Why Is There Not More Employer-Sponsored LTC Insurance?
Few people dispute that a long-term critical illness can devastate financial security for all but the most wealthy of us. Part of the solution, we believe, is to implement changes that will foster greater purchase of long term care insurance at the workplace. Here is why.
The odds of developing such illnesses are increasing. This is a problem for our health care system, and it is one of the reasons the Medicare system has such dismal future prospects.
Government estimates indicate there will be almost 70 million people over the age 65 by the year 2030 and that nearly 8.5 million of those will be over age 85.
At the present time, the government estimates 22% of people over age 85 live in nursing homes, with nearly half requiring help with normal activities. The cost for these services is enormous. At the present time, nursing home stays in this country cost $35,000 to $50,000 a year. Whats more, people who enter nursing homes stay for over two years and many stay much longer.
That means the cost for nursing home services is beyond the median net worth of households headed by people over age 65. Therefore, the ability to pay such staggering amounts, without government help or insurance, is well beyond the reach of the average wage earner.
What happens to those who need daily care but cannot obtain the necessary insurance to pay for it? They must either rely on the charity of their families or hope they are fortunate enough to live in a state with a Medicaid program that will pick up the cost of enabling them to survive with some modicum of dignity.
The vision of a hard working American spending his or her final years dependent on the charity of family or the government is not appealing. A better solution is long term care insurance.
For many years, conventional wisdom held that people who needed LTC insurance could not afford it and those who could afford it did not need it.
This was particularly true before enactment of the Health Insurance Portability and Accountability Act of 1996. HIPAA granted favorable tax treatment for premiums on tax-qualified LTC policies. For individuals, these premiums are treated as other health insurance premiums and–subject to the limitations applicable to all medical costs–are deductible. Moreover, premiums paid by employers are deductible in the same manner as are premiums for other types of health insurance provided by employers.
The years since 1996 have seen a remarkable interest, both in the insurance industry and on the part of consumers, in LTC insurance. Even so, there has been little employer involvement in providing this insurance to employees.
