What is a true group long-term care plan?

We define a true group long-term care plan as one that encourages high employee participation and meets employers’ objectives by using plan designs to reward and retain the most valuable employees. Features like vesting, waiting periods, and employer contributions make it much more likely that employees will participate in the plan and can keep an employer's cost to a level similar to a group dental plan. Thus, a true group plan differs from a voluntary or payroll deduction plan in which the employer does not contribute.

How much does a true group long-term care plan cost?

To demonstrate how much a long-term care offering could cost an employer, let’s discuss the following plan at $150/day with these attributes:

• unlimited lifetime benefit
• 30-day elimination period
• 5% compound inflation indexing

For this plan, a 45-year old pays $130.80 per month with an average cost per employee (all ages) of $140.14. Remember that as a voluntary benefit, employees pay the entire amount. Although this plan provides sustained protection against future losses, the rate is expensive and warrants a more cost-effective approach. Therefore, we move the plan to true group and adjust the overall cost of $140 per employee per month in following fashion thereby achieving a $25 per employee per month rate - similar to the cost of a dental plan.  

If we apply a similar analysis to a different plan design with $100/day, a three-year maximum and inflation limited to future offers of increase coverage, the cost per employee per month would be only $4.62.

Note! For an essential perspective about true group long-term care, please reference the book True Group Long-Term Care by Milliman’s consulting actuaries Jon Shreve and Jill Van Den Bos (published by the International Foundation of Employee Business Plans).

Why is true group long-term care so important?

• Many Americans will have no way to pay for long-term care services when they are needed.
• Insurance for long-term care will not become widespread if only available on an individual basis, which means that the change will need to come first from employers.
• Group coverage needs to include employer contributions to make it affordable to employees and vesting to make it affordable to employers.