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What Happened to Long-Term Care Insurance? Looming State-Mandated Programs On The Horizon

July 15, 2022

By Michael Cody, CLU, REBC, RHU

Principal, Senior Vice President

When long-term care coverage entered the employee benefits marketplace in the late ‘80s, it quickly grew over the next decade-plus.

But in the early 2000s, insurers noticed the mounting losses from a need that did not have extensive actuarial data on incidence and severity. The unpredictability of losses forced several insurers to raise prices substantially — sometimes in the range of 75% or more. They also stopped writing new policies or non-renewing existing policies.

About a decade ago, it seemed the long-term care marketplace was effectively dead. Since then, just about the only way someone could get coverage for LTC was through the purchase of a permanent individual life insurance policy where the accumulated cash value could be used if there was a typical LTC benefit trigger.

But due to ever-climbing costs for eldercare, inflationary pressures, medical costs, societal shifts and strained Medicaid budgets, a long-term care crisis is looming.

States Exploring Legislative Solutions

To address these growing risks, state governments have begun considering legislative solutions to fund government-administered long-term care programs.

Presently, only Washington State has passed such legislation, which is slated to take effect next year and will be paid for by a 0.58% payroll tax on all wages. Business owners with private LTC coverage in place prior to November 1, 2021, were permitted to opt out of the tax.

Although Washington is the first, it may not be alone for long. About a dozen other states are considering similar legislation — including California, which has already formed a task force to explore a statewide LTC program.

Employees are more concerned than ever about their acute and long-term health. Additionally, they are seeking additional help from their employer as they care for family members.

Private Long-Term Care Options Can Provide Businesses Choice

Given the momentum behind the LTC movement, businesses might consider private insurer-based options so employees can select the appropriate coverage levels to meet their needs.

At MMA and Lovitt & Touché, we have the expertise to help you devise a program that gives your employees choice and control of this important benefit before potential mandates are put into place.

If you want to learn more, contact us to explore your options.