Group long-term care insurance: decision-making factors and implications for financing long-term care

This study proposes and tests a systemic family decision-making framework to understand group long-term care insurance (LTCI) enrollment decisions. A random sample of public employees who were offered group LTCI as a workplace benefit were examined. Findings reveal very good predictive efficacy for the overall conceptual framework with a pseudo R2 value of .687, and reinforced the contributions of factors within the family system. Enrollees were more likely to have discussed the decision with others, used information sources, and had prior experience when compared to non-enrollees. Perceived health status, financial knowledge, attitudes regarding the role of private insurance, risk taking, and coverage features were additional factors related to enrollment decisions. The findings help to inform policymakers about the potential of LTCI as one strategy for financing long-term care.     

The importance of employer sponsorship in the long-term care insurance market

Medicare and Medicaid are major sources of long-term care payments and thus will bear much of the burden from the growth in long-term care service use. The large future demand for long-term care services is of great concern among policymakers due to its expense and the use of public program dollars. It is argued that the individual purchase of long-term care insurance can help alleviate the increasing financial pressure on public programs responsible for the majority of longterm care financing. However, consumers have shown little interest in insuring against the high costs of long-term care. This analysis examines the effect of several factors on the decision to purchase a long-term care insurance policy: knowledge and attitudes of long-term care insurance and the long-term care financing system, the perceived risk for longterm care, financial planning behavior, and the availability of long-term care insurance. The interim results indicate the factor most likely to affect the decision to purchase long-term care insurance is access to employer-sponsored long-term care insurance. This suggests tht the availability of affordable and high quality coverage is more important than demand-side factors such as awareness of long-term care insurance and a perceived greater risk for long-term care.     

Group Long-Term Care Insurance: Decision-Making Factors and Implications for Financing Long-Term Care

This study proposes and tests a systemic family decisionmaking framework to understand group long-term care insurance (LTCI) enrollment decisions. A random sample of public employees who were offered group LTCI as a workplace benefit were examined. Findings reveal very good predictive efficacy for the overall conceptual framework with a pseudo R² value of .687, and reinforced the contributions of factors within the family system. Enrollees were more likely to have discussed the decision with others, used information sources, and had prior experience when compared to non-enrollees. Perceived health status, financial knowledge, attitudes regarding the role of private insurance, risk taking, and coverage features were additional factors related to enrollment decisions. The findings help to inform policymakers about the potential of LTCI as one strategy for financing long-term care.     

Supplemental Retirement Savings Plans in the Public Sector: Participation and Contribution Decisions by School Personnel

Virtually all full-time state and local government employees are covered by a retirement plan, typically a defined benefit plan, in which they are required to participate. In addition, most school employees have the option of choosing to contribute to a voluntary retirement savings plan offered by their school district. Relative to private sector workers, public employees face an expanded choice of retirement savings plans. Federal tax policies allow state and local governments the opportunity to offer both 401(k) plans and 457 plans to their employees. In addition to these plans, public schools and certain other organizations can offer 403(b) plans to their employees. This paper examines the decision to participate in a voluntary savings plan and the level of contributions for those that enroll in at least one of the plans. The analysis begins by describing the savings options available to public school employees and how these plans differ. The findings indicate that the same economic and demographic factors that influence saving decisions by private workers also drive the decisions of school employees. The three savings plans offered to public employees have many similar characteristics; however, several differences in the plans imply that certain workers may prefer one plan type over the others. Probit and Tobit models of participation in any plan and total annual contributions are estimated. Finally, we estimate the determinants of the decision to choose any one or a combination of savings plans.     

Financing reform for long-term care: strategies for public and private long-term care insurance

The way the nation provides for the financing and delivery of long-term care is badly in need of reform. The principal options for change are private insurance, altering Medicaid, and public long-term care insurance. This article uses the Brookings-ICF Long-Term Care Financing Model to evaluate each of these options in terms of affordability, distribution of benefits, and ability to reduce catastrophic out-of-pocket costs. So long as private insurance is aimed at the elderly, its market penetration and ability to finance long-term care will remain severely limited. Affordability is a major problem. Selling to younger persons could solve the affordability problem, but marketing is extremely difficult. Liberalizing Medicaid could help solve the problems of long-term care, but there is little public support for means-tested programs. Finally, universalistic public insurance programs do well in meeting the goals of long-term care reform, but all social insurance programs are expensive and seem politically infeasible in the current political environment.     

