Grappling With LTC

Sunday, September 2, 2012
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When I consider the topics of long-term-care insurance and caring for loved ones -- especially elderly -- I always turn to my friends and colleagues in Hawaii. Hawaii is a harbinger for what's to come in both caregiving and LTC since it is the nation's leader in the number of intergenerational households.

Kevin Sypniewski, president and CEO of AGIS and the San Ramon, Calif.-based AGIS Network, was a long-time Hawaii resident and one of my go-to resources on caregiving. Since the last time Kevin and I talked, more insurance carriers have reduced their LTC offerings or moved out of the market completely.

This exodus -- coupled with double-digit premium increases -- has made human resource executives uncomfortable with offering LTC benefits.

One contributor to the exodus, he says, is that actuaries who priced the original LTC products didn't expect miniscule enrollments, nor lapse rates fewer than 1 percent or 2 percent for those who did enroll.

Jesse Slome, executive director for the Los Angeles-based American Association for Long-Term Care Insurance, adds that the industry "never anticipated low-interest rates, which made it difficult for insurance companies to make a profit and regulatory issues -- at a state level -- that didn't allow for rate increases amplified insurance-carrier exposure."

But the real challenge for LTC insurance is the plan design itself, he says. Insurance companies created it in the 1980s for senior citizens as a nursing-home supplement product, he says. LTC coverage is anything but that now.

So, how can HR leaders resolve this?

Bonnie Pang, a vice president and benefit consulting manager for Honolulu-based Atlas Insurance Agency Inc., says organizations should first partner with ancillary assistance vendors, which provide elder-care services. She also advises negotiating individual LTC coverage with a group discount as a voluntary-benefit offering for employees.

Another approach is to present asset-based long-term-care insurance, including life insurance with an LTC rider.

Carol Egan, second vice president of marketing and product for Lake Forest, Ill.-based Trustmark Insurance Co.'s Voluntary Benefit Solutions, says the carrier offers three voluntary universal-life products with embedded LTC riders.

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One of the more interesting plan designs presents the worker with an affordable product, which is a combination of term and universal life insurance.

The life-insurance benefit drops to one-third of the original face value when the retired employee reaches age 70, but the LTC rider remains at the original amount.

Employees can tap into the LTC payment -- if they've lost the ability to perform two or more activities of daily living -- at the rate of 4 percent a month, for up to 25 months.

Sypniewski says HR executives should start the LTC-enrollment process by offering caregiver workshops first. Universal-life policies with LTC riders and critical-illness policies grant a baseline benefit for lower-income workers while group or individual LTC policies provide more coverage for higher-paid employees.

"There is nothing worse than having an employee get excited about a benefit and then presenting a program he can't afford," he says.

Carol Harnett is a consultant, speaker and writer in the fields of employee benefits. She can be emailed at

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