My marketers and I are often confronted with the following scenario; an employer has either instituted or been presented with a true group long-term care insurance program; maybe even by you! The cost of the program is low or at least perceived that way. The broker that brings us the case wants to compete or at least know why he shouldn’t just go the true group route. When we dig through the weeds of the true group program we find that what has been presented or sold is the following benefit package; $3,000 per month nursing home coverage, 70% for residential care/assisted living, 50% home care, no inflation protection, and a two or three year benefit period. The plan is inexpensive because for all intents and purposes the plan is air!
Here’s why. Nearly 85% of all long-term care services are provided at home. Another 8% or so are provided in an assisted living setting. This leaves only 7% utilization in a nursing home. The employer sees $3,000 per month benefit but in reality they’ve only purchased $2,100 per month ($70 per day) for assisted living and $1,500 per month ($50 per day) for vast majority of care (85%) that the insured will want and need. Now let’s say that the typical daily cost of care is currently $200 per day. In reality, this insured will only be covering 25% of the cost of care at home.
However, as we know, it isn’t the cost of care today that’s at issue it is the cost of care when the insured actually needs it. Since long-term care costs are doubling at a 5% pace, if this insured needs care in 15 years, the group policy sold will pay for less than 10% of the actual cost of home care. The picture gets worse as time goes on. Considering that the average age of issue for LTCi is age 57 this insured probably won’t need care for 25 to 30 years. What will this group long-term care insurance program be worth at that time? BUBKAHS!
Yes, I know that key employees can buy-up on their daily benefit, purchase inflation protection and a longer benefit period. However, many don’t so all they really have is an illusion of long-term care insurance coverage. Part of this has to do with the true group enrollment process; it is too easy since it requires no interaction between the agent and the consumer. In my humble opinion the employer is wasting their money on an illusory benefit and the agent is not fulfilling their fiduciary obligation.
Now don’t get me wrong, I’m all in favor of employer paid core benefit programs and I have written about how you can provide significant benefits to a large number of employees for as little as $30 per month per employee. We’ve done that at our agency for our full-time employees. My rule of thumb, however, is as follows:
- Always sell 100% home care.
- Always sell 100% RCFE (assisted living).
- Always sell some form of inflation protection even if it is a guaranteed purchase option.
- A two year benefit is OK; three years is better and not that much more costly.
- Work the buy-ups hard, particularly for your owners, key employees and their spouses
And most importantly use individual long-term care insurance products in a MULTI-LIFE program to overcome the vast majority of any underwriting issues that you may face.
I’ve written a number of different articles and Blogs as well as conducted webinars and seminars on why MULTI-LIFE long-term care insurance is generally better than true group. I don’t wish to be redundant on this topic. If you don’t want to go back and read why than just believe me, it is. The simple fact remains that we can get significant underwriting concessions and (for want of a better term) JET ISSUE on employer groups with as few as three covered employees. You also get real first year commissions and renewals are VESTED.
MULTI-LIFE long-term care insurance now accounts for 50% of our sales (2008) and I suspect that percentage will increase. Due to our success in this arena we have been able to provide long-term care insurance to business owners that otherwise would not have qualified for LTCi under any circumstances; ALL AT STANDARD RATES WITH 5% TO 10% EMPLOYER SPONSORED DISCOUNTS.
MULTI-LIFE is for any insurance producer who has business owners as clients. Most significantly, if you are a group benefits producer who is watching your income decrease as you work harder and harder to maintain your revenue base, MULTI-LIFE long-term care insurance is the key to sustained and increased income. Oh and by the way, did I mention that your renewals are VESTED?
And if you are a long-term care insurance specialist you are missing the boat if you haven’t learned that individual sales are waning and multi-life sales are NOW. Have you thought about partnering with a benefits or property/casualty agent who is willing to do joint work with their business owner clients. Ask us how!
We have three front-line carriers with amazing MULTI-LIFE long-term care insurance programs; Transamerica (15+ employees), Prudential (7+ employees) and MetLife (3+ employees). We anticipate more carriers will be joining the hunt and you ought to be on board for the safari.
Call your BJFIM/Paradigm marketing representative today or email me atbarry@paradigmins.com.
Barry, after I posted my comment above, I read in your 10/8/2007 blog that Dear Barry:
I just read in your Oct. 2007 blog that “Even within a group of only five employees we can create classes for coverage allowing us to maximize benefits for the owners and their spouses while purchasing starter plans for other employees. The flexibility is amazing.”
Will you please elaborate on what kinds of classes of employees that I can create?
Thanks.
Rob
Barry, the Prez of a med. group of mine with 45+ employees wants to run his own LTCI through the employer. His idea is to offer each employee LTCI with the employer paying 50% of the premium. He believes that no more than 3 people will apply, thus making it possible for him to offer a group benefit and get his own coverage.
In the meantime, it’s going to be cumbersome to get his census updated and get LTCI rates for 45 employees. And there’s always the risk that more employees will opt for the coverage than he speculated would do so. Then, the whole deal could go up in smoke because it would be too expensive for the employer. Can I carve out just the managers and executives for this offer or would it be discriminatory? Is there a better way for me to go about this? Please advise. Thanks. Rob
Robert, in response to your questions:
1. You can create classes of employees based on job duties, length of service, hourly vs. salaried,full-time, part-time. Therefore, president, vice-president, supervisors, managers all work as job classes.
2. You don’t need an entire census. Just get your BJFIM/Paradigm marketers the cenesus of employees that you wish to offer the plan to based on job class and that can be quoted. We don’t need the entire group census for a quote.
Sounds like a great group and thanks for your post.