Long Term Care Insurance at the Worksite: An Overview Provided Courtesy of:
About LTC Financial Partners Long term care planning is a very complex issue. Fortunately, each LTC Financial Partner is a neighbor, a member of your local community and a specialist who has years of experience helping people evaluate their unique situation and consulting with them on possible solutions for long term care insurance planning. Each partner has developed scores of successful and productive plans for people who want to protect their assets and still be assured of receiving quality care. Of the top 100 licensed LTC specialists across the United States, more than half are partners at LTC Financial Partners. Only highly trained and experienced licensed specialists are invited to become partners in LTC Financial Partners. Each is an owner committed to understanding a client s unique needs and goals. Our Resources Our company represents a wide range of the highest rated insurance carriers selling long term care insurance. Each Partner earns the same commission, which allows objectivity in selecting the company that meets each client s special needs. All information contained in this book is offered for informational purposes only. This is not an offer to sell long term care insurance. The information should not be construed as pertinent to your situation or as tax advice. You are encouraged to speak with a long term care expert for advice and consult your own tax advisor regarding your own particular circumstances.
Table of Contents I Section I Long Term Care Fact Sheet.... 1 Section II Worksite Facts....2 Section III Multi-Life LTCI Advantages.... 3 Section IV Tax Advantages....4-5 Section V Designing a Long Term Care Policy.... 6 Section VI Plan Communication & Implementation.... 7 Section VII LTC Outreach and Education Program (LTCOEP)....8-9 II III IV V VI References...10 Appendix...11 VII A Published by LTC Financial Partners
Section I Long Term Care Fact Sheet 12 million people are currently receiving long term care and those numbers continue to increase. 82% of those cared for are either at home or in Assisted Living. Only 18% of those needing care are in nursing homes. 39% of people needing long-term care are working age adults, ages 18 64. Average stays: Nursing Home...2.4 years Home Health Care... 4.5 years Assisted Living...18 months Life span of Alzheimer s patient: 4.9 average, 5.7 for women, 4.2 for men Long Term Care Demographics 60% 65 and older 1 Long term care costs are projected to triple in 20 years (current costs/national averages). Home Health Care..$19/hour = $66,673/year Assisted Living...$99/day = $35,628/year Adult Day Care....$61/day = $22,265/year Nursing Home....$189/day = $68,985/year Under very limited circumstances, Group Health Insurance and Medicare pay for Skilled Care only, not custodial care. Medicaid is part of the welfare system and provides limited options for care. One must meet asset and income spend-down guidelines to meet welfare standards. With the signing of the Deficit Reduction Omnibus Reconciliation Act of 2005, which tightens Medicaid eligibility rules, the government has sent a clear message that for many Americans, Medicaid will no longer be a viable option for long term care planning. Aging of America: 78 million Americans are baby boomers and will begin turning 65 in 2011 35 million Americans are currently over age 65, growing to 70 million by 2030 Fastest growing segment of population: 85+ will grow to 8.5 million 75,000 people over age 100, projected to triple in 20 years. 1% Children < 18 39% Working Age Adults Ages 18-64 Who Pays for Long Term Care? 11% Private Insurance <2% VA (Home Care and Nursing Home) 18% Medicare 3% Other 23% Out-of-Pocket Source: 1/04 Centers for Medicare and Medicaid Services 2,2002 statistics 43% Medicaid
Section II Worksite Facts The annual cost to companies for workers lost productivity due to elder care responsibilities is estimated at $3,412 per employee each year. By 2005, more than 37 percent of U.S. workers will be more concerned with caring for a parent than a child. II Two-thirds of caregivers work full or part-time representing 10% of the workforce today. It is estimated that the caregiver will spend an average of 22 hours per week providing eldercare for a family member. Twenty percent of caregivers provide care 40+ hours per week. Caregiving can cost more than $659,000 over an employee s lifetime. The cost is reflected in time away from work spent caring for family members, lost wages, and lost contributions to Social Security and pensions. Employers are willingly offering LTCI as a benefit option because they can tie coverage to increased productivity, higher morale, lower turnover and absenteeism, and reduced employee stress. The aging of the baby boomers could cause a labor shortage so severe that it could result in an economic catastrophe. 2
