The U.S. population is aging and, as it does, the need for long-term support and services will only grow. According to a 2017 fact sheet from the AARP Public Policy Institute, on average, 52% of people who turn 65 today will develop a severe disability that will require long-term care (LTC) at some point. For this reason, among others, employers should consider offering LTC insurance as a fringe benefit.
High cost of care
LTC insurance helps covered individuals pay for the care they need because of a severe cognitive impairment or if they need assistance with activities of daily living (ADLs), including bathing, dressing, toileting and eating. They might require assistance because of an accident, disability, chronic illness or aging.
The costs associated with such care have skyrocketed. AARP reports that the average annual cost of a private room in a nursing home in 2016 was about $92,000, with a shared room costing around $82,000 annually.
The average cost for a home health aide in 2016 was $20 per hour. With the average aide working about 30 hours per week, that came out to $31,000 per year. And, to the surprise of many, Medicare doesn’t pay anything for LTC, whether in-home or at a facility.
LTC insurance isn’t cheap. But by buying the insurance on a group basis, you may be able to obtain a discount from the individual policy rates.
You also might qualify for a guaranteed issue plan that provides coverage regardless of health status and need — meaning employees who might not be able to get coverage on their own would now have one less thing to worry about.
From a tax perspective, you can claim a deduction for the premiums you pay, and neither the premiums nor the benefits are taxable for the employee.
The positive impact of offering LTC insurance can play out over the long term. First, a fringe benefit like this can draw better job candidates who are looking for more than just basic health care coverage. It might help you retain employees as well — especially those who are already looking toward retirement and beyond.
Think about extending LTC insurance to employees’ family members, too. As AARP notes, unpaid family and friends provide most LTC support, often incurring direct costs as well as lost wages and benefits. Employees providing caregiving could be forced to cut their work hours, take easier positions or quit work altogether.
By providing coverage for their family members, you could reduce the caregiving burden on your employees, relieving stress on them — and probably reaping productivity gains to boot.
A worthy consideration
Not every employer will have room in its benefits budget to buy LTC coverage. But if you’re looking to upgrade your fringe benefits, this is one perk that’s well worth considering. To discuss further, please contact us.