Traditional Long-Term Care: Why You Should Be Looking For Alternative Solutions

April 15, 2022

What is traditional long-term care? Why isn’t it working?

Traditional Long-Term Care (LTC) has long been seen as a solution for the aging workforce but it often falls short of meeting the needs of the affected population. High costs, use it or lose it policy design and the requirement of medical underwriting, leaves many looking for an alternative to Traditional Long-Term Care.

Public awareness of long-term care is also at an all-time high, driving the demand for coverage from employees who often juggle work and caregiving. Compounding the issue is the demand for long-term care far outnumbers the existing supply. With the baby boomer generation reaching retirement age, government resources are being stretched thin creating limited resources for employers.

Heed my warning – your state could be next.

It’s no longer enough to watch the long-term care market, it’s time to take action. Legislative changes to institute a long-term care payroll tax are already slated to take effect in Washington State on July 1, 2023 with additional states, like California expected to announce the same year.

But you might ask, doesn’t Medicare cover LTC?  The reality is while it does provide some coverage, it’s only short-term and in specific circumstances such as hospital or nursing home/rehabilitation states due to injury. It won’t be enough for most of the aging workforce. According to the Genworth Cost of Care Survey2, the monthly costs to stay in a private room in a nursing home or one that provides nursing care averages nearly $8,821 per month. In contrast, the average monthly social security check is just $1,555.

So what’s the solution?

Hybrid life insurance policies are attractive to employees and offer a fresh, affordable approach with better coverage than Traditional LTC. Hybrid LTC policies are called multi-use policies, as it will pay a benefit in some way. Whether it is for terminal illness, long term care or a death benefit. Hybrid LTC also allows employees to build cash value, enroll with no medical questions up to specified amounts and they can keep their coverage post-employment, with the same rates and plan design. While hybrid polices may sound like the obvious alternative to traditional long-term care offerings, I cannot stress enough how important it is to offer coverage soon otherwise you could face limited options as carriers continue to stretch to support the growing interest in the hybrid life insurance market.

How is your organization preparing for changes in the LTC market? Are you aware of legislative changes that might be happening or beginning to happen in your state? I invite you to visit my webpage, and share your thoughts on what you and your connections are seeing in your local LTC market. Join me here Carlozo’s Corner or email me at [email protected].

Welcome to Carlozo’s Corner, a new weekly installment I’m pleased to contribute to the FENG newsletter. I’m Anthony Carlozo, a client executive at Marsh McLennan Agency (MMA), the employee benefits division of Marsh.

At Marsh McLennan Agency, I work with organizations of all sizes to help them minimize their risk and maximize the value of their benefits programs.

Here I’ll be sharing insights about a current market trend and the strategies I’m seeing employers adopt to adapt to today’s evolving business landscape.