Section III Multi-Life LTCI Advantages For the Employer Cutting Edge Benefit: Recruitment Retention Reward Available as Employer Paid or Voluntary Pay Premiums Deducted as Business Expense Program Availability for Executive Carve-outs and Selected Classes Group Discounts For Employees and Family Members Simplified Health Qualification Available Agent Assisted Implementation with Individualized Plans Flexibility in Plan Design Guaranteed Renewable Guaranteed Acceptance with Large Groups: Initial Enrollment New Hires For the Employee Protects Qualified Plan Assets (401K, Profit Sharing, Deferred Compensation) Available to Spouses and Family Members with Discounts Subject to Health Screening Premiums Count as a Medical Expense Employee s Portion can be Payroll Deducted Individual Policies are Portable Allowing no Loss of Premiums Can be Customized to Each Employee s Individual Needs Guaranteed Renewable Accelerated Pay Options: 10 Pay 20 Pay Paid up 65 3
Section IV Tax Advantages For the Employer Corporation (C Corp) 100% deductible for employee and spouse S Corp, Partnership, LLC, Sole Proprietor Potential deduction against adjusted gross income For the Employee Benefits are received tax-free No W-2 income to employee on premium paid by employer Tax Qualified Plans premiums may be deducted (subject to itemized deductions) The Internal Revenue Service has announced the maximum amount of premiums for qualified long-term care insurance policies that qualify for deductions in 2008. IV Maximum Qualified Long Term Care Insurance Premiums Under Code 213(d)(10) Eligible for Deduction Attained Age Before Close of Year: 40 or Less More Than 40 But No More Than 50 More Than 50 But No More Than 60 More Than 60 But No More Than 70 More Than 70 2007 $290 $550 $1,110 $2,950 $3,680 2008 $310 $580 $1,150 $3,080 $3,850 Source: IRS Revenue Procedure 2006-53 (2007 limits) and 2007-66 (2008 limits) IRS rules for Tax Year 2007, rules adjusted annually. The above information is offered for informational purposes only. This information should not be construed as tax advice. You are encouraged to speak with a long term care expert for advice about your business and consult your tax advisor regarding your own particular circumstances. 4
Section IV Executive Carve Out Using Long-Term Care Insurance An Executive Carve Out plan can be used when a business decides to reward a specific group of executives by purchasing for each member in the group, a long-term care insurance policy. The executive or key employees are usually those who are key to the success of the business. By using an accelerated pay option such as a ten pay, the business can project the cost of this special benefit and determine when the premium payments will stop. When the executive retires the business can present him or her with a paid up long-term care insurance policy. Whether the policy is limited pay or a continuous pay long-term care insurance policy,there are many advantages to this plan: The Executive is the owner of the policy and it is portable. The business can deduct the cost of the premiums, just like health insurance. The total premium paid by the business is not included in the executive s income (unless the executive has an ownership interest in a pass-through business entity like a partnership, S corporation, LLC, etc.). Benefits under a tax-qualified long-term care insurance policy are paid to the executive tax free. The discussion of legal and tax considerations in this material is an interpretation of current law and is not intended as legal or tax advice. Business Owners should consult their legal and tax professionals. 5
Section V Designing a Long Term Care Policy To simplify the benefit selection process for choosing the right long term care insurance policy, there are 5 choices that impact the premium. 1) Daily or Monthly Benefit Choose the benefit that most closely matches the average cost of care in your area. This is the daily benefit available for facility care. Recommendation: Purchase close to the private room rate in your area. If you choose to self-insure some of the cost, purchase at least 70% - 80% of the private room rate. 2) Home Health Care & Community Coverage Most people would like to remain home as long as possible. If this is important to you, add a home care benefit or purchase a policy with home care included. Recommendation: 80%-100% of the daily benefit. 