Defined contribution health benefits

This Issue Brief discusses the emerging issue of "defined contribution" (DC) health benefits. The term "defined contribution" is used to describe a wide variety of approaches to the provision of health benefits, all of which have in common a shift in the responsibility for payment and selection of health care services from employers to employees. DC health benefits often are mentioned in the context of enabling employers to control their outlay for health benefits by avoiding increases in health care costs. DC health benefits may also shift responsibility for choosing a health plan and the associated risks of choosing a plan from employers to employees. There are three primary reasons why some employers currently are considering some sort of DC approach. First, they are once again looking for ways to keep their health care cost increases in line with overall inflation. Second, some employers are concerned that the public "backlash" against managed care will result in new legislation, regulations, and litigation that will further increase their health care costs if they do not distance themselves from health care decisions. Third, employers have modified not only most employee benefit plans, but labor market practices in general, by giving workers more choice, control, and flexibility. DC-type health benefits have existed as cafeteria plans since the 1980s. A cafeteria plan gives each employee the opportunity to determine the allocation of his or her total compensation (within employer-defined limits) among various employee benefits (primarily retirement or health). Most types of DC health benefits currently being discussed could be provided within the existing employment-based health insurance system, with or without the use of cafeteria plans. They could also allow employees to purchase health insurance directly from insurers, or they could drive new technologies and new forms of risk pooling through which health care services are provided and financed. DC health benefits differ from DC retirement plans. Under a DC health plan, employees may face different premiums based on their personal health risk and perhaps other factors such as age and geographic location. Their ability to afford health insurance may depend on how premiums are regulated by the state and how much money their employer provides. In contrast, under a DC retirement plan, employers' contributions are based on the same percentage of income for all employees, but employees are not subject to paying different prices for the same investment.     

Questions and answers on health insurance benefit issues

This Issue Brief addresses eight topics in the areas of health insurance and health care costs. Using a question and answer format, the discussion draws largely on EBRI research and the EBRI Databook on Employee Benefits, third edition. In 1993, U.S. expenditures on health care were $884.2 billion, and they are projected to reach $2,173.7 billion by 2005, increasing at a projected average annual rate of 7.8 percent. Health care spending accounted for 13.9 percent of Gross Domestic Product (GDP) in 1993 and is projected to reach 17.9 percent of GDP by 2005. Among the factors contributing to the increase in health care costs are the growth in the number of individuals with traditional reimbursement health insurance coverage, the rapid expansion of technology and treatment options, and demographic factors such as the aging of the population. In 1993, employers, both public and private, spent $235.6 billion on group health insurance, accounting for 6.2 percent of total compensation. Group health insurance is the fastest growing component of total compensation, increasing at an average annual rate of 13.7 percent from 1960 to 1993. An increasing number of employees are required to make a cash contribution to their health insurance plan premium. In 1993, 61 percent of full-time employees in medium and large private establishments who participated in an employee only health insurance plan were required to make a contribution to the premium, up from 27 percent in 1979. In 1993, 185.3 million persons under age 65 had health insurance coverage, while 40.9 million people--or about 18.1 percent of the nonelderly population--received neither private health insurance nor publicly financed health coverage. Of those individuals who had health insurance coverage, 60.8 percent, or 137.4 million persons, received their health insurance through an employment-based plan. In 1993, 15.2 percent of the nonelderly population without health insurance coverage were noncitizens. In six states noncitizens represented a higher proportion of the total uninsured population than individuals in the nation as a whole. An increasing number of employers are self-funding their health insurance plans. In 1994, 74 percent of employers with 500 or more employees self-funded their health insurance plans, up from 63 percent in 1993. An estimated 22 million full-time employees in private industry and state and local governments participated in a self-funded employment-based health insurance plan.(ABSTRACT TRUNCATED AT 400 WORDS)     

