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Long term care insurance: Finding a marketing strategy

Need for the product spans various age groups

By Len Strazewski

First, audit your clients’ group health coverage and locate some savings opportunities. Then, get them to apply the windfall to long term care insurance (LTC).

They’ll be happy you did—and you’ll earn a sweet spot on their list of trusted advisors.

That’s the way Becky Byrne, account executive at Western States Insurance in Missoula, Montana, opens the door to a benefit she says is indispensable for 21st century families.

With more than 300 employees and offices in 15 cities, Western States is one of the largest agencies in the West, with specialties in commercial insurance, construction bonds and group employee benefits.

Byrne, who has more than 15 years’ experience as an employee benefits producer, says most employers are focused almost exclusively on their group health insurance plans—and the costs that increase practically every year. As a result, promoting group LTC can be difficult without some financial analysis of a client’s employee benefits budget, Byrne says.

Group health renewals are an annual challenge, she admits, but as the agency sharpens its pencils for new and continuing clients, Byrne says the firm has had pretty good luck finding ways to trim costs and restructure coverage to free up some benefit dollars.

“Once you have demonstrated your ability to save some money, clients can be more open to the idea of spending some of those savings on additional benefits. But LTC can be a tough product to market, depending upon the leadership of your customer,” she says.

The next step in Byrne’s LTC marketing plan involves meeting top executives or business owners to make the case for using the new-found resources on a new benefit: LTC. But one sales pitch does not fit all.

As seniors live longer by managing chronic diseases, LTC is becoming a more important insurance product and a more popular employee benefit, Byrne observes; but selling the coverage requires an agent to educate clients on the value of the coverage for each generation.

“Demographics matter,” she says. Because LTC is often perceived as an employee benefit for the aging, young executives in their 40s don’t see the coverage as a benefit for themselves, although they may understand its value for older employees or dependents.

“Executives in their 50s and 60s may see the value for themselves or their families but may perceive the cost of the benefit as beyond the resources of their firm,” Byrne says.

LTC insurance indemnifies policyholders for the expense of care necessary to assist them with activities of daily living (ADL), which may include nursing home or assisted-living institutions or home care. The coverage is usually structured to pay up to a monthly maximum over an established coverage period, usually three to five years.

In some states, the LTC funding can also be tied to payouts from an annuity or the cash value of a universal life insurance policy.

Group LTC is generally offered to employees who receive the coverage themselves, and they also may be able to purchase coverage for their dependents and non-dependent parents.

Group LTC programs usually offer employees a maximum base benefit of $200 per month for a three year-period and offer opportunities for employees to increase coverage or add inflation protection on a voluntary basis, Byrne says. Leading LTC insurers, including UnumProvident and MetLife, offer group plans with limited or no medical underwriting, which simplifies administration for employers.

LTC insurance is also available on a voluntary, employee-pay-all basis, although Byrne advises agents to focus on group programs rather than individual voluntary payroll marketing.

“When an employer makes a commitment to offer group coverage, it really sends a message to employees about the value and importance of this benefit and strongly supports the voluntary purchase of expanded coverage,” she says.

LTC isn’t cheap

Permanent rates vary by age as well as some medical underwriting factors, so the voluntary coverage is less expensive if purchased at a younger age. However, LTC insurance isn’t cheap.

According to the American Association for Long-Term Care Insurance, a trade group in Westlake Village, California, the average annual cost of coverage for a 55-year-old purchaser ranges from $775 to $1,500, depending on coverage limits and underwriting factors.

Emotion can play a powerful role in the LTC insurance purchasing decision, adds Wilma G. Anderson, president of Senior Care Associates in Littleton, Colorado. Anderson, who calls herself “The LTC Coach,” has been advising agents, brokers, employers and retirees about ways to provide long term care since 1988.

Producers have had the greatest success marketing LTC insurance to employers with 200 or more employees, she notes, and smaller firms are a relatively untapped market for agents and brokers who already have a commercial property/casualty insurance relationship.

Like Byrne, Anderson recommends that agents and brokers seek an informational meeting with senior executives of their commercial clients, preferably including the chief executive officer and human resources director.

Don’t sell, she advises; just ask if any of the executives has had experience with a long term care situation, assisting a parent, grandparent or dependent with choosing or arranging long term care.

“Many executives will have already faced the problem of dealing with a family member who has been ill or disabled. Ask them if they already care for an ill or disabled family member. Ask them how long the person has been ill,” she says.

Their naturally emotional responses won’t necessarily sell the product but will open the door to new ideas, she says. This gives the producer an opportunity to present some LTC options.

Anderson agrees that agents should recommend a basic group LTC insurance benefit with an employee option to buy up to higher daily benefits, longer coverage periods and inflation protection.

For smaller employers who are reluctant to spend more on employee benefits, agents might want to recommend an employer-paid executive LTC insurance benefit and a voluntary employee-paid benefit for others.

Some executives, however, will continue to be resistant, Anderson says, and will tell their agents that they do not foresee the need in their lives. “There is still lots of denial out there,” she says. “Many people still believe that the events that create the need for LTC will never happen to them—or won’t happen for many, many years.”

To make the sale, agents should be prepared to respond to the misconceptions, adds John Noble, director of long term care products at UnumProvident in Portland, Maine.

UnumProvident holds about 80% of the group long term care insurance policies in the United States or about 550,000 lives, excluding coverage for federal government employees and polices written exclusively in California.

Not just for the elderly

“When you say ‘long term care,’ most people think of a nursing home for end-of-life care,” Noble says. However, recent analysis of the insurer’s LTC claims indicates that more than half of the claims—about 58%—are made by individuals under 65 years old.

“Our claims analysis shows that both group and individual long term care are frequently used at much younger ages,” he notes. The average age of an under-65-year-old policyholder is only 53, and more than 15% of claimants from this group are younger than 45.

The claims analysis, the first of what will become an annual review, also indicates that the top five causes of claims for individuals under 65 are cancer (about 30%), stroke (more than 10%), neurological diseases, dementia and multiple sclerosis.

More than two-thirds of all the claimants in this age group received care at home, rather than a nursing home or assisted living facility, while only 17% received nursing home care.

A typical claim for an under-65 policyholder lasts a year or more and can be $70,000 or more—the average cost of a year in a nursing home, according to the National Association of Insurance Commissioners.

“The conditions impacting these claimants can require months, if not years, of treatment and care,” Noble says. “And many of these conditions worsen as we age. Add in the fact that more young people are suffering from conditions like obesity and diabetes, and this leads us to expect incidence rates to continue to rise for this age group.”

This new understanding of LTC claims trends confirms a powerful sales opportunity for agents and brokers seeking to build their book of employee benefits business, he says. Younger employees have a need for LTC coverage, but few producers are educating their small-group clients about the need.

“Most traditional agents and brokers are not promoting LTC,” Noble says. “They are focusing on their health care renewals and virtually ignoring LTC as natural companion coverage to regular health plans.”

LTC coverage is evolving, Noble adds. In Vermont, for example, state law allows LTC coverage to pay caregivers, including family members who provide recognized LTC services.

If an agent succeeds in matching a client with a satisfactory LTC employee benefit program, the sale will pay dividends that go beyond commissions, notes Anderson.

“Your clients will see you as much more than their property/casualty insurance agent. They will see you as a provider of serious options for their companies and their employees,” she says. *

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