Can a life insurance, LTC combination boost a firm’s benefit program?

Allen Wastler

By Allen Wastler
Allen Wastler is a former financial journalist with over 30-years of experience, including time at CNBC, CNN, and Knight-Ridder Newspapers.
Posted on May 19, 2021

In the midst of the ongoing pandemic with its alarming headlines about extended illness and hospitalizations, more and more businesses are looking at their voluntary benefit programs and looking at alternate ways to offer their employees protection for long-term care.

“So many people look to their employer for general financial help,” said Mike Hirschberg, MassMutual managing director of worksite and executive benefits who works with financial professionals to put together company benefit programs. “And long-term care is becoming a hot topic.”

About 40 percent of employers say the coronavirus outbreak has affected their views of the importance of benefits, according to a survey by the research group LIMRA.A quarter of the respondents to the survey said they are now more interested in updating their insurance benefits programs within the next 18 months.

One area they are looking at is long-term care. That was the case even before the pandemic due to the growing sandwich generation. More and more people with children are also taking on responsibility for aging parents, and so see the impact of extended care needs.

Yet, on an individual level, employers see reluctance among employees to take advantage of specific long-term care insurance offerings in company-sponsored voluntary benefit programs.

Why? There is a general tendency to believe that long-term care coverage is one of those things you might never need.

Indeed, findings from the recent MassMutual Long Term Care in America Study found that merely 15 percent of those surveyed believe suffering a long-term care issue is extremely or very likely.2

But the reality is that 70 percent of adults who live to age 65 will need long-term care in the future, according to the Department of Health and Human Services.3

That’s worrisome since a significant number of people don’t understand the costs of long-term care. According to the MassMutual study, 78 percent of survey respondents underestimated, overestimated, or could not guess the annual cost of nursing home care. This knowledge gap leads to a lack of confidence in the ability to pay for extended care.

When respondents were asked how they were going to pay for a potential long-term care need, 82 percent predicted that at least half of their care would be paid care, as opposed to familial care, and they would have to pay for it using personal savings or retirement funds.

There are a variety of options for preparing for such costs, including additional savings and insurance. Traditional long-term care insurance typically has been the choice for people who want to be prepared for the cost of care. However, some do not want to pay premiums for many years for coverage they may never need. In addition, the premiums for these types of policies are generally not guaranteed and have increased significantly in recent years.

However, other options and innovations are becoming available. These include life insurance policies that offer benefits for long-term care or chronic care. There are also some annuities becoming available that provide long-term care protection.

Employers are beginning to look at such innovations and what may be available for voluntary benefit plans as a way to help employees prepare for possible costs while overcoming the mental aversion to paying for something that may go unused. What options are available for a business through a voluntary benefits program can vary and most business owners seek out a financial professional to help them understand the choices.

“You can never plan for when someone may need care,” said Hirschberg. “But having access to benefits through an insurance policy takes pressure off and gives an employee and their family time to adjust and plan. And that’s a great benefit to make available to workers and help their financial wellness.”

And financial wellness in employees adds up to better business. In fact, according to a MassMutual employee financial wellness study, 74 percent of small business owners said employee financial well-being plays a significant role in workforce morale and productivity.4

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Hirschberg interview conducted in November 2020 and quotes represent the express opinion of the speaker.

1 LIMRA, “The Impact of COVID-19 on Employers’ Approaches to Workplace Benefits,” June 26, 2020.

2 MassMutual Long Term Care in America Study. Study Conducted by Greenwald & Associates. November 2019.

3 Department of Health and Human Services, “What is the lifetime risk of needing and receiving long-term services and supports?,” April 2019.

4 MassMutual 2017 Small Business Employee Financial Wellness Study.

 

The information provided is not written or intended as specific tax or legal advice. MassMutual, its subsidiaries, employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.

Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001.