LTC coverage: the critical missing element in insurance protection

Long-term care is not yet a commonly offered employee benefit. While the New England Journal of Medicine estimates that 43% of people turning 65 will one day enter a nursing home, only 3% of Americans currently have long-term care insurance.

Do most people really need long-term care insurance?

In the U.S., 70% of people have private medical insurance, 47% have life insurance, 40% have disability insurance, but only 3% have long-term care insurance. About 45% of employees have pension or retirement plans. Each of these represents important parts of the safety net. Medical coverage protects employees against catastrophic medical bills, life insurance protects against the loss of income due to death, and disability insurance protects against financial hardship in the event of loss of income. Long-term care is the remaining potential financial catastrophe against which most employees have no protection. Ironically, the probability that an employee will one day face a nursing home stay is greater than the probability of disability or premature death while employed, yet, most employers still do not offer long-term care to their employees. As well, almost 60% of people have dental coverage, which is convenient for employees but offers no meaningful protection against financial disaster. Long-term care coverage can be designed to cost less than dental coverage, and offer a much more valuable benefit.

Why isn’t long-term care insurance as common as other insurance products?

Most Americans prefer not to think about needing long-term care. The concept of physical dependence is contrary to our self-sufficient culture and ideals. Most Americans are shockingly under-informed or have misconceptions about the probability of needing long-term care. Individuals convince themselves that “I won’t need long-term care,” “My kids will take care of me,” or that “I would rather shoot myself than end up in a nursing home.” These feelings prevent individuals and families from planning for future long-term care needs. In addition to avoiding the unpleasant subject of nursing homes, people also make bad assumptions about its financing. Many Americans share the misconception that Medicare or private health insurance covers the cost of long-term care.

Many employers only offer long-term care coverage on a voluntary basis. Such an approach causes very low participation (as it would with other benefits). Moving long-term care to a contributory coverage would increase its prevalence, and designed correctly, true group long-term care could be as inexpensive as group dental.

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.