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Thursday, October 19, 2017

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Employers and Long-term Care Insurance

Long-term care may well be the greatest uninsured need in America. Most people will need some type of long-term care services at some point, so long-term care partnership insurance can be an important option to help pay for the costs. It can also be an important benefit for employers to consider.

More employers are offering a long-term care insurance benefit to employees. In fact, according to the Health Insurance Association of America, more than 1 million policies have been sold through 3,500 employers. By offering long-term care insurance through the employer, many people have access to long-term care insurance during their working years when premiums are more affordable. In addition, offering long-term care coverage can help employers recruit and hire talented employees.

Today employers have a wider variety of long-term care insurance options. There are traditional group products (true group) and individual products (worksite or multi-life products) offered by employers. Individual products often provide additional discounts, such as a good health or spousal discount, which is not typical of a true group policy and may also provide more customizable plan options.

Some employers offer long-term care insurance as a voluntary benefit, but there is also a segment of the market where employers provide some type of subsidy. These options may be an employer contribution toward the premium payment or offering a low-cost base policy, with employees being able to buy additional coverage.

Successful Campaign

The State of Minnesota had one of the most successful employer-offered long-term care insurance outreach campaigns in the entire United States. In 2000, the State of Minnesota achieved a 20% participation rate in its offering of long-term care insurance to state employees. This was due in large part to the campaign that highlighted the state tax credit for those who buy tax-qualified long-term care insurance, as well as how long-term care insurance can help pay for care that is not paid for by other sources such as Medicare.

A Good Time for Employers to Offer LTC Insurance

More than ever before, the increasing number of caregivers caring for aging people or people with disabilities has impacted the workplace in terms of productivity, absenteeism, stress and morale as employees struggle with work and family caregiving. By sponsoring a long-term care insurance program available to employees and their spouse and parents, an employer can try to lessen the workplace impact of these caregiver demands.

Need for Accurate Information for Employers

Surveys have shown that there is a lack of accurate information available to employers about offering a long-term care insurance benefit. Data shows:

• Only 40% knew that coverage is portable

• Only half knew that employer-paid premiums are tax deductible as a business expense

• More than half did not know that costs to the employer of offering long-term care insurance at the workplace are minimal or none

• 60% of employers surveyed in a state with a tax credit, were not aware of this tax advantage

Employers need to know the true facts about the coverage they may decide to offer. Long-term care insurance:

• Is portable

• Costs to the employer can be minimal or none

• Have tax advantages to the employer

• Can be a benefit that attracts and retains key employees

• Coverage can help improve workplace productivity

• Has easy-to-understand materials available for employees

Do employers contribute toward the cost of coverage?

While most employers offer long-term care insurance as an employee-pay-all, contributing toward the cost of coverage sends a very strong message to employees that the employer supports the benefit. Plus, the employer can deduct these contributions in the same manner in which they deduct for health insurance contributions.

What are the tax benefits of setting up a plan for employees?

Employers can offer long-term care benefits suited to their employees at a relatively low cost. And the federal tax code allows employers to deduct 100% as a business expense for both the cost of setting up a long-term care plan for their employees and for any contribution made by the employee, their spouse, dependents and retirees toward their tax-qualified long-term care insurance premiums.

How do employers set up a plan?

An employer may first want to gauge employee interest and raise awareness using a simple email survey. Employers shouldn’t assume that if employees aren’t asking for the benefit, they don’t want it. They may need some education to help them understand this product’s importance. If there is sufficient interest, employers can contact benefits consultants and insurers to determine specifics.

For additional information, see the links below. The studies and information contained in the links below were used in the development of this information.

Minnesota Board on Aging Study of Employer Interest in Long Term Care Insurance (PDF)
Understanding the Impact of Family Caregiving on Work (PDF)

The MetLife Study of Caregiving Costs to Working Caregivers (PDF)

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