Group Long-Term

Care Insurance: A Great Sales Opportunity

by Dennis Healy

It's no exaggeration that group long-term care insurance can be your next great sales opportunity. Group LTC insurance should command more of your attention, particularly if you want to help clients enhance their benefit packages and if you want to expand your own business.

The first reason to learn more about group LTC insurance is the emerging issue of long-term care itself. A person needs long-term care when they can no longer manage some basic activities of daily living without assistance, such as dressing and bathing. The need for long-term care can come up at any time during a person's life due to illness or an accident. That said, the rise in longevity has increased the need for long-term care. The aging of the Baby Boomers means that this need will continue to increase over the next several years.

The cost of care is also a concern. Long-term care can be extremely expensive. The average annual cost of a nursing home is $74,000 a year, with significantly higher costs in certain areas, according to a 2005 study conducted for John Hancock by Harris, Rothenberg International. The average cost of nursing home care is about $84,000 a year in San Diego and about $130,000 a year in San Francisco. Costs can run as high as $3,000 a month in assisted living or residential care facilities. Home healthcare costs range from $15 to $22 an hour across California. Like everything else, long-term care costs are expected to rise.

Then there is the matter of funding these costs. Many people would be hard-pressed to pay out-of-pocket for care and would quickly deplete most of their savings accounts and 401(k) plans. In extreme cases, one spouse could become impoverished while using assets to fund care for the other spouse.

Too many people think they can rely on government programs, such as Medicare and Medi-Cal. They don't realize that Medicare is only designed to pay for acute illnesses and Medi-Cal has asset and income requirements that they may not be able to meet. In addition, Medi-Cal may not pay for home care, where most people would prefer to receive services.

There Is Growing Interest Among Employers

The need to address long-term care has not been lost on employers. Over the past 11 years, there has been a 600% increase in the number of employers adding group LTC insurance to their benefit portfolios, according to LIMRA data. There is still enormous potential for this product even in light of the impressive growth so far.

If your client does not have a group LTC insurance plan, you can begin by sharing long-term care issues and explaining how adding group LTC insurance would be good for their business and their employees.

You can position group LTC insurance as an executive carve-out product. There is usually more interest in this coverage at the executive level. More employers are rewarding key employees by paying for all or part of the premiums.

Employers that are willing to pay for executive coverage may also offer group LTC insurance to all employees on a voluntary basis. Carriers can usually justify a more favorable rate structure for the voluntary piece of business, which may encourage participation. On a purely voluntary basis, group LTC insurance provides an easy, low-cost way for employers to enhance their benefits package to attract and retain high caliber employees.

Group LTC insurance enjoys the same tax advantages as health insurance; the premium paid on behalf of an employee deductible is considered a business expense.

A more subtle benefit is that the coverage addresses productivity lost to care giving responsibilities. It is increasingly common for employees to be caught between caring for elderly relatives and raising young families. Employees can become distracted at work, spending time on the phone arranging for their loved oneÕs care or leaving early to cope with a care-giving emergency. Group LTC insurance helps relieve this burden by funding the care that loved ones need and by assigning a care coordinator to provide guidance and support to each claimant.

Group LTC insurance gives employees important insurance protection not found in their medical or disability benefits. It can also play an important role in retirement planning, since employees with the coverage are less likely to have to withdraw money from their 401(k) plans to pay for care. With group LTC insurance, employees can pay for their retirement plans instead of paying for long-term care expenses. It can also help them feel more optimistic. The 2006 John Hancock Long-Term Care Survey revealed that respondents who have already purchased LTC insurance are much more confident (65%) than those who have not (38%) that their companyÕs pension or retirement plan will be adequate.

Evaluating Your Prospects

Evaluating prospects is an important part of the sales process. Because group LTC insurance is sold most often as a voluntary benefit, looking for certain characteristics will help ensure enrollment success. Consider average employee age, salary, and education.

With your California-based clients, you can expect your best enrollments to be with highly educated employee populations with an average age of 40 and an average income of at least $50,000. Participation in other voluntary offerings, such as 401(k) plans and supplemental life insurance, will also give you some insights into how receptive employees may be to group LTC insurance.

Another factor to consider is how much support the employer is willing to give in introducing the benefit. Many employees are still not familiar with long-term care issues and how group LTC insurance can help them. We have found that employer endorsement can be the single most important indicator of enrollment success. Less than ideal demographics can be overcome with strong employer support, such as allowing the use of the company logo and access to employees as part of a comprehensive communications campaign. By the same token, weak employer support can undermine enrollment results even with excellent employee demographics.

Selecting a Carrier

There are several considerations in selecting a carrier for your client's group LTC insurance plan. While all carriers offer plan designs that your clients may find attractive or service organizations to support the plans, there are important. First, gauge the carrierÕs commitment to the long-term care insurance industry. This is important in light of some recent carrier exits from the market, which left employers needing a new insurer. By and large, a company that has been in the market longer and has a broader suite of individual and group long-term care products will have a stronger commitment to LTC insurance.

The carrier's financial stability is another differentiator. Since employees may not need long-term care services for many years, the carrier's claims paying ability is vital to ensure that it will be able to deliver on its promises. The best-known rating agencies, such as A.M. Best and Standard & Poors, are excellent indicators of claims paying ability, but be sure to check the carrier's Comdex Score. It is a consolidation of all of the carrier's ratings. Companies are ranked on a scale of one to 100. As a rule, the higher the Comdex Score is, the more stable the company is.

Serving Your Clients, Building Your Business

There has never been a better time to talk to clients about group LTC insurance. As Baby Boomers age, they will have growing awareness of and interest in this product. The federal government has already taken steps to encourage people to purchase LTC insurance with the passage of the Deficit Reduction Omnibus Reconciliation Act of 2005. Among other things, this law tightens Medi-Cal eligibility rules, making a stronger case for private long-term care insurance.

You can add value to all of your business relationships by becoming a resource for long-term care and group LTC insurance. Your clients for life, health, and disability insurance will appreciate learning more about this important employee benefit. Offering group LTC insurance can also give you an entre to meeting new clients. Employers that don't hear about it from their brokers may be very willing to learn from you about group LTC insurance. In the face of the growing need for long-term care, knowledgeable brokers who can demonstrate the value of group LTC insurance have the potential to grow their own businesses in the near future and for many years to come.

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Dennis Healy is vice president of John Hancock's Group Long-Term Care Insurance Department with responsibilities focusing on client development in all employer market segments. His management responsibilities include oversight of the sales, account management, marketing, and proposal teams.

Long-term care Insurance is underwritten by John Hancock Life Insurance Company, Boston, MA 02117. For more information, e-mail dhealy@jhancock.com.