Voluntary long-term care insurance: best practices for increasing employee participation

This is the second of two Issue Briefs (April and May 2000) on long-term care (LTC) insurance. The previous Issue Brief addressed the problem of increasing sponsorship, while this report addresses the issue of increasing employee participation. Participation rates in group LTC insurance plans tend to be low. A potential watershed event for the development of the employment-based group LTC market is the proposed LTC program for federal employees and retirees (a program that would have to be enacted by Congress). The perception of a successful offering to federal employees could provide an enormous boost to the group LTC insurance market. Employee communication and education are seen as critical to the success of LTC enrollments. The importance of support shown by an employer for a new LTC plan offering cannot be overstated. Unlike 401(k) plan participation trends, LTC participation rates are highest among large companies. Insurers tend to view the 40-60 age range as the primary target for group LTC insurance, and employee salary as the best predictor of LTC insurance enrollment. Higher educational levels also are associated with higher levels of LTC participation. Perceived need for LTC insurance is perhaps the biggest barrier to the purchase of LTC insurance by employees due to competing financial priorities and the fact that LTC issues are generally off the "radar screens" of younger employees. Plans with skilled nursing home and home care benefits experience higher participation rates than plans lacking these benefits. The availability of lower-cost and long duration benefit options can be an important factor in determining participation. Most sponsors have chosen to offer noncontributory (i.e., fully employee-paid) LTC plans. Employer reluctance to make contributions may be caused by HIPAA's prohibition on the inclusion of LTC insurance in cafeteria plans. One of the major advantages of group LTC plans is the availability of guaranteed issue (i.e., issuing coverage without requiring evidence of insurability) for employees, which is not available in the individual LTC market. It is easy for enrollment to be derailed by the presence of any of a number of harmful conditions, such as employer-sponsors who distance themselves from the offer, ineffective communications, or difficult enrollment processes. Achieving consistently strong levels of participation in LTC plans will require employer-sponsors and their insurance carriers to form strong partnerships, with worker participation as their primary stated goal.     

Convergence of long-term care planning and retirement planning at the work place

There is an increasing expectation that the private-sector should provide needed solutions to pressing problems in long-term care. Long-term care insurance has figured prominently in recent discussions. Within the long-term care insurance market, the potential of the employer in making such insurance available to employees has been discussed extensively. This paper traces the increasing convergence of retirement planning and long-term care planning at the work place. The long-term care insurance market has come a long way, and the employer-sponsored segment of the market has recorded the highest rate of growth in recent times. Furthermore, the employer-sponsored market is beginning to diversify. Low take-up rates still remain a problem. Recent rapid growth of the market coupled with the federal government's involvement as an employer offering long-term care insurance is bound to expand the market further.     

Employer-sponsored long-term care insurance: best practices for increasing sponsorship

Behind the enthusiasm of policymakers for long-term care (LTC) insurance is the belief that increased ownership of private LTC insurance will reduce the government's future liability for financing the nation's LTC needs, currently projected by the Congressional Budget Office to increase by 2.6 percent annually between 2000 and 2040. Some observers say that sustained economic growth could keep these increased expenditures at the same share of total GDP; others argue that current federal expenditure trends will become unsustainable without large tax increases. The potential of the employer-sponsored group LTC market to stave off a national LTC financing crisis has recently started to receive popular notice in the news media. However, for the potential of the group LTC market to be realized, there must be widespread employer sponsorship of group LTC plans and significant participation levels among eligible employees in these plans. The present analysis of industry data estimates the LTC plan sponsorship rate for all U.S. employers with 10 or more employees at 0.2 percent. The sponsorship rate among large employers is significantly higher (8.7 percent). The greatest growth opportunities are projected to lie in the smaller employer market, because it is enormous and virtually untapped. Nonsponsors cite a variety of barriers to employer sponsorship of LTC plans. For many nonsponsors, the most important obstacles are the intrinsic characteristics of their work forces: employees are too young, transient, part-time, and/or low-income to be suitable for LTC insurance. For many others, lack of awareness and low priority are the primary obstacles. Because group LTC insurance has been widely available for only 10 years, many benefits managers view it as "too new and untested." Prior to the passage of the Health Insurance Portability and Accountability Act (HIPAA), in August 1996, the tax treatment of long-term care insurance premiums was unclear because Congress had not addressed the issue and the Internal Revenue Service had not issued clear guidance. In essence, HIPAA served to clarify the tax status of LTC insurance and establish product criteria for tax qualification. The interventions contained in HIPAA appear to have been insufficient to stimulate coverage growth rates that will meaningfully reduced the future burden on government financing of LTC. Although employment-based LTC insurance appears to be the best mechanism for mass expansion of coverage at affordable rates, the data suggest that employer sponsorship of LTC plans is relatively rare, especially among smaller employers, and that sponsorship rates may not dramatically increase without significant investments in employer education and new incentives.     

