Webinar Recap: The State of Life with Long Term Care

Long-term care (LTC) is increasingly attracting a big focus in today’s environment, not only with employee benefits but also in our world as a whole. Providing employees with Long-term care programs is a step in that direction given that can help individuals cover services and care, providing the support they need to meet the requirements of their activities of daily living.

Corestream recently hosted a webinar as part of its financial wellness series. The webinar is actually the second episode in the series and focused on the latest trends in long-term care, including how new legislation affects your employees financially. The webinar guest was Alicia Humphreys, regional vice president at Chubb, an insurance vendor and Corestream partner. You can see the video here to learn more about the topic.

Long-Term Care Explained

Long-term care is personal care that individuals may need due to a prolonged illness or due to aging. Long-term care can be in the form of nursing home care, assisted living care, daycare, and other similar kinds of care. Americans are getting older, and people are living longer. Traditionally, long-term care is usually meant for an aging population. Government estimates indicate that 70% of people over the age of 65 will require long-term care*. This means an increasing demand for long-term care because of its relevance in today’s market.

When it comes to the state of long-term care presently, it has been observed that older individuals are thinking about retirement and what they’ll need financially to achieve good long-term care. Younger individuals who are employed are often taking care of their parents and family members who may need long-term care.

So long-term care is truly a very hot topic in today’s world, not just in terms of the financial benefit that will help assist the individual or employee with the burden of care but also because, when you look out there, you see a lot of people taking care of parents and loved ones in an unpaid capacity.

Challenges of Long-Term Care for Both the Old and the Young

Long-term care is expensive. Typically, costs range from $1,690 for community and assisted living adult day care to $90,034 in a nursing home private room**. These expenses are not constant but will actually increase as we get older. Designing financial wellness programs that can improve savings outcomes, empower spending decisions, and offer financial guidance is critical given the ongoing inflationary challenges.

The major drivers of the increasing cost of long-term care include rising demand, which is outpacing supply; a shortage of skilled workers; the higher wages of long-term care workers; and new regulatory requirements. Expectedly, the increasing cost of long-term care has created significant impacts, such as:

• Insufficient access to LTC services
• High annual costs which exceed annual household income, savings, and social security combined
• A workforce crisis: more than one in six Americans is an elder caregiver
• 70% of caregivers for elders experience work-related challenges**

What US States Are Doing to Help Provide Access to Long-Term Care

Remember that Medicare does not cover the cost of long-term care services. So the trend in states all over the country is that Medicare budgets are straining Medicaid. So states are looking at what they can do to change this situation in order to have the capacity to help individuals cope with their long-term care needs through publicly funded long-term care programs.  Six states that have had activity in 2023 on this issue ( (Washington, Massachusetts, California, New York, Pennsylvania, and Minnesota) 

Here is a breakdown of the measures these states have taken:

Washington

• WA Cares program funded by a .58% per $100 payroll tax.
• Payroll tax scheduled began July 1, 2023 with the first benefits available in July 2026.
• Several bills were introduced to repeal or modify but no action was taken to pass them.
• Actuarial study submitted October 2022 indicating that the fund is expected to be solvent through 75 years 
• https://wacaresfund.wa.gov/wa-cares-benefits/

Massachusetts

• Legislation was introduced in January 2023 to establish a special commission to study and make recommendations to establish a state-wide LTC insurance program; to-date, this bill has not advanced.
• The bill was referred to the Committee on Elder Affairs which held a hearing in May 2023, but this bill has not advanced.
• https://malegislature.gov/Bills/193/HD2610

California

• In August 2023, the State released an agent and broker alert with guidelines regarding misleading marketing and selling practices.
• Task Force provided recommendations and report in December 2022 and the task force is meeting regularly throughout 2023 to modify based on Oliver Wyman’s feasibility study.
• Current recommendation includes multiple plan designs and contribution rates, a payroll tax up to 2% with no income cap, possibility of both employer and employee contributions, and a 12 month lookback for private coverage to apply for tax exemption.
• Actuarial analysis to be completed and submitted by January 2024. http://www.insurance.ca.gov/0500-about-us/03-appointments/ltcitf.cfm 

New York

• Legislation was introduced in May 2022 but did not move forward.
• It was expected that legislation would be modified and reintroduced in the 2023 legislative session, but there was no legislation for a publicly funded LTC program brought forward.
• Industry groups continue to work to help inform state legislators so they can advance a comprehensive bill that considers private LTC insurance options as part of the solution.
• https://www.nysenate.gov/legislation/bills/2021/S9082

