Voluntary long-term care insurance: best practices for increasing employee participation

This is the second of two Issue Briefs (April and May 2000) on long-term care (LTC) insurance. The previous Issue Brief addressed the problem of increasing sponsorship, while this report addresses the issue of increasing employee participation. Participation rates in group LTC insurance plans tend to be low. A potential watershed event for the development of the employment-based group LTC market is the proposed LTC program for federal employees and retirees (a program that would have to be enacted by Congress). The perception of a successful offering to federal employees could provide an enormous boost to the group LTC insurance market. Employee communication and education are seen as critical to the success of LTC enrollments. The importance of support shown by an employer for a new LTC plan offering cannot be overstated. Unlike 401(k) plan participation trends, LTC participation rates are highest among large companies. Insurers tend to view the 40-60 age range as the primary target for group LTC insurance, and employee salary as the best predictor of LTC insurance enrollment. Higher educational levels also are associated with higher levels of LTC participation. Perceived need for LTC insurance is perhaps the biggest barrier to the purchase of LTC insurance by employees due to competing financial priorities and the fact that LTC issues are generally off the "radar screens" of younger employees. Plans with skilled nursing home and home care benefits experience higher participation rates than plans lacking these benefits. The availability of lower-cost and long duration benefit options can be an important factor in determining participation. Most sponsors have chosen to offer noncontributory (i.e., fully employee-paid) LTC plans. Employer reluctance to make contributions may be caused by HIPAA's prohibition on the inclusion of LTC insurance in cafeteria plans. One of the major advantages of group LTC plans is the availability of guaranteed issue (i.e., issuing coverage without requiring evidence of insurability) for employees, which is not available in the individual LTC market. It is easy for enrollment to be derailed by the presence of any of a number of harmful conditions, such as employer-sponsors who distance themselves from the offer, ineffective communications, or difficult enrollment processes. Achieving consistently strong levels of participation in LTC plans will require employer-sponsors and their insurance carriers to form strong partnerships, with worker participation as their primary stated goal.