Financing Reform for Long-Term Care

The way the nation provides for the financing and delivery of long-term care is badly in need of reform. The principal options for change are private insurance, altering Medicaid, and 110 FROM NURSJNG HOMES TO HOME CARE public long-term care insurance. This article uses the Brookings-ICE Long-Term Care Financing Model to evaluate each of these options in terms of affordability, distribution of benefits, and ability to reduce catastrophic out-of-pocket costs. So long as private insurance is aimed at the elderly, its market penetration and ability to finance long-term care will remain scverely limited. Affordability is a major problem. Selling to younger persons could solve the affordability problem, but marketing is extremely difficult. Liberalizing Medicaid could help solve the problems of long-term care, but there is little public support for means-tested programs. Finally, universalistic public insurance programs do well in meeting the goals of longterm care reform, but all social insurance programs are expensive and seem politically infeasible in the current political environment. The way the nation provides for the financing and delivery of long-term care is badly in need of reform. No other part of the health care system generates as much passionate discontent as does long-term care. At the heart of the problem is the absence of any satisfactory way to help people anticipate and pay for long-term care. The disabled elderly find, often to their surprise, that the costs of nursing home and home care are not covered to any significant extent by Medicare or private insurance. Instead, they must rely on their own savings or, failing that, turn to welfare in the form of Medicaid. At a national average cost of $40,000 a year for nursing home care, long-term care is a leading cause of catastrophic out-of-pocket health care costs for the elderly. In addition, despite the strong preferences of the disabled for home and community-based services, current financing is highly skewed toward care in nursing homes. While the debate over long-term care reform has many facets, it is primarily an argument over the relative merits of private- versus publicsector approaches. Differences over how much emphasis to put on each sector partly depend on values that cannot be directly proved or disproved. Some believe that the primary responsibility for care of the elderly belongs with individuals and their families, and that government should act only as a payer of last resort for those unable to provide for themselves. The opposite view is that the government should take the lead in ensuring comprehensive care for all disabled older people, regardless of financial need, by providing comprehensive, compulsory social insurance. In this view, there is little or no role for the private sector. Between these polar positions, many combinations of public and private responsibility are possible.     

The Future of Financing for Long-Term Care: The Own Your Future Campaign

The purpose of this study was to examine the outreach effort and impact of a joint federal-state campaign, Own Your Future, promoting awareness and planning for long-term care (LTC) in the state of Washington. The study applied survey methodology to evaluate the extent of campaign dissemination, evidence of its impact on LTC planning behaviors, and barriers to purchasing private LTC insurance. A total of 3,198 survey responses from a randomly selected community sample and a Washington State employee sample (ages 51 to 71) were analyzed. Results indicated that the impact of the campaign was limited, both with respect to awareness of the campaign itself and to initiation of LTC planning behaviors. Quantitative data revealed a high prevalence of health-related problems (e.g., obesity, diabetes), inadequate knowledge of basic LTC-related information (e.g., cost, payers), and negative attitudes toward purchasing LTC insurance among respondents. Qualitative analyses suggested that respondents perceived significant problems related to affordability and accountability within the current LTC insurance industry. These possible barriers to the purchase of LTC insurance suggest targets to be addressed by policy makers seeking to find ways to offset the public costs of LTC.     

