CPAs are under increasing pressure to provide long-term care insurance to firm members, as well as to advise clients on appropriate LTC coverage. The triple-whammy of increasing medical costs, longer life expectancies, and the aging Baby Boomer workforce approaching retirement is moving the concept of long-term care to the front burner.It's not unusual to see LTC insurance as a benefit option at accounting firms, even though, so far, it has few takers. Grant Thornton has offered it as a voluntary benefit choice since 1991, but even after nearly 15 years, only 3 percent of eligible members choose to purchase the insurance.
Anne Lang, chief human resources officer for GT, described the program as a voluntary benefit, "post-tax, all 100 percent participant-paid." She said that the firm doesn't track participation by age, but estimates that 75 percent of those purchasing the insurance are over the age of 40.
But as the workforce continues to age, costs continue to rise and people continue to live longer, LTC insurance is bound to become a significant player among benefit options.
Jeanne Sasek, director of health and welfare plans at Big Four firm KPMG, reported a similar response. She said that less than 1 percent of active partners and employees participate in the firm's LTC plan, which, like the plan at Grant, is a post-tax voluntary benefit paid for through payroll deductions. "Those that do participate in the program tend to be in the 40-plus age range," she said.
That age fits with the national norm.
According to the American Association of Retired Persons, the average age of people who purchase LTC policies is in the mid-60s. While policy-makers are hoping to raise awareness of the need for LTC insurance and lower the age at which people consider buying a policy, most younger people today have other expenses on their minds.
At KPMG, where LTC insurance has been available since 1999, "The average employee age is relatively young," said Sasek. "These individuals tend to be more concerned with buying houses, supporting young families, and saving for college and retirement than LTC."
LTC insurance is a relatively new player in the arena of health benefits, having been around since the mid-1980s. While many CPA firms are starting to offer it as an option, others haven't left the proverbial gate yet. For example, Missouri-based BKD is considering implementing an LTC insurance benefit, but hasn't done so yet.
Randy Hultz, director of career development at BKD, explained, "It just hasn't been a high-demand type of item."
More than nursing home care
The services encompassed by the phrase long-term care go way beyond the common characterization of nursing home care. According to the National Academy of Social Insurance, LTC is care provided on a regular basis for more than three months that includes help with daily activities, including shopping and taking medication; help with personal tasks such as bathing and dressing; and help with nursing care such as monitoring blood pressure or the side effects of medicine.
This care can occur at a nursing home facility, at an assisted-living facility, or at home, and be provided by paid professionals, paid non-professionals, and even non-paid family members.
The expenses of long-term care can mount quickly, and this is where the insurance comes in. Most analysts estimate that at least 40 percent of people over age 60 will need long-term care services. What surprises many people is that traditional health insurance and the public insurances, including Medicaid and Medicare, cannot be counted on to cover the expenses of long-term care.
LTC insurance isn't for everyone. Analysts agree that the best candidates are in their late 40s or older, with assets in the range of $200,000 to $300,000. These people have amassed enough asset value that they might be able to leave something to their heirs, and don't want to put themselves in a position of having to completely spend down their assets in order to qualify for public aid.
Lots of options
While some CPAs are learning about LTC insurance through their own firms' benefit programs, it behooves all CPAs to learn more about the need for this care in order to field questions from clients.
The American Institute of CPAs offers several courses to help practitioners get up to speed on LTC options and the needs of clients. Developed by the AICPA/CICA ElderCare Task Force, these courses are designed to help CPAs understand the professional standards necessary to provide specialized advice to clients.
This is definitely an area where one size does not fit all. There are many different types of LTC policies, and the provisions in those policies vary greatly. Here are some considerations that need to go into the decision-making process.
* Who will be covered? Many plans are available not just to a company's employees, but to their dependents, parents, grandparents, parents-in-law and life partners. A determination also needs to be made regarding coverage that will be available to beneficiaries with pre-existing conditions.
LTC policies are not subject to ERISA guidelines, and thus can be limited to certain groups of employees, such as executives and highly compensated individuals. Note that this is not as exclusionary as it might seem on the surface. Lower-paid employees are more likely to qualify for public insurance benefits such as Medicare.
* How much will it pay? Full-time nursing home care is estimated at approximately $50,000 per year; however, specialized care can cost much more. LTC plans can include a daily as well as an overall cap on spending. Cost-of-living increases can be incorporated as well.
* How long will the benefits last? Plans do not necessarily cover lifetime expenses. Instead, many plans cover costs for a fixed number of years.
* How will the premiums for the plan be structured? Funding for LTC plans can range from a one-time payment, to a 10-year payment plan, to ongoing, open-ended premiums.
* What types of care will be covered? LTC plans can be written to specify that home care be covered. Care provided by unskilled workers, including family members, can be covered. It's difficult, but important, to contemplate the types of care that covered individuals might need or want.
Experts caution that waiting to see if a need arises for long-term care can jeopardize personal assets and place a person in a situation where his medical condition prevents him from qualifying for or affording appropriate LTC insurance.
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