Pennsylvania

• Legislation was re-introduced in April 2023 (same bill introduced in August 2022).
• Current draft has a January 1, 2024 premium collection start date but did not advance out of committee.
• https://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?sYear=2021&sInd=0&body=H&type=B&bn=2779

Minnesota

• FTI Consulting was awarded a contract to study options that increase access and funding of LTC services in the State.
• Options focus on a Medicare companion product as a solution versus taxing residents to underwrite a public long-term care benefit.
• As in previous sessions, Legislation was introduced again in March 2023 to establish a fund for LTC services but did not advance.
• https://www.revisor.mn.gov/bills/text.php?number=HF1664&version=0&session=ls92&session_year=2021&session_number=0

The Value of Payroll Tax to Employees

There’s value in the payroll tax arrangement. The Washington payroll tax model funded a pool of dollars for the individuals involved, with the maximum amount for long-term care being 36 thousand dollars.

The model is an interesting one because it allows an employee who already has private coverage to be exempt from the payroll tax option. In that case, the state is sure that such individuals do not need to key into the state-mandated program. It is reasonable to assume that other states may adopt the Washington example

Any Deadlines to Either Take Up Private Coverage or Get Insured Through an Employer?

Yes, that’s how Washington handled it. Employees had a couple of months within which they could file for an exemption if they had an alternative program. It’s not certain whether other states will follow Washington’s approach.

However, companies are being proactive about it, not just because of legislation but also because of the growing conversation about the need for long-term insurance or the need for access to long-term coverage in case an employee needs to purchase it. So these organizations are thinking of offering something to their employees in case legislation does not come.

The Different Long-Term Care Options for Employees

It’s definitely a challenging market. There is group long-term care insurance which is a form of long-term care coverage that aims to provide just the insurance needed for long-term care in the form of monetary benefits. The challenge with group long-term care is that many carriers have exited that market and this has made things very challenging. For instance, rate increases are being introduced by the few carriers still offering group long-term care.

But the trend in the industry at the moment is a move towards a hybrid product that combines life insurance with long-term care. The hybrid option is basically a lifetime insurance product that accelerates death benefits upfront even if the employee or individual needs the benefit for long-term care. Hybrid is the present direction of the market. People are moving away from group long-term care because of its pricing challenges, unlike the hybrid life with long-term care product, whose pricing is stable.

How Large Enterprise Employers Implement a Life Long Term Care Solution

Traditionally, you first take a look at the group (employees) to get a sense of what it looks like. You then provide a proposal for that group and subsequently provide life insurance with a long-term care acceleration feature. The next stage is to build everything on the platform. For instance, integrating enrollment and other voluntary perks into the platform.

However, this product needs a lot of education. This is a complicated market. Having such a product on your platform without education is not the best for both employers and employees. So employers really need to do a good job of educating employees on what long-term care is, the need for it, and what the hybrid life long-term care product is all about. 

This can be through webinars, group meetings, or whatever else is needed to educate employees about a product. Then employees can make their own election and purchase decisions.

What Does It Look Like Partnering with a Benefits and Technology Platform Like Corestream in Terms of Ease of Enrollment, Administration, Communication, and Education?

A product like permanent life with, long-term care is challenging for technology platforms to build. By partnering with a company such as Corestream, you’ll leverage your ability to build and administer permanently for long-term care. Thus, a lot of employees can visit your platform and benefit from some services.

Corestream also emphasizes promoting education. It is a voluntary benefits platform that provides clients with benefits schemes and a variety of other products, including life insurance, without them having to worry about employee administration, communication, or education because Corestream also specializes in them. It is this versatility in providing various niche benefits that gives Corestream an edge over big HCM and core benefits companies.

What Happens if You Eventually Do Not Need the Long-Term Care Component of the Hybrid Product?

The benefit of a life with long-term care product is that if you don’t need the long-term care component, it is a life insurance vehicle. So if you don’t use the long-term care, then it will have some benefits for your beneficiary, who is free to utilize it on your behalf.

Should an Individual Overlook His Employer and Get This Program on His Own Through an Insurance Agent?

There are some benefits to having an employer program. First is the ability to spread the risks around the group, which can make you enjoy lower rates. But perhaps the biggest benefit is the ability to guarantee an issue, which means no medical inquiries will be needed before getting coverage. This is unlike getting coverage on your own through an agent, which will involve medical scrutiny that may drive up your rates.

*Sources: US Census Bureau; World Bank; Institute for Health Metrics and Evaluation

**Source: Genworth Cost of Care Study 2021; Council on Aging

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