Whether you’re a home office marketer or a producer in the field, you’re always searching for new ways to expand your business. Yet, you may be overlooking the growing sales potential for long-term care insurance, particularly in the worksite market. The multi-life market is steadily growing, but still undersold. People are showing an interest in, and then purchasing LTCI at a younger age than ever before, and the multi-life market provides access to these consumers.
Long-term care insurance is taking hold as a popular voluntary benefit as employers seek inexpensive ways to keep their valued employees happy while minimizing expenses under a strained economy. While you probably realize that worksite sales are a key to quickly expanding your business, you may still hesitate to jump into this market. With nightmarish visions dancing in your head of investing months laying the groundwork for a great employer case and exhausting yourself selling your tail off only to get a 5% participation rate, no wonder you are avoiding taking the plunge. But think how easy it would be to get employees to enroll and how much more profitable it would be for you if you could only manage to convince the employer to contribute something, anything, to the plan. Well, here’s a newsflash. It’s not as hard as you may think to get a budget-conscious employer to offer employer-paid LTCI — especially when you can tell them it will only cost $5 a month per employee. No kidding! Here’s how.
In today’s society, the reality is that elder care is expected to replace childcare as the number one dependent concern for employees. As employees become caregivers to parents and other family members, they often have to reduce work hours or leave work entirely to provide that care. This means lost productivity and lost money for employers. More than one-third of employed caregivers surveyed reported cutting back on work hours or quitting work entirely in order to fulfill their caregiving duties, according to a 2007 survey conducted by the National Alliance for Caregiving. The resulting lost productivity costs businesses as much as $34 billion annually, or an average of $2,110 for each of the estimated 15.9 million caregivers working full time. What if you could walk into a meeting with a benefits specialist or a CEO of a company and tell them that they could protect themselves against this risk for just $5 a month for each employee? Don’t you think that would grab their attention?
An employer-sponsored long-term care insurance plan can help protect companies, their employees, and their employees’ families against the potentially crushing financial impact of a long-term care crisis. With a $5 a month contribution for each enrolling employee, an employer can offer a base LTCI cash plan to their employees. Yes, that’s right. Cash. So now you have two sales points working together. Not only is the employer offering employees access to the protection of LTCI for little cost to the employee, but that coverage can be presented in terms that are easy to understand. With a cash benefit, there is no need to explain complex contract language or definitions of covered types of care. Cash is most relevant to the working age adult who may not need care for many years because a cash benefit will provide maximum flexibility today and 30 years from now, paying for whatever types of care evolve in the future. This means it’s easier to target the entire base of eligible employees, including those spry 30 year olds who may have scoffed at purchasing traditional reimbursement LTC coverage.
In addition to just being good business, offering employer-paid long-term care insurance reaffirms the employer’s philosophy behind a matching funds contribution to employees’ 401(k) accounts. Whether it is building a retirement through a 401(k) or protecting it with long-term care insurance, the message is the same: “If you care, I care.” When employers offer matching funds for their employees’ 401(k) contributions, it encourages the employees to participate in a retirement savings plan that they may otherwise overlook. By contributing to a long-term care insurance plan, the employer once again draws the employees’ attention to an often overlooked benefit, and encourages them to take advantage of the opportunity to protect themselves and their hard-earned dollars. Making a $5 a month commitment demonstrates that the employer values the coverage, which in turn solidifies the importance of the protection in employees’ minds, and encourages them to enroll. In fact, 82% of LTC enrollees said that their employer’s contribution was very important in their decision to purchase a policy, according to a recent HIAA study. That employer support is a key element in drastically improving your participation rate.
Now, let’s talk affordability – for the employer and the employee. The employer-sponsored plan provides advantages to all involved. In addition to providing protection for the employer against lost productivity costs, even partially funding an LTCI plan has tax advantages. For example, in a C-Corp, 100% of all LTCI premiums an employer pays are tax deductible, allowing a savings of up to 40% on actual premium expenses. To illustrate how negligible the impact would be on an employer’s bottom line with the $5 a month plan, consider this: if an employer has 127 employees and 57 of those purchase a policy, the yearly cost to the employer per employee is a mere $60. Over the course of a year, the employer will pay $3,420. Assuming a 35% tax bracket, the actual amount invested in the plan after taxes is just $2,223. And, the cost of coverage is easy for businesses to forecast and manage because premiums are based on age and health at time of enrollment.
Now that you’ve seen how affordable an LTCI offering can be for the employer, I’m sure you’re wondering what the cost is to the employee. First, consider that the average age of LTCI purchasers in the worksite is 47. Because there is a generally a long time horizon with these prospects, they want to know they will be covered for whatever type of care evolves in the future, and a cash plan provides that flexibility. Although cash LTCI is often a bit more expensive than a reimbursement plan, it tends to be more appealing to the bulk of worksite prospects.
In terms of dollars and cents, you’ll find that even with a cash plan, the rates are pretty affordable. For example, if you were to quote a base plan that offers $100,000 in benefits paid out at $1,500 monthly with a 90-day elimination period and no inflation, the premium contribution for a 47-year-old employee would be about $11 a month. That’s less than one latte a week. On either end of the spectrum, a 30-year-old purchasing the same plan would pay around $1 a month, and a 60-year-old would pay $34 a month — just a little over $1 a day. Affordable, right?
I would be remiss if I didn’t offer a word of caution about this plan, however. Particularly because of the age bracket you are dealing with, it is important to consider offering some form of inflation protection when quoting policies. If you were to take that same policy and add a 5% compound inflation rider with a maximum limit of double the original benefit amount selected, the premium contribution required by the 47-year-old would increase to around $22 a month. For the 30-year-old, the contribution would be $5 monthly, and the 60-year-old would pay $59 monthly. Premiums paid by the employee may be tax deductible on the employee’s federal income taxes, and some states offer tax credits for LTCI premiums paid as well. Everyone wins.
By offering LTCI in the workplace, employers are protecting themselves while protecting their employees’ retirements and taking care of their employees’ families who also have the option of purchasing a policy at the discounted rates. Talk about expanding the sale!
Long-term care insurance doesn’t have to be complicated, and it doesn’t have to be expensive. If you market it correctly, it’s simple, affordable, and just good business. With the $5 employer-paid case, employers can help their employees truly protect their retirement funds while protecting themselves from the cost of lost productivity, and you can build your business by leaps and bounds.
Stuart Kent Demars, CLU, CHFP, began selling long-term care insurance after he experienced a long-term care crisis in his family. He attributes his success to being able to relate his personal experience to those he encounters in the business-to-business market, and turning the emotional sale into a sound business decision.