Group LTC Insurance plans are increasingly subject to large in-force premium increases - and employers are wondering how they can support their employees who purchased plans facing those increased rates. The good news is that for most employees they options to modify coverage and keep premiums at a similar rate - if they have access to good advice.
This is a concern for employers offering plans because unlike most other voluntary benefits, employees who buy long-term care insurance typically keep the plans for their entire life. Group certificate are usually purchased in the employees 40's and 50's, and after an employee leaves their employer they typically start paying premiums directly to the insurer.
Why are rate increases happening?
It's because group actuaries underestimated the high retention rate that policyholders have - and these pricing mistakes have had a big impact on current policies. “Individuals are living longer and holding on to their policies longer than we anticipated,” Steve Zabol, president of closed block operations for Unum Group, told regulators at a Florida hearing on August 12th. Unum, which stopped selling group LTC in 2012, has determined that a 75% rate increase is necessary for their policies on a national basis. They are not alone. Big group writers of coverage such as CNA, MetLife, Prudential, and MetLife face similar pricing issues and have embarked on in-force premium increases.
For employers who thought group coverage offered better discounts and preferred underwriting, they are understandably frustrated to find that often their employees who purchased group policies may not be as protected as employees with individual policies. According to a Boston Globe article discussing problems in Massachusetts, “"group purchasers who thought they could leverage a better rate by pooling their members, ended up vulnerable to massive rate hikes. These group plans were one of the major loopholes in the old regs, and now the Division of Insurance is leaving consumers prey.”
Employers can help out their current employees and retirees who have these policies, however. Here are some steps they can take:
- Partner with a LTC specialist organization. A benefits firm with expertise in LTC Insurance can help develop a strategy for handling in-force rate increases and decisions related to plan changes. As mentioned, often existing certificate holders can modify coverage to keep premiums at a similar level.
- Supplement carrier support for employees. Although many insurers offer call center support, their interests and the interests of the policyholders are not always aligned. Having an independent resource to give guidance to employees can be a big help.
- Consider a new offering of multi-life individual coverage. The advantages of individual products offered on multi-life basis are many, including premium discounts and gender neutral pricing. In additoin, these carefully underwritten blocks will be fully portable and as newer products come along the carrier can offere the lastest plans.
Long-term care insurance is a valuable and important benefit, both as 401K protection and an extension of health insurance. Because of it's long-tail nature, however, it's critical of offer ongoing support to policyholders. The marketplace is evolving and changing, and employees are looking for help.
Want to learn more? Employers interested in learning more about Group LTC or have questions on existing plans can contact LTCI Partners or their benefit broker.