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April 2021   Volume 19, Number 4        

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Individual vs. Group Long-Term Care Coverage for Employees

Considering whether to offer long-term care insurance to employees? How does group long-term compare to individual long-term insurance?

The answer is that in comparison to group long-term care insurance, individual coverage has advantages and disadvantages.

First, the benefit of long term care insurance is that it pays a daily stipend that covers the costs of long-term services and support, whether the beneficiary remains in their home or is in a facility. They are covered if they are suffering from a chronic medical condition, a disability or a disorder such as Alzheimer's disease. The kind of services an individual might need can range from skilled nursing or assistance with day-to-day tasks.

There are two common forms of employer-offered long-term care insurance:

  • True group: usually offered by employers with 500 or more employees.
  • Voluntary group: usually offered by smaller employers who give employees the opportunity to purchase coverage at a reduced or subsidized cost.

For many people, the major concern is cost and you may find that group insurance or voluntary coverage is not necessarily cheaper than individual policies.

The biggest advantage of a group policy is that all employees will qualify for coverage, regardless of health issues. This is because the risk of claims is spread over a larger group of people. Thus, an employee who has a history of stroke or drug addiction can be covered for less than what it would cost for individual coverage. However, an employee in reasonably good health or married will likely pay more for employer-Helaoffered coverage than they would for identical protection purchased on an individual basis.

Voluntary insurance is a package of individual long-term care insurance policies offered at a discount to companies with at least 10 eligible employees. Most companies require the applicant to undergo full health underwriting before being accepted for coverage, while some companies may have simpler questions depending on the size of the group and whether the employer contributes to the program.

Individually purchased long-term care insurance is a good, economical purchase for non-smoking individuals in relatively good health, especially people married or living with a partner, since marital or spousal discounts are usually offered, which can reduce the cost as much as 40 percent. Discounts don't usually change even if the policyholder's health changes.

Unfortunately, when applying for individual policies, people with conditions insurers feel pose greater long-term care risk can be declined coverage. That’s why waiting to apply for a policy until you’re 50 or so can be risky and why employer-sponsored coverage can be a blessing to an older work population.

Group Plan Questions

If you are considering offering group long-term care insurance to your employees, here are a few questions to ask when comparing policies:

  • What is the initial daily benefit?
  • Does the policy pay 100 percent of the costs for home care, assisted living or nursing home care?
  • How long are benefits paid?
  • How long is the waiting period before benefits are paid?
  • Does the policy only reimburse for actual expenses or does it provide cash?

Many group policies do not increase the coverage over time, which is a way to keep costs lower. It’s worth asking what the benefit level be in 10, 15 or 20 years. Please call us to get more details.

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In this issue:

Pandemic Fears Are Changing Employee Benefit Preferences

Federal Government Allows 401(k) Distributions for Birth or Adoption

Individual vs. Group Long-Term Care Coverage for Employees

HealthCare Options for Unemployed Workers

COVID-19: Do You Have Liability?



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