As long-term care insurance becomes increasingly attractive as a voluntary benefit, employers and benefit brokers are going to have to adapt with the reality of state variations in LTC plans. Although these variations can make it harder to implement a program, with some perspective and understanding it should be a hurdle that can be overcome.
Why do benefits vary by state? LTC Insurance is health insurance, and is regulated on a state by state basis. This is true whether the long-term care product is made up of individual policies sold on a group basis or if the policy is with the employer and the individual employees get certificates. In either case states have the ability to regulate provisions such as minimum benefits available, partnership plan eligibility or certain sales practices.
For a large group enrollment in multiple states, this creates a situation where an employee in New York might be getting a different plan and premium rates than an employee in Kansas. Here are ways in which state variations impact benefit advisors and employer groups during an enrollment:
- Licensing - In order for an benefit broker to offer a policy in a particular state, they must abide by the state licensing and contracting rules - including state required CE requirements in many states. One day, it is expected the recently passed NARAB will make it easier to get contracted nationally.
- Product- Because states must approve all new LTC products, there are often times when a carrier's product is approved in some states but not in others. This is important because newer, more price-stable products are based on current interest rate assumptions and are expected to be profitable for carriers. Older product series might not be as attractive for companies to offer because they are based on older assumptions. Certain states, like New York and California, are notoriously slow in approving products. Luckily, most states are part of the interstate insurance compact, resulting in a faster product approvals.
- Underwriting - To overcome the problem of newer products not being approved in certain states, carriers might modify their underwriting in that state so that only full underwriting is available until the newer product is approved. This helps them get the best risks for their block of business.
Because of the state variations, it is vital to have a personalized experience for the potential LTC buyer. This is done by having a quality education and enrollment campaign - creating a customized rate quote for each eligible participant and assisting them in picking the best plan.
There is an advantage to having state-by-state product offerings. When new employees come on board, they are getting the latest product offerings and features, not just the certificate of a product that was designed and priced many years ago. With today's offerings being individual products offered on a multi-state basis, the policy agreement is directly between the insurance carrier and the employee, locking in portability.
Remember, LTC Insurance is designed to be used well in the future during retirement years. When choosing an offering, focus on choosing a carrier who has a good track record of paying claims and will be there to help a family in need.
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