(This article first appeared in the August/September 2023 issue of Aspire Magazine)
It has only been about 15 years, but long term care insurance (LTCI) is popular again. All of us in the LTCI biz knew this might be inevitable. After all, we can see the demographics “writing on the wall.” There are over 50 million family caregivers in the United States. They can only do so much until professional home care or facility care is needed. The collision of baby boomers needing care, states paying attention to the crushing need, and the impact on family caregivers has made LTCI popular again. Well, sort of.
You may have heard this story: Without long term care planning, extended care is paid out of pocket. Once income and assets are depleted, Medicaid kicks in. But what happens when Medicaid runs out of money?
The year is 2021. Washington State is ground zero with the second highest cost of home care in the nation. Leaders in the state can see a crisis on the horizon. As a result, Washington passed a law requiring a long term care payroll tax on all W2 employees who do not own private insurance. With a deadline set for six months after passage of the law, a fire sale ensues. The result was the sale of over 400,000 LTCI or hybrid policies in a single state in six months. In the prior year, less than 100,000 policies focused on long term care were purchased nationally—a generational low.
One group hybrid LTCI carrier sold nearly 200,000 policies, or $100 million of premium, representing almost half the policies in Washington. While an incredible stat, the one that may be more incredible is that this same carrier sold over $100 million in 2022, without a payroll tax looming. There was continued demand for this product.
New Long Term Care Funding Solutions
The group hybrid long term care market is growing 50 percent per year. Carriers are paying attention, and other states are as well. California and New York are slowly exploring their own payroll taxes, as are as many as 30 percent of all other states according to a recent Nationwide study. There are many more carriers entering the market with long term care riders on their group life policies.
These new options are popular not just because of the payroll taxes. They nailed a target market: Guaranteed issue underwriting, affordable price points of $500 to $1,000 per year, easy to access product offerings through education and enrollment through employers and associations.
LTCI as a starter plan through the employer helps the 97 percent of Americans who currently do not own long term care insurance. The best way to help someone get comprehensive coverage in the future may be to get them a smaller plan now.
Whether you work with individuals or groups, you will feel the impact of the demand. When your neighbors, friends, families, and clients start asking you about the insurance offered through their employer, what will you tell them? Do you think the policies are too small to make a difference?
A Closer Look at Guaranteed Issue Products
Let’s look at these long term care extension riders for the masses. You may be surprised what you can get for $1,000 per year on a guaranteed issue basis. One of the most popular products in the individual long term care market is a life insurance hybrid that not only accelerates the death benefit, but also extends long term care coverage once the death benefit is exhausted. Following in those footsteps, these features have become popular on group products too. For $1,000 per year, you not only get a $100,000 death benefit if you don’t need long term care, but should you run out of coverage over 25 months, you might get another 25 or maybe even 50 months of additional coverage—as much as $300,000 total.
Value plus ease of access is driving this renaissance in long term care planning solutions.
An Opportunity to Build Your Business
What can you do to participate in this market growth? First, realize that even if you work with individual clients, they may have links to an employer group or association that can set up a group long term care program. We see guaranteed issue carve out solutions for as few as 25 executives at price points that are affordable for employers to comfortably fund the entire group. Your individual clients may be business owners and white-collar professionals who you already help with life, annuity, or disability income planning. Funding a plan for 25 of their colleagues on a guaranteed issue basis is within reach.
As more carriers enter the market and more states take further steps to implement their own long term care payroll taxes, it is inevitable that this market will continue to surge. What are you doing to prepare yourself for the resurgence of LTC insurance?