Tony Dillard writes: This is in response to the letter to the editor by Margie Emch in the October 2008 LTC e-Wire (Letter: Inflation option is costly). The problem of LTC policies sold at worksites without inflation protection rests on a 50-50 fault basis: 50% is the fault of the insurance company being represented; and 50% is the fault of the agent who sold the idea of a small employer-funded core benefit.

The company’s fault lies in promoting guaranteed issue for a small base plan for all employees, because the insurance carrier knows their claim exposure will be little to none. The truth of the matter is, if the employee does not buy up from this base plan, a claim most likely will never take place.

Using myself in this example, I am 39 years old and live in Dallas-Fort Worth, Tex. Our average cost of care, according to the interactive cost of care map from Genworth, Richmond, Va., is $60,640 for a nursing home and $40,704 for home health care. Let’s say I had a plan offering a 3-year, $2,000 monthly indemnity benefit, not a cash benefit. If I don’t buy up and have an earlier-than-expected nursing home claim, say next year, I would be required to write a personal check for $3,000 to go with the $2,000 from the LTC carrier to fund my care. How many baby boomers and gen-Xers have that kind of monthly income available, especially during a recession?

Also, if I don’t have $3,000 to coinsure, I will not be able to stay in the facility very long after they figure out I can’t pay the entire bill. The problem may not be as horrific with a home health claim, because most home care is part time, and the expense is less. However, the problem of coinsuring still exists.

And then there is the Medicaid question. Can you have an LTC insurance policy and qualify for Medicaid?

In my book, a buy-up from an employer-funded core LTC benefit is one in which the employee adds to his or her plan in such a manner that it would cover the average 3-to-5-year claim. And you know what? Most employees don’t do this.

As for the agent’s 50% share of the fault for selling their business client on the idea of an employer core LTC benefit with the ability to buy-up, consider this: Many company and brokerage representatives are teaching agents to sell this way. What they should be doing is recommending that agents talk to their business clients about implementing a rich core Partnership benefit for key executives that will pay for a minimum of 3 years of quality care at claim time. In most cases, the money that is paid for a small employer-pay-all core benefit will be the same, maybe even less, for a rich key executive LTC insurance Partnership carve-out plan.

Modified guarantee issue underwriting (that means underwriting takes place on the application only) is available to groups as small as three. The employer can then offer a voluntary benefit to the rank and file if they wish. Why offer a small benefit to someone if they are not going to nurture it? Because that is what agents have been taught to do.

This message is my personal opinion and is not an attack on the agent who wrote the letter to the editor. However, I abhor employer-pay-all small LTC insurance core benefit offerings unless the employer allows for a comprehensive and robust marketing campaign to take place prior to an enrollment to all employees.

Tony Dillard
Vice-President of Marketing
America’s Long-Term Care Insurance Experts
New Braunfels, Tex.
tony@americasltciexperts.us