LONG-TERM CARE YESTERDAY,
TODAY AND TOMORROW
The time is right to explore alternatives
to current offerings
By Frank Morang
For as long as many of us have been in this business, long-term care has been part of the benefits conversation with customers. But today, the costs of long-term care, combined with the likelihood that people will need long-term care, have led many states to consider legislative action to address the issue.
To be fair, the conversation around long-term care and long-term care benefits has been building for years. But many of us in the business can feel it reaching a crescendo. The combination of demographic, legislative, and economic factors has placed long-term care front and center and is forcing new conversations among employers and insurance brokers.
In this piece, we’ll examine the underlying causes of what many call a care crisis, share a potential solution, and preview what the future may hold for long-term care.
The current state of long-term care and how we got here
As you may know, long-term care insurance provides support when some-one needs help managing their day-to-day activities. Benefits can start for any number of reasons including sickness, injury, aging, or cognitive impairment.
In the past, if you mapped our population by age on a chart, it would look like a lopsided pyramid. There were more young people at the bottom and fewer older people at the top. Today, it’s the opposite, and the older population is larger.
Several factors contributed to this shift:
Baby boomers, the large generation born between 1946 and 1964, are entering their senior years.
Younger generations aren’t having as many children. On average, in 1965, families had 2.44 children. In 2020, that number was down to 1.93, according to Statista.
Advances in medicine have helped extend life expectancies. The average life expectancy in 1960 was just under 70 years. Today, life expectancy is 77 years, according to The World Bank.
History and challenges of stand-alone long-term care
In the past, many turned to a stand-alone long-term care policy to support this growing need for care. Unfortunately, many insurers miscalculated how many policy holders would make claims and how long they would need care (see “Assumption/Reality” table). As a result, insurers are scrambling to keep their products—sometimes winning large premium increases. A few of these faulty assumptions about the stand-alone long-term care market have caused many carriers to pull out of the market altogether.
If employers are waiting for their states to implement legislation on long-term care, they’re leaving
Why and how a hybrid solution may be the answer
Stand-alone long-term care coverage is usually positioned as a “use it or lose it” proposition, which can incentivize lower voluntary lapse rates and higher utilization. In contrast, a hybrid or combination product is not a use it or lose it solution. Rather, policyholders can access the benefits in a number of ways, and somebody is going to be paid something if they keep their policy in force.
A hybrid product combines life insurance and long-term care benefits. It allows people to purchase life insurance coverage that includes the ability to advance part or all of the death benefit for care needs. This can be a practical solution and has several pros, including:
- Guaranteed use of benefits—either long-term care or a death benefit.
- Typically, the younger you purchase coverage, the lower your premiums.
- May include benefits for family caregiving as well as professional care.
In addition, the design of hybrid policies is quite different than what led to the challenges many large long-term care insurers face. For example:
- Rates on policies such as universal life or whole life generally are stable and remain level throughout the life of a product, so they’re not subject to the rate increases of stand-alone products.
- People tend to buy hybrid products at a younger age for life insurance, giving more runway before use of the benefits.
- There are no inflation protections like many individual-qualified long-term products.
Why employers shouldn’t wait to act (and steps they should take)
Given the challenge we face, a growing number of states are looking at enacting legislation to address the issue of care—from both a need and cost perspective. The Washington Cares Act was first. And while it provides a blueprint, pending legislation in other states could be different, and employers and their employees will have to navigate that challenge.
Aside from legislation, employers have two reasons to pay attention to the shifting long-term care landscape:
- Care recipients face increased financial stress due to the cost of care, lingering health issues if they can’t afford proper care, and in-creased distractions due to managing bills and changes at home.
- Caregivers face an emotional commitment in addition to the time and energy that providing care requires. While employers may not see this directly, the people providing care are often in their workforce, which can lead to missing time at work, presenteeism, and even leaving the workforce.
There’s a lot of buzz around legislation, but the bottom line is these care challenges are real and they’re there whether legislation comes into play or not. If employers are waiting for their states to implement legislation on long-term care, they’re leaving employees vulnerable. Legislation points to the challenge we face, but it shouldn’t be treated as the deciding factor on whether action is needed today.
In addition, employee assistance programs can help employees navigate challenges—whether it’s care planning tools and strategies or access to tools that can help them manage complex aspects of care. Sometimes, these programs are paired with an enrollment in a long-term care or hybrid life and long-term care product to provide a comprehensive solution to the challenge of long-term care.
Where we go from here
Many people have experienced the impacts of care firsthand. Whether it’s seeing the financial cost of care for a family member or witnessing the strain put on a friend caring for a loved one, the care crisis is all around us—in our neighborhoods, workplaces, and homes.
While there’s no one-size-fits-all solution, the time is right to explore alternatives, including hybrid life insurance with long-term care benefits.
Frank Morang has been with Trustmark Voluntary Benefits for 10 years. He develops and manages voluntary group and worksite distribution in the Empire region, encompassing New York and Connecticut. Frank began his career at Unum as a disability underwriter, and also has experience in the medical and group benefits arena.