Group LTC plan design is a balance of simplicity, adequacy, and affordability

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By Jon Shreve | 01 August 2005

What are the essential factors for a successful long-term care plan design?

Designing a group long-term care plan should always reflect the employer's objectives and, in the end, these objectives usually reflect a balance of these factors:

  • Simplicity: The plan needs to be easy to understand so that an employee is willing to make a choice. The more choices that an employee has, the less likely it is that s/he makes a choice at all.
  • Adequacy: The plan is generally designed to fill a hole in the safety net, which means that the design must protect against most major losses. This includes having adequate protection against inflation, high enough daily maximums to pay for services, and long enough coverage to protect against most long-term care stays.
  • Affordability: The plan needs to be affordable, for both the employee and the employer. The perceived value of the benefit to the employee needs to be higher than the costs in order to get high participation.

How does benefit design affect affordability?

When designing a group long-term care plan, there are a variety of plan design options you can choose to find the best balance between simplicity, adequacy, and affordability for both you and your employees. For example:

  1. $100/day, maximum of 3 years of coverage, no inflation protection
  2. $100/day, maximum of 3 years of coverage, with compound inflation protection
  3. $150/day, lifetime maximum, with compound inflation protection

These designs may be combined with a mixture of employer contributions, waiting periods, and vesting rules in order to keep the costs affordable to both employee and employer.

How can I design the best plan for my members?

It’s essential to understand and improve your members’ attitudes towards long-term care so they will properly comprehend the value of these critical benefits. Equally, it’s important to understand what coverage options offer most of what your members will need. Finally, it’s crucial to make the plan simple enough that your members will be excited to join.

Why is true group long-term care so important?

  • Many Americans will have no way to pay for long-term care services when they are needed.
  • Insurance for long-term care will not become widespread if only available on an individual basis, which means that the change will need to come first from employers.
  • Group coverage needs to include employer contributions to make it affordable to employees and vesting to make it affordable to employers.