Concerns over the cost of complying with federal health care reform have dissuaded many employers — especially those in the price-sensitive middle-market — from offering long-term care insurance to their employees.

In fact, many middle-market employers already began shying away from offering this coverage after insurers began exiting the group market en masse, leaving only multilife policies available to offer via worksite marketing.

Many advocates had hoped a little-known part of the Patient Protection and Affordable Care Act — the CLASS Act that would have created a federally administered long-term care program — would spark greater interest in the coverage.

Though 80 million baby boomers started turning 65 in 2011, only about 3% of U.S. residents older than 18 have long-term care insurance, according to the Los Angeles-based Association for Long-Term Care Insurance. Moreover, about 70% of people over 65 will need some form of long-term care, according to the Centers for Medicare and Medicaid Services.

However, when the Obama administration stripped the CLASS Act from PPACA after determining it was not financially feasible, interest among most employers in offering long-term care coverage waned, overshadowed by concerns about complying with other provisions of the landmark health care reforms, experts said.

Midsize employers today “are so consumed with health care reform, they're basically putting additional benefits on hold. Long-term care is something that is discussed, but of course, their main concern is what's forthcoming in the next few months,” said Cheryl Gunter, director of sales at Digital Insurance in Atlanta.

“They are even more reluctant because Genworth (Financial Inc.) has the only true group product left on the market, but their primary focus is on larger employers,” Ms. Gunter added. “So the smaller and midsize employers are forced into multilife products. They aren't bad products, but the downfall is the lack of guaranteed issue.”

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In an email, a Genworth spokesman said the insurer continues to offer group long-term care insurance products to employers with more than 500 employees on a voluntary basis and to employers with more than 150 employees, if the cost is paid by the employer.

“Long-term care had been one of our most active practices over the past 10 years until the spate of carrier withdrawals,” said Frank Fimmano, senior vice president of the elective benefits practice at Aon Hewitt in Morristown, N.J. But today, “the state of the market has the potential for delivering more disappointment than good.”

Because guaranteed issue no longer is available, the underwriting process and need for more communications means “the enrollment is not done as easily as with group programs,” he said. There's also less product customization, which can take even more explaining, he added.

“Group plans were chocolate, vanilla or strawberry. Now you can get all 59 flavors,” Mr. Fimmano said.

“Many of our employers have taken a step back on long-term care strategy as the dust settles on health care reform,” said Brad Cillian, director of supplemental benefit programs at IMA Inc. in Denver. “They are more focused on this new portfolio of supplemental health products — gap products — which resonate more with younger and middle-aged employee populations.”

But long-term care insurance historically has had much lower participation rates than other voluntary insurance products, such as long-term disability, accident coverage and dental insurance. Genworth estimates that when offered on an employee-pay-all basis, enrollment rates range from 4% to 10%, with older workers more likely to purchase it than younger workers.

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Long-term care insurance is much more expensive than other voluntary benefit products, making it less attractive when an employee must pay the entire cost.

A basic policy that will pay up to $162,000 for the long-term care needs of a 60-year-old working couple will cost $1,816 per year, according to the American Association for Long-Term Care Insurance. This compares with $500 annually for a dental plan.

Unfortunately, “if we can't get the agreed-upon participation requirements set by carriers, that affects underwriting,” IMA's Mr. Cillian said.

Though insurers offering multi-life products via the worksite use less rigorous underwriting standards than when selling to individuals, “there are still employees who won't qualify because they have early stage multiple sclerosis” or some other debilitating condition, said Jerry Manning, principal at J. Manning & Associates, a Chicago-based broker specializing in long-term care insurance.

Participation rates also may affect multilife product pricing, with most insurers giving discounts ranging from 5% to 15% off what they might pay buying the coverage in the individual market if a certain enrollment threshold is reached, he said.