Overcoming LTC barriers

It is no secret that the long-term care insurance (LTCI) industry is having trouble offering products with a convincing and an attractive value proposition. In a recently released report, Conning Research & Consulting, Inc. reminds us that from an economics point of view, in order for a consumer to purchase a product, the product must 1) satisfy a perceived need or a want for which the consumer is personally responsible and 2) have an acceptable price.¹ It appears that there are large gaps between LTCI consumers and insurers in both of these areas.

We all know the problems the long-term care insurance is facing. Nonetheless, the U.S. population will have an increasing need for long-term care services in the coming years, and most people are not taking action to purchase insurance to fund these future long-term care expenses. Offerings of long-term care coverage must address the following barriers:

• Ignorance: A large portion of the population is ignorant of the need for LTC insurance as a protection against high future long-term care costs.
• Denial: Those who do realize the magnitude of long-term care costs, presume that these costs will be paid by a public entity or deny the possibility of needing long-term care themselves.
• Cost: Still others see the cost of long-term care insurance as too high compared to their perceived value.

One effective way to deal with employees' ignorance or denial of their potential future need for long-term care services is through an employer-sponsored program. By sponsoring a long-term care program, employers communicate to their employees the importance of LTCI and the potential need for long-term care services. More employees are likely to participate in an employer-sponsored program; therefore, the employer is able to provide a larger, more efficient "safety net" for their employees.

If an employer also decides to financially contribute to the cost of the plan, even more employees will participate in the program because the deterrent of a high cost has been mitigated. Employer financial sponsorship reduces the cost burden for employees, but the burden is then shifted to employers. To combat the high costs associated with employer financial sponsorship of LTC, employers can implement a true group long-term care program in which employers and employees jointly contribute to self-fund future long-term care costs. By implementing features such as waiting and vesting periods to a properly tailored LTC plan design, the cost for both employers and employees is reduced to a level similar to the cost of a dental program. At the same time, employers provide coverage to their most valued, long-term employees.

1"Long-Term Care Insurance: Searching for the Value Proposition," Conning Research & Consulting, Inc. 2008.