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A growing number of companies are offering long-term-care (LTC) insurance to their workers, a relatively inexpensive benefit that baby-boomer employees are increasingly clamoring for.
About 3500 U.S. businesses now offer LTC coverage to their employees, up from 2200 in 1998, according to the Health Insurance Association of America (HIAA). "It's a benefit that's easy to offer. There's no huge cost attached, (just) the setup and administrative costs," says Susan Coronel, Long Term Care Director at HIAA. Interest is strong enough that the number of employers offering this benefit has continued to rise, despite the weak economy, albeit at a slower rate than in the late 1990s. No doubt, the growth will pick up again when the economy improves and the labor market tightens.
Employees typically pick up the full cost of LTC insurance, but at group rates, it's usually cheaper than premiums found on the open market. The policies generally offer about $100 a day to help cover the cost of home-based programs, assisted living or nursing home care for up to four years. The average per-day amount of long-term care in the U.S. today is $168.
Employers are optimistic that offering long-term-care insurance to workers and their families will improve productivity. The idea is to reduce the amount of time employees spend away from the office taking care of an aging or sick parent or spouse. A survey conducted last year by the U.S. Chamber of Commerce found that nearly half of its members' employees took time off work to tend to an elderly relative. That number is sure to grow as the baby-boom generation ages and demand for LTC coverage increases.
Two months ago, the federal government introduced a long-term-care option for its employees, a move that is likely to spur even more private sector interest. The federal program is open to some 20 million people, including not only civilian and military workers and retirees, but also their spouses, surviving spouses, adult children (at least 18 years old), parents, in-laws and stepparents. The coverage is provided through a joint endeavor by John Hancock and MetLife called Long Term Care Partners, and annual premiums will run 10%-15% below the open market. Since July 1, the program has received some 630,000 requests for applications, an indication of the strong demand for such coverage.
In fact, the federal pool is so large that it could influence pricing in the broader LTC market, putting pressure on group rates offered in the private sector. That will further motivate companies to offer a long-term-care benefit.
"The federal program will have a ripple effect among private employers," predicts Coronel. "Many follow the government's lead in the area of employee benefits, and they'll also want to make sure they stay competitive in attracting and retaining employees."
Currently, average annual premiums (with inflation protection) for LTC policies are $649 for a 40-year-old, $881 for a 50-year-old and $1802 for someone who is 65 years old. A year's stay in a nursing home costs $61,320 on average and is expected to skyrocket over the next 10 to 20 years.
Tax incentives to help workers pay for long-term care have been kicking around in Congress for years. The House recently passed a bill (H.R. 4946) that would allow taxpayers to deduct 50% of LTC premiums. But that's a far cry from an earlier proposal from Rep. Nancy Johnson (R-CT) and Sen. Charles Grassley (R-IA), which would phase in full deductibility of premiums within four years and provide an immediate $3000 tax credit to individuals with long-term-care expenses. Because of the rising federal budget deficit, House leaders were unwilling to go that far. The 10-year cost of the original Johnson-Grassley bill is estimated at $33.5 billion, while the slimmed-down version's price tag is only $5.3 billion.
The Senate has not acted on long-term-care tax breaks, and there's still a chance a more generous incentive will get tacked on to some other fast-moving piece of legislation this fall. But time is running short in this Congress, and budget constraints make enactment this year an uphill climb.
Researcher-Reporter: Gerry Moore
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