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Faced with Uncertainty, Employees turn to Employers for Retirement Planning Help

Faced with Uncertainty, Employees turn to Employers for Retirement Planning Help

With pension plans becoming harder to come by and growing uncertainty surrounding the future of the Social Security system, retirement planning continues to be more of a personal responsibility. Faced with this reality, employees are increasingly looking to their employers for advice and guidance with retirement planning.

Near the height of the recession in 2008, retirement-related concern began to gain momentum. A 2008 study by MetLife found that a majority of employees were beginning to express concerns about having a comprehensive financial plan for retirement1. The economy at the time certainly served as a catalyst for this fear, but it has not seemed to slow down since then. From the recession to now, a time of relative economic boom, these concerns remain on top of worker’s minds. According to a recent Accenture survey, 82% of workers and retirees across the U.S. and Canada would like more help with retirement planning2.

Included under the umbrella of retirement planning is long-term care planning, which garners a great deal of attention on its own. One recent consumer survey found that 35% percent of respondents indicated they were “very or extremely concerned” about needing long-term care services, with 12% listing it as their top financial concern. This level of concern surpassed fears about medical expenses and losing money on investments and was neck-and-neck with concern over meeting monthly expenses3.

Given this heightened level of concern, it’s only natural for employees to look to their employers for assistance not just with general retirement planning, but with long-term care planning as well. According to a survey analysis by LifePlans, Inc., among those familiar with Long-Term Care insurance [LTCi], 59% of individuals agreed they would be interested in learning about private LTCi if their employer was sponsoring a plan for its employees4. Being a benefit that people tend to purchase once and keep for the rest of their lives, LTCi requires more education and consideration than many other benefits. Having the structure of an employer-sponsored program ensures employees can educate themselves on the potential need for long-term care and consider how LTCi may fit into their retirement plans.

Among employees who are fortunate enough to be offered LTCi through their employers, the benefit is greatly appreciated. One study found that when asked what the most important benefit offered to them was, the number of employees who chose LTCi was five times greater than those who chose life insurance5. Having access to consolidated resources through their employers gives employees the chance to give this benefit the attention it deserves and helps demonstrate the clear value of including LTCi as a part of one’s retirement strategy.

Retirement is no longer guaranteed by hitting “X” number of years on a job or turning 65. Today, people are often left to their own devices to develop a retirement plan. Since private financial advising is too costly an option for some, many individuals would like easier access to such advice through their employers. Combining this reality with the fact that concerns over long-term care are at an all-time high, it’s clear that employers could benefit from implementing an LTCi program for their employees. Long-term care planning may just be one piece of the retirement planning puzzle, but it is a significant one, and employers cannot discount the value of providing employees with access to such financial security and peace-of-mind.

  1. “Study of Employee Benefit Trends”, Metropolitan Life Insurance Company, 2009
  2. “Workers Want More Help with Retirement Planning”, Planadviser, 2018
  3. “2017 Barometer Insurance Study: Consumer Financial Concerns”, LIMRA and Life Happens, 2017
  4. “Who Buys Long-Term Care Insurance?”, LifePlans, Inc., 2017
  5. “Employer Survey 2015”, Benefitspro, 2015
Don’t Pick Any Two When You Can Have All Three

Don’t Pick Any Two When You Can Have All Three

This LTCi carve-out design will cost the employer less, provide increased benefits to the employee, and make you, the producer, more!

Our practice is primarily focused on employer-funded long-term care insurance and these types of cases account for approximately 75% of all new cases in our firm.

Three years ago, we introduced a program design that provides employees additional funded benefits, saves the employer money, and increases the producer’s overall placed premium.

Quite simply, we have the employer fund the cost of Shared Care for the employee [only] if the spouse/partner decides to enroll on a voluntary basis. Shared Care allow couples to share in each other’s benefits should one spouse/partner deplete his or her benefits; also, the surviving spouse / partner will inherit any unused benefits from the deceased spouse/partner.

The cost of adding Shared Care is outweighed by the increased discount resulting from now insuring both spouses/partners. On the platform we use from Transamerica, the cost of Shared Care is 7.5 – 22% depending of the length of the benefit period; the longer the benefit period, the lower the cost for Shared Care. The discount for one spouse/partner buying is 15% but it goes to 30% – a relative discount of 17.6% – if both spouses/partners buy.

