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The number of employers offering long-term care insurance by the end of 1996 grew 21.6% from the year-end 1995 level, according to a recent survey.
Most of the plans employers offered were employee "pay-all" plans, but 432 of the 1,532 employers reporting they offer the benefit paid at least part of the LTC premium for employees and/or retirees, the Washington-based Health Insurance Assn. of America said in its survey report. Among employers that do not subsidize the premium, the average employee participation rate was about 6%, according to the report.
That low participation rate "is one of the stumbling blocks" in the employer market, said Susan Coronel, long-term care director for the HIAA. Among all other benefits, employees often see long-term care as a low priority. While those employees who are not educated about long-term care tend not to buy it, those who have had experience with persons who needed long-term care are more likely to purchase the coverage, Ms. Coronel said.
Greater employer promotion of the benefit also spurs growth, she said.
More small employers are offering the benefit than large employers. Among the employers offering long-term care insurance at the end of 1996, 51.95% had 100 or fewer employees, 13.03% had a workforce of 1,001 to 5,000, 9.12% had from 5,001 to 25,000 employees, and 5.13% had 25,000 or more. HIAA based those percentages on data derived from 12 LTC insurers that represent 80% of the market.
The reasons more large employers are not offering the benefit is that they tend to have more concerns about the legal and tax issues involved in offering a new benefit, and employers in recent years have been focused on trimming benefits, Ms. Coronel said.
Policies sold through the employer market accounted for more than 650,000 of the 4.96 million policies in force at the end of 1996. The remainder were sold to individuals, through the group association market or as accelerated death benefit riders to life insurance policies. The year-end 1996 total for policies sold through all sources is 14% greater than year-end 1995. The annual rate of growth averaged 22% from 1987 to 1996, the HIAA report states.
The main factor in the increase of policies in 1996 over 1995 was the discussion and ultimate passage of the Health Insurance Portability and Accountability Act late that year, said Ms. Coronel. Consumers were educated by the discussion and took advantage of the opportunity to purchase pre-1997 policies that would then be grandfathered into a tax-qualified status under HIPAA, as long as the policies were qualified under state long-term care insurance requirements. Under the law, employers can pay a certain amount of employee LTC premiums without employees being taxed. And consumers who pay for the coverage themselves can count the premium as a medical cost for tax purposes.
The HIPAA legislation came after the 1994 demise of national health care reform legislation, which sent a "clear signal from government that (long-term care) is not going to be a social benefit" and that consumers must provide it for themselves, Ms. Coronel said.
When data from 1997 is analyzed, growth will probably remain in the range of the past couple years. During the first part of the year, insurers were occupied with reformatting and refiling policies to attain tax-qualified status. Because of that, the real impact of HIPAA won't be seen until this year's figures are analyzed, she said.
Ms. Coronel said the survey also shows that premiums in the employer market have stabilized, if not decreased slightly. They are comparable with the individual market. The average annual premium for individual policies containing a $100-a-day nursing home benefit and a $50-a-day home health care benefit, four years of coverage and a 20-day deductible was $247 at age 40, $364 at age 50, $980 at age 65, and $3,907 at age 79. The premiums increase significantly with a 5% compounded inflation feature.
Copies of "Long-term Care Insurance in 1996" are available from the Health Insurance Assn. of America for $25 each, plus shipping and handling, by calling 800-828-0111.