benefit programs.

There are enrollment firms that have built platforms to offer LTC protection, with 100 percent of the client interaction taking place online.  The employee can view a virtual meeting, calculate rates for various benefit designs, electronically chat to get a quick question answered, schedule a telephone appointment with a benefit advisor if necessary, and enroll on-line with an electronic signature.  In many cases, the enrollment process takes less than five minutes. This is a dramatic improvement over the traditional LTCI individual application process.

Most employers have also philosophically evolved to the position that they don’t want their employees taking the time to sit down with an insurance agent face-to-face during company time.  These new education and enrollment platforms offer a customer experience that is consistent with current consumer buying behavior and employer’s desires to offer benefits in an employee friendly way.

Summary

The need to provide funding for eventual long-term care services still exists.  And recent surveys confirm that employers still want to offer, in some cases purchase, quality long-term care coverage for their employees.  However, many advisors and benefit firms have avoided offering long-term care insurance to their clients because of the many maladies associated with traditional LTCI.  Now that LTC linked benefit products have migrated into true group platforms, with supporting education and enrollment technology, you can be assured of offering your clients a quality LTC protection solution in a client friendly way.

You can now offer LTC protection to employees that has: guaranteed issue underwriting, guaranteed unisex rates, identical coverage across state lines, a death benefit if no LTC services are needed, fully portable coverage with no premium or benefit changes, and the ability to enroll completely on-line.  The value propositions for all parties is now very compelling to offer LTC protection to employees at work.

Yes, long-term care protection as an employee benefit is back and better than ever.

Bill Jones is president and CEO of the National Alliance of Insurance Agencies, Inc.