The future of financing for long-term care: the Own Your Future campaign

The purpose of this study was to examine the outreach effort and impact of a joint federal-state campaign, Own Your Future, promoting awareness and planning for long-term care (LTC) in the state of Washington. The study applied survey methodology to evaluate the extent of campaign dissemination, evidence of its impact on LTC planning behaviors, and barriers to purchasing private LTC insurance. A total of 3,198 survey responses from a randomly selected community sample and a Washington State employee sample (ages 51 to 71) were analyzed. Results indicated that the impact of the campaign was limited, both with respect to awareness of the campaign itself and to initiation of LTC planning behaviors. Quantitative data revealed a high prevalence of health-related problems (e.g., obesity, diabetes), inadequate knowledge of basic LTC-related information (e.g., cost, payers), and negative attitudes toward purchasing LTC insurance among respondents. Qualitative analyses suggested that respondents perceived significant problems related to affordability and accountability within the current LTC insurance industry. These possible barriers to the purchase of LTC insurance suggest targets to be addressed by policy makers seeking to find ways to offset the public costs of LTC.     

Control and participation for employees within geriatric care: does ownership make a difference?

The welfare sector in Sweden has undergone extensive changes during the last 15 years, and private and cooperative actors have entered the public market. In the light of high sick-leave rates, especially in female-dominated professions, it is important to identify factors that can help to improve the working conditions and promote health among employees. The purpose of this study was to compare how two of these factors, participation and control, are perceived by employees in three different forms of ownership: public, cooperative and private. In all, 186 employees working at seven geriatric care institutions with three ownership forms were invited to participate in the study. 82% responded to a questionnaire containing issues related to working conditions, e.g. control and participation. The one-way ANOVA and Kruskal-Wallis were used to analyse the findings among the three groups of employees working in public, cooperative or private setting. Results showed that employees in cooperatives experienced more participation than employees working in the public and private sectors in two out of four variables - employee's voice concerning work environment issues and sympathetic response from the manager and decision-making concerning work activities at large. As expected, there were no difference in perceived control between ownership forms, which might be explained by the fact that the work nature in geriatric care is rather regulated, restricted and formalized, regardless of ownership form, resulting in limited freedom over the work situation for the individual employee.     

Sources of health insurance and characteristics of the uninsured: analysis of the March 1997 Current Population Survey

This Issue Brief provides summary data on the insured and uninsured populations in the nation and in each state. It discusses the characteristics most closely related to individuals' health insurance status. Based on EBRI analysis of the March 1997 Current Population Survey, it represents 1996 data--the most recent data available. In 1996, 82.3 percent of nonelderly (under age 65) Americans had private or public health insurance. Seventy-one percent had private insurance, 64 percent through an employment-based plan. Sixteen percent had public health insurance. The percentage of uninsured Americans has been increasing since at least 1987. In 1987, 14.8 percent of the nonelderly population was uninsured, compared with 17.7 percent in 1996. However, the erosion of employment-based health benefits cannot fully explain this increase since 1993. Instead, the decline in public sources of health insurance would partly explain it. It may be that, while the percentage of individuals with employment-based coverage is rising, individuals previously covered by Medicaid and CHAMPUS/CHAMPVA are not being fully absorbed into the employment-based health insurance market. Between 1995 and 1996, the percentage of nonelderly Americans without health insurance coverage increased from 17.4 percent to 17.7 percent. Further examination indicates that children completely accounted for this increase. In 1995, 13.8 percent of children and 19 percent of persons ages 18-64 were uninsured, compared with 14.8 percent of children and 18.9 percent of persons ages 18-64 in 1996. With the recent passage of legislation designed to reduce the number of uninsured children, the next focal point for health care reform could be early retirees and unemployed persons. President Clinton and some members of Congress have expressed an interest in improving access to and affordability of coverage for these groups. Currently, health care cost inflation is at its lowest point in years, but there are signals indicating that it is about to rise above current levels. The federal government's recent announcement that health insurance premiums will rise for federal employees an average of 8.5 percent in 1998 may portend higher future health care costs. Similarly, disappointing earnings announcements from several large insurers because of higher medical costs and lower-than-expected revenues may indicate that health insurance plans will increase premiums. Employment and income play a dominant role in determining an individual's likelihood of having health insurance. Age, gender, firm size, work hours, and industry are also important determinants; however, these variables are also closely linked to employment status and income. Some of the widest variations involve factors that are not always looked at in traditional demographic assessments, such as citizenship. However, variations by race, ethnicity, and citizenship are also closely linked to employment status and income.     

