Long-term care insurance has been a difficult product to sellfor some time, and recent events have called its marketabilityfurther into question. With several prominent insurers, includingPrudential and MetLife, announcing decisions to stop signing newLTCI policies, and with the federal government's decision last yearto halt implementation of its own health care reform-basedvoluntary program—the CLASS Act—the future for the entire issue oflong-term care insurance—at first glance—looks grim.

After a second look, though, there are glimmers of promise, anda reason to believe