3) Waiting Period (Elimination Period) The longer the waiting period, the lower the premium. With the costs of care tripling over the next twenty years, the difference you might save in premiums may not justify having to pay the first three months out-of-pocket. Recommendation: No longer than a 60 or 90-day elimination period. 4) Benefit Period - Helps to determine your benefit pool of money available for your care. How long will the policy pay benefits? Benefit periods are available from 1 year to lifetime. Choose at least a three-year benefit, preferably a six-year benefit. Recommendation: Working with a professional will help to develop a plan that is cost effective in its premium and valuable when you need care. The best long term care plan is the one that is in force when you need it. V 5) Inflation Protection According to the General Accounting Office, long term care costs are growing at 5.8% annually and are projected to triple in 20 years! Recommendation: If you are under age 70, purchase inflation protection at 5% compounded annually. Ages 70-74, purchase 5% simple inflation protection. Ages 75 and over, purchase a higher daily or monthly benefit and build in inflation protection immediately or use a Guaranteed Purchase Option. 6
Section VI Plan Communication & Implementation In addition to the flexibility and low cost of implementing a Long Term Care Insurance Benefit Plan, getting started is easy. The advantage of working with a specialist enables the process to be handled efficiently and professionally. Assistance in the plan development process including the section of: Daily or Monthly Benefit Elimination Period Benefit Period Home Health Care Benefit Inflation Protection Plan Selection Carrier Selection Participation requirements Assistance with the outreach and implementation process: All marketing and application processing is personalized for your company Individual and group educational workshops provided to employees Marketing available to eligible family members Introductory letter sent to employees homes Payroll stuffers Posters Ongoing service: Education and Implementation for new employees Maintain and service the plan 7
Section VII LTC Outreach and Education Program (LTCOEP) The LTC Outreach and Education Program was developed and branded by LTC Financial Partners in response to our experience with over 125,000 employees in various settings throughout the country. The employees were offered individual LTC Insurance as part of their voluntary benefit enrollment program. A traditional employer product (or Group Plan) relies on the employer, carrier and HR Department to outreach to their employees. The sales of policies to employees, their spouses and extended family members are referred to as an enrollment process, which has a limited time window. Normally a Group Enrollment process does not afford the individual employee access to private meetings with Long Term Care Insurance experts to discuss the many complexities associated with Long Term Care Insurance for themselves, their spouses or extended family members. In fact, with a group plan, the employees are forced to rely on themselves in choosing the many options available and frequently purchase too little or too much insurance. A recent study conducted by the Forbes Consulting Group comparing over 250 Group LTC enrollment cases from four major Long Term Care Insurance Carriers concluded that the single largest factor contributing to a successful enrollment is employer support. The percentage they considered to be a High Success was only 7.7% of the eligible employees signing up for LTC Insurance. The second most significant factor contributing to success in a Group Enrollment is the number of choices given to employees. The fewer options explained to employees, the greater the number of employees actually enrolling. The last significant point worth mentioning is the correlation between marketing expense and results in enrollment. The difference between communicating the importance of Long Term Care protection is significantly more complex and detailed than ANY other voluntary benefit currently offered. The conclusions that were reached firsthand by LTCFP and confirmed by the Forbes Study underscore the drawbacks of a traditional group approach: The HR Department, which often has been significantly reduced in size due to numerous rounds of restructuring, needs to proactively engage in the employee educational process in order to produce even a mere 7.7% participation rate. The employer and carrier need to reduce options and produce a limited product selection process to combat the lack of adequate education. The employer and/or carrier need to spend time and resources on marketing to their employees. 8 VII