Long-term care and the private insurance market

Increased life expectancy and the aging of the baby boom generation will bring rapid growth in the number of people at risk of needing long-term care (LTC). This Issue Brief provides an overview of the current LTC financing and delivery system in the United States, focusing on private-sector initiatives to meet the United States' LTC needs. It discusses private-sector plan design--particularly employment-based plan design--providing an in-depth look at the dramatic changes taking place in the private-sector LTC market since its inception in the early and mid 1980s. Aside from informal care provided in the community, the current system of financing LTC depends largely on the Medicaid program and individual financing. Issues confronting this system include spiraling costs associated with LTC services that may threaten beneficiaries' access to care. Other issues include the potential depletion of personal assets and a bias toward institutionalization (which may not always provide the most cost-effective or desired type of care available). Many leaders regard private long-term care insurance (LTCI) as a way to increase access to financing and as a potential alternative to Medicaid and out-of-pocket financing. By the end of 1993, a total of 3.4 million private-sector LTCI policies had been sold, up from approximately 815,000 in 1987. While the majority of these plans were sold to individuals or through group associations, employment-based plans accounted for a significant proportion of this growth. Premiums for LTCI vary substantially based on age and plan design. Insurers generally attempt to set premiums such that they will remain level over the insured's lifetime. However, because little LTC claims insurance experience yet exists, the actuarial basis for developing premiums and statutory reserves is limited. Several bills over the last three Congresses have been introduced to address the issue of LTC. However, due to cost implications and lack of consensus regarding the optimum overall structure required to finance and deliver care, broad legislation to expand coverage--particularly public coverage--is not likely in the near term.     

Health insurance for all long-term care workers: estimated costs and coverage impacts in Minnesota and recommendations for States

A major barrier to building a strong workforce to meet the growing need for long-care is lack of affordable health benefits. This study projects impacts of funding health coverage for all long-term care workers in Minnesota. Under the most cost effective model plan design, enrollment in employer-sponsored coverage would increase 73% to 100% for individual coverage and 26% to 42% for family coverage. Total monthly costs would be $698/worker in the commercial market or $634/worker through a new dedicated risk pool. Based on our findings and past research, the authors present recommendations for structuring and implementing a long-term care worker health insurance initiative.     

Low-Income Children's Participation in a Public Health Insurance Program in Georgia

To expand health care coverage to uninsured, low-income children, the Congress created the State Children's Health Insurance Program (SCHIP) in 1997. Given ample evidence that state Medicaid programs have failed to enroll many eligible children, experts questioned whether SCHIP could successfully enroll low-income children. Using Georgia state SCHIP data, we analyzed enrollment patterns and identified factors contributing to program enrollment. This study found that the children's enrollment is explained by perceived costs and benefits of joining the program as well as the underlying family structure, demographic factors, and health status. We discuss implications of these findings on the participation of low-income families in public sector programs.     

Health Insurance for All Long-Term Care Workers: Estimated Costs and Coverage Impacts in Minnesota and Recommendations for States

A major barrier to building a strong workforce to meet the growing need for long-care is lack of affordable health benefits. This study projects impacts of funding health coverage for all long-term care workers in Minnesota. Under the most cost effective model plan design, enrollment in employer-sponsored coverage would increase 73% to 100% for individual coverage and 26% to 42% for family coverage. Total monthly costs would be $698/worker in the commercial market or $634/worker through a new dedicated risk pool. Based on our findings and past research, the authors present recommendations for structuring and implementing a long-term care worker health insurance initiative.