Provided the employer-funded benefit pool is at least the equivalent of two-and-a-half years, the resulting premium is lower if the spouse/partner is also enrolled therefore saving the employer money.

The inclusion of Shared Care drives the communication & conversation toward spouse/partner coverage and as a result we have increased our spouse/partner participation by 94%. Consequently, the increase in voluntary participation from spouses has led to an increase in premium per case of about 20% while saving the employer on average 7% in premium.

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LTCi Claims Paid Continues Upward Trend

LTCi Claims Paid Continues Upward Trend

What’s often lost in news of rate increases and announcements of carriers entering and exiting the market is the fact that Long-Term Care insurance [LTCi] claims continue to grow – both in amount paid and number of claimants. With prospective consumers and current policyholders potentially wary of the industry due to this one-sided media coverage, it is important to adequately inform people of the proven track records carriers have when it comes to meeting their commitments to insureds come claim time.

Recent claims data shows that carriers are indeed making good on their promises. From 2000 to 2014, industry-wide claims payments more than quadrupled, growing from $1.87 billion annually to $8.73 billion1. This growth has not stopped either, with recent estimates for annual claims approaching $10 billion2. The trend holds true with the number of claimants as well, which grew over 5% to nearly 300,000 individuals in the one-year period from 2016 to 2017 alone3. Given this continued growth in amount paid and claimants served, it is no wonder that the share of private insurance financing (i.e. LTCi) covering the costs of long-term care is growing faster than all other sources of long-term care financing4.

Furthermore, despite the increased volume, it remains incredibly rare that policyholders are denied claims. Estimates for industry-wide denial rates are approximately 4%, with most denials resulting not from a matter of the carrier’s direction, but from policyholders’ misunderstanding of what is and what is not covered in their policies5. What’s more – eight in 10 claimants found filing a claim to be an easy process6. The importance of these two findings cannot be overstated. For many individuals, the process of transitioning into a nursing home or other facility or having someone come to their home for home care can be a time filled with stress and complication. It is reassuring to know that the process of filing a claim is comparatively hassle-free.

There are certain trends with respect to group claims that are worth noting as well. As with individual claims, group claims also continue to rise. What’s particularly interesting, but not surprising, though, is that the average group claim is smaller than the average individual claim2. The implications of this are intriguing for carriers currently in or considering entering the Worksite market. Leaving underwriting out of the equation, with their lower daily benefits and shorter benefit periods2, perhaps Worksite plans can lay a path for greater sustainability down the road.

A recent case example was the impetus for this article and serves to nicely summarize this trend. Mutual of Omaha recently updated a consumer-facing piece which details its claims experience, linked here. As of the last iteration of this piece, which cites statistics from 2015, Mutual of Omaha reported paying out $90 million in claims annually with over $889 million total paid out since 19877. Just two years later, the updated piece reports an increase of 20% in annual claims payments with a 24% increase in total claims paid8.

Mutual of Omaha’s piece is aptly titled, “Promises Kept.” Consumers interested in purchasing LTCi want to be confident in the fact that the carrier they choose will be able to fulfill its commitment come claim time. Also, with approximately $2 trillion in potential benefit value in in-force LTCi policies4, current policyholders need to know carriers are adequately prepared to meet their obligations as well. So long as this trend continues – on both a carrier and industry-wide level – clients and shoppers alike can rest assured.

  1. “75 Must-Know Statistics About Long-Term Care”, Morningstar, 2017
  2. “2017 Milliman LTCi Survey”, Broker World, 2017
  3. “Long-Term Care Insurance Claims Paid – 2015 thru 2017,” American Association for Long-Term Care Insurance, 2018
  4. “The State of Long-Term Care Insurance: The Market, Challenges and Future Innovations”, NAIC & The Center for Insurance Policy and Research, 2014
  5. “The Benefits of Long-Term Care Insurance and What They Mean for Long-Term Care Financing”, LifePlans, Inc., 2014
  6. “Experience and Satisfaction Levels of Long-Term Care Insurance Customers: A Study of Long-Term Care Insurance Claimants”, LifePlans, Inc., 2016
  7. “Promises Kept”, Mutual of Omaha, 2016
  8. “Promises Kept”, Mutual of Omaha, 2018