Demand For LTCI Has Been Growing Since 1990

Long-term care insurance (LTCI) is apparently one of the hottest products in the benefits market today.

The Health Insurance Association of America notes in a study that the number of small employers that have started offering LTCI increased to 3,000 from 58 between 1990 and 2001.

According to the 2000–2001 HIAA study, the total number of LTC policies sold overall through the employer market exceeded 1.3 million in 2001. Most of these plans also offered coverage to spouses of employees, retired employees and their spouses, and to parents and in-laws of the employees and retirees.

The HIAA says that insurers paid out $839 million in LTCI benefits during 2001. The benefits covered a wide range of services, including home health care, assisted living facility (ALF) expenses, nursing home care, respite care, and hospice care.

—Employees are using LTCI to meet multiple objectives. One in four employees say that protecting their assets or leaving an estate is the most important reason for their enrollment. About one in five said that preserving financial independence, and guaranteeing the affordability of needed services are the most important reasons for enrolling.

—Sixty-seven percent of survey respondents said that an employer contribution to the policy premium would make them more interested in enrolling. Another 59% said another important factor was the option to deduct premium costs from income tax.

—When asked which one factor would make them most interested in enrolling in an LTC plan, more than 33% of non-enrolled employees said tax incentives—regardless of whether people itemize or not.

—Between 17% and 47% of non-enrolled employees said they were willing to pay the associated age-adjusted premium for a policy that meets their needs.

In commenting on the study, the HIAA noted that, while cost remains a significant enrollment barrier, those who ultimately do sign up for LTCI view it as a long-range investment proposition.

Toward that end, HIAA said it believes that employers and consumer organizations should continue to educate younger working-age individuals about LTCI, so they will begin to "shift their mindset toward planning for events that may seem unlikely or far-off."

Labor, Leave Acts Being Studied For Possible Reform

The federal Employment Standards Administration (ESA) has placed the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA) upon its regulatory reform agenda, according to Asst. Secretary Victoria Lipnic.

Noting that the Bush Administration was not out "to undo overtime," Secretary Lipnic said the ESA was simply looking to unravel the uncertainty that currently surrounds how to interpret that particular section of the Act. In the absence of a concrete explanation, the secretary said, the overtime provision benefits no one.

With respect to the FMLA, Secretary Lipnic noted that reform was needed, in part, due to a 2002 Supreme Court decision (Ragsdale vs. Wolverine Worldwide) that nullified a provision within the Act that forces an employer to provide leave beyond 12 weeks in certain circumstances.

Secretary Lipnic said the ESA had completed a number of "stakeholder meetings" on FMLA and is assimilating the information that was gathered.

Although noting "change does not come quickly to many laws and regulation," Secretary Lipnic said she hoped to announce specifics regarding the proposed reforms "sometime fairly soon."

Involving Consumers Linked To Success For Health Plans

The critical need to educate and involve individuals about consumer-directed health plans was underscored by a survey released this year and conducted by California Health Decisions (CHD), a non-profit group founded to identify public values on issues related to health care.

CHD, which conducted the survey during the second half of 2002, found that 85% of 800 Californians surveyed had never heard of consumer-directed health plans. When informed such plans included flexible spending and medical savings accounts, one in seven (14%) of those surveyed then said they were familiar with them.

Upon learning how consumer-directed health plans were structured, 46% found them to be "very" or "somewhat" appealing, 46% found them to be "not too" or "not at all" appealing, and 8% did not have an opinion.

Demographics played a role in the survey results. Younger, single, healthy individuals, as well as those who were initially uninformed about consumer-directed health plans, found them appealing. Those surveyed who were older, less healthy, and believed they had a solid understanding of such plans, found them to be unappealing.

Those finding consumer-driven health plans appealing said they were attracted by the ability to roll over unused funds from year to year (86%), and the ability to access healthy savings account funds after leaving a job (83%). At the other end of the reaction spectrum, 65% of the respondents did not find the lower premiums and higher deductibles appealing. Two-thirds of the respondents said they preferred that employers offer multiple health care options, not just consumer-directed ones.

Based on the survey results, the CHD made four recommendations: (1) Engage consumers in determining how consumer-driven health plans are structured; (2) Involve consumers in educating others about the plans through the use of "real life" experiences; (3) Offer clear and direct information on rising health care costs and their impact on employers; and (4) Provide consumers with performance and quality data they can use to select hospitals and doctors.

The CHD concluded: "The road between consumer confusion. . .and clarity, between distrust and confidence. . .has fewer obstacles if firsthand consumer participation is integral at every step. . .these plans must be not only 'consumer directed' or 'driven', but 'consumer developed' with full involvement from the outset."

A Valuable Product Many Ignore Talking About

What do most employees need for a secure future, but ignore getting? Here's a hint: It's the same thing that many employers would bring to their employees' attention—if they were not overwhelmed by other priorities. The subject in question? Long-term disability (LTD) insurance.

Corroborating this disturbing news is the National Association of Insurance Commissioners, which points out that, at age 35, a worker has a 25% chance of becoming disabled for more than 90 days during the remainder of his or her working life.

Employers, however, naturally have their attention focused on immediate and ever rising medical premium increases, according to Anita Potter, manager of product research at the Life Insurance Marketing Research Association (LIMRA). As a result, supplemental benefits, such as LTD insurance, are given a backseat during broker discussions.

Compounding matters is the fact that LTD insurance is not a priority with many cash-sensitive employees who are not convinced they truly need such a product.

Disability coverage of any kind is generally lacking in the small business arena. According to the ACLI, only 22% of such firms offer short-term disability benefits, and just 13% offer LTD coverage.

To educate the public about the need for LTD coverage, the ACLI and the Consumer Federation of America have published a brochure ("Long-Term Disability Income Insurance—Financial Protection for You & Your Family") which is available free of charge at www.acli.com. In addition, the Health Insurance Association of America (HIAA) has published "An Employer's Guide to Disability Income Insurance" which can be found at www.hiaa.org.

The Small Business Health Fairness Act of 2003 could potentially give small businesses the same competitive leverage as large employers when providing employees with health insurance, according to Senator Olympia Snowe (R-Maine).

Under Snowe's bill, small businesses could obtain their health insurance through an Association Health Plan (AHP). The bill includes safeguards that would protect a small business from fraudulent trade associations.

Snowe is chair of the Senate Committee on Small Business and Entrepreneurship. Co-sponsors of the bill include Sen. Kit Bond (R-Missouri), Sen. Jim Talent (R-Missouri), Sen. John McCain (R-Arizona), and Sen. Elizabeth Dole (R-North Carolina).

Sen. Ron Wyden (D-Oregon) and Sen. Orrin Hatch (R-Utah) have introduced bipartisan health legislation that is intended to establish a Citizens Health Care Working Group to promote public debate on health care, and encourage congressional support of recommendations derived from those discussions.

The Health Care that Works for All Americans Act (S. 581) is currently being studied by the Senate Committee on Health, Education, Labor, and Pensions.

The Act has been introduced by Rep. Judy Biggert (R-Illinois) and has more than 65 co-sponsors. Under the bill, if the employer and the employee agree, the employee has the option of banking up to 160 hours that he or she can use at a later time as paid time off. In unionized businesses, the union and the employer would have to agree on the proposal.

In addition, the bill would allow an employee to cancel the agreement at any time and provides protection against employer coercion to accrue or use compensation time. The proposed legislation would amend the Fair Labor Standards Act (FLSA), which was enacted in 1938—a time when few women worked outside the home.