I’m not talking about traditional long term care insurance (LTCI). In fact, I don’t even use the phrase “long term care insurance” anymore. And this is coming from a guy who has been deeply involved in the LTCI industry since 1991. I now use the phrase “long term care protection” which covers all types of long term care funding solutions including traditional LTCI. With some products being filed under IRC 7702(b) and some filed under IRC 101(g), and the licensing and marketing differences and restrictions for each, it is simply much easier and safer to refer to any long term care funding solution as “long term care protection.”
We are all aware that the traditional LTCI market is past its prime. Sales peaked in 2002 and have been declining since. But linked benefit sales, primarily life/long term care products, have been on the rise for the last decade. The linked benefit product category now dominates sales within the long term care industry.
There are two main types of life/long term care linked benefit products; the asset-based design that provides significant long term care benefit leverage much higher than the death benefit, and the traditional life insurance policy design that enables an acceleration of the death benefit for long term care needs. Each of these designs is offered on an individual policy chassis and not ideally suited for use in the employer market. That is, until now…
A Product Evolution
Traditional life policies that enable acceleration of the death benefit for long term care benefits have now migrated to the “True Group” arena. True Group refers to the product design by which an employer receives a master policy and the insureds receive certificates of coverage rather than individual policies.
True group products are inherently different from individual products. Common features of these true group life/long term care products include:
- Insureds in various states receive the same coverage as those in the domicile state where the master policy is issued, i.e., this eliminates state product variations or the risk of no product availability in certain states;
- Unisex pricing is available (HR folks love this);
- Significant underwriting concessions are available, including guaranteed issue for both employees and their spouses/domestic partners;
- Cash benefits for the long term care claim; and,
- Group sizes as small as five full-time employees.In addition, and this is big in my opinion, some true group life/long term care products now offer an extension of long term care coverage beyond the acceleration of the original death benefit. That is a rarity with an individual, traditional life insurance product with a long term care acceleration rider.
In addition, and this is big in my opinion, some true group life/long term care products now offer an extension of long term care coverage beyond the acceleration of the original death benefit. That is a rarity with an individual, traditional life insurance product with a long term care acceleration rider.
Wait, There’s More…
There are two additional trends that contribute to the new opportunities we now have to offer long term care protection in the employer market using true group life/long term care linked benefit products.
The first trend is the rising prices of traditional LTCI. One consequence of higher traditional LTCI prices is that the difference in pricing between the traditional model and the new linked benefit model has closed significantly. In fact, a 40-year-old can purchase a similar pool of long term care benefits in a true group life/long term care linked benefit plan at a premium lower than if purchasing traditional, individual LTCI. And for a 50-year-old, the pricing for each product design is similar. Also, many of the new true group products offer guaranteed premiums, i.e., you take the risk, and message, of potential future rate increases off the table. Purchasing a pool of long term care benefits, which also includes a death benefit if no long term care services are ever needed, at lower or similar premiums compared to traditional LTCI, makes for a very compelling value proposition to employees.
The second trend involves developments in technology. Today, people shop and buy products online, including insurance products. Many insurance sales today occur online where the broker utilizes screen sharing, webinars, and electronic applications. There are enrollment firms that have built platforms to offer these new true group linked benefit life/long term care products completely online. The employees can view a virtual meeting, customize their benefits and rates, chat with a benefit advisor to get questions answered, and enroll online with an electronic signature. The need for a face-to-face meeting with a broker has been replaced with technology. And frankly, most employers prefer this new method.
Summary
The elements below summarize why there is now tremendous opportunity to offer quality long term care protection in the employer market utilizing true group life/long term care linked benefit products:
- Significant underwriting concessions, including guaranteed issue.
- Competitive pricing as compared to traditional LTCI.
- Death benefits if no long term care services are needed.
- Long term care benefits exceed the death benefit.
- Uniformity of coverage across state lines.
- Guaranteed, unisex premium rates available.
- Cash long term care benefits at time of claim.
- Fully portable coverage if employee leaves.
- Group sizes as small as five lives qualify.
- 100 percent online enrollment services available.
Many of us have read the excellent book Blue Ocean Strategy, which describes how to effectively win in the market by swimming in new, uncontested waters. The migration of life/long term care linked benefit products into the true group arena has created a new, blue ocean of opportunity for offering long term care protection to employees through their employers. Many have thought the employer marketplace to be long dead for offering long term care. I have to tell you, those that believe that are dead wrong.
And let’s remember one more important fact. The need for private long term care funding sources still exists and is still the responsibility of the individual, not government. The need for long term care planning is still here, and still will be here in the future. I expect a significant resurgence in the employer market in 2019 and beyond for selling long term care protection. I suggest you jump in now before the water turns red. The water is still very blue and feels great.
