Health & Medical
Long-term benefits
The dos and don'ts of purchasing long-term care insurance for your employees
By Kelly Tomkies
Smart Business Columbus | March 2003
In the next 10 to 20 years, there will be 40 million to 50 million Americans reaching an age where they may need long-term health care, either at home or in a nursing home, says Jim Bentley, account executive, benefits department, with Archer-Meek-Weiler Agency Inc.
"Baby boomers are approaching that age, and it's going to create a major crisis," says Bentley. "The costs of long-term health care will escalate."
Employers which address this need by offering employees long-term care insurance will have a competitive edge, he says.
"There are definite advantages to companies that offer long-term care insurance," says Bentley. "In some cases, the premiums are tax deductible."
If you offer the policy just to directors and officers and pay the premium in full, the entire cost is tax deductible. If you can't pay the entire premium up front, then pay it off within 10 years, so if prices go up, it won't affect you.
The biggest decision is whether to offer group or individual plans. Ann Burgoyne, account executive, employee benefits, with Berwanger Overmyer Associates, says it's important to offer three plans, each with a different level of benefits -- a less expensive plan with minimum benefits, a more expensive plan with maximum benefits and one somewhere in the middle. Burgoyne says individual plans offered on a group basis are most flexible, while group plan premiums are the most likely to face increases.
And make sure you purchase a plan that includes home care costs.
"Home care costs can be more expensive than a nursing home but a preference for the employee," Burgoyne says.
Bentley says the more employees you have, the better value group plans are.
"But one size fits all, so you may need another policy to cover what the group plan doesn't," he says.
Also consider how benefits are paid. An indemnity policy pays the monthly benefit amount regardless of how much long-term care costs are; a reimbursement policy only pays the actual costs.
An indemnity policy can help if a family member cares for you, because you still receive the benefit amount, says Burgoyne. However, once you reach the maximum amount, you won't receive any more payments.
With a reimbursement policy, if your benefit amount is $4,000 a month and you only use $2,000 a month, you can extend the life of the policy. How to reach: Archer-Meek-Agency Inc., (614) 221-3225 or www.archer-meek.com; Berwanger Overmyer Associates, (614) 326-4931 or www.e-boa.com