Section VII As the country s most experienced Long Term Care Insurance Brokerage, LTC Financial Partners learned that Long Term Care Insurance involves many sensitive financial, family and healthcare issues that are best addressed in a private setting. The assumption that less information is better is a disservice to the intelligence and the individual needs of the employee. LTCFP believes there is no reason the employee needs to know less than the average consumer. An employer who is committed to an outreach and education program will be rewarded by higher rates in employee productivity, retention and satisfaction. LTC Financial Partners designed, developed and produced a turnkey solution to communicate the benefits of planning for long term healthcare needs. The Long Term Care Outreach and Education Program, LTCOEP utilizes customized materials specifically created for each distinctive worksite. Following are examples of LTCOEP materials, which are available. 1. Seminars 7. Intranet Sites 2. Posters 8. Internet Sites 3. Flyers 9. PowerPoint Slide Shows 4. Direct Mail 10. Targeted Inserts 5. Email Blasts 11. Informational Booklets 6. Press Releases 12. Quarterly Newsletters How It Works LTC Financial Partners (LTCFP) assigns an account manager to each Company to work in collaboration with LTCFP s Marketing Department. The organization decides on which materials to customize and determines which delivery mediums are most appropriate. LTC Financial Partners has a proprietary relationship with the country s oldest and most experienced LTC materials publishing company, which helped create LTCOEP. Regardless of size, complexity or degree of customization required, LTCOEP will assist in educating every employee on the benefits of planning for long term care. LTC Financial Partners has demonstrated the experience, commitment, carrier support and industry leadership to make the LTC Outreach and Education Program the standard worksite communication method. The goal is to replace the term enrollment with education with respect to offering employees access to Long Term Care Insurance. 9
References Commerce Weyerhaeuser Atlantic Media JSA Architects Travel Impressions Columbia MedCom Vanir Construction Management Banking Institutions KeyCorp Morgan Keegan Union Bank of California Brookstreet Investments NRL Federal Credit Union Ohio Bankers League-Pioneer Bank Provident Credit Union Medical Institutions Swedish Medical Center Highmark Trinity Hospital Stevens Hospital Cooper Medical Center Central Maine Medical Center Stericycle Strategic Partnerships Financial Planning Association Interim Healthcare Society of Human Resource Managers (SHRM) National Association of Professional Organizers National Network of Estate Planning Attorneys CareOptions Online HighMark Blue Cross Blue Shield Benefits Consulting Firms AON Competitive Benefits Association ClearPoint National Benefits Group of America Farmington Enrollment Group Educational Institutions University of New England Stetson University Boston Athenaeum 10
Appendix O Shaughnessy, Carol, Congressional Research Service, testimony to Senate Aging Committee, June 28, 2001 O Shaughnessy, Carol, Congressional Research Service, testimony to Senate Aging Committee, June 28, 2001 MetLife 2004 Market Survey of Nursing Home and Home Care Costs as published on Consumer Affairs.com 10/4/2004 MetLife Mature Market survey, 2004 Assisted Living Federation of America, 2003 Alzheimer s Association, 2004 Met Life 2004 Market Survey of Assisted Living Costs as published in Provider Magazine News. MetLife 2004 Market Survey of Nursing Home and Home Care Costs as published on Consumer Affairs.com 10/4/2004 Centers for Medicare and Medicaid 2004 statistic The Nursing Facility Sourcebook, 2001, American health Care Association, p. 71s Ohio Medicaid & Elder Law Planning 2003 Administration on Aging, 02/01/2005 Long term care insurance matures as a benefit, Employee benefits journal, Dec 2002 and the Wall Street Journal 2001 Business First (The Conference Board) 1/2/00 The Urban Institute; John Hopkins University School of Medicine, The Milbank Quarterly, Vol. 78, No. 3, 2000 Employee Benefit News, August 1, 2001 U. S. Department of Labor, Advisory Council on Employee Welfare and Pension Benefit Plans, November, 2000 Beverly Goldberg, VP of the Century Foundation quoted from Employee Long-Term Care Insurance Matures as a Benefit, Employee Benefits Journal, December 2002 20 IRC Sec. 160 21 IRC Sec. 162 (1)(5) 22 HIPAA 1996 A 11
O UR MISSION STATEMENT We see a time when every individual will live fully and completely in dignity, comfort and independence without financial burden. To that end, our work, passion and purpose is to bring appropriate long term care financial solutions to all those we meet. Toll Free (877) 582-4478 www.ltcguidestone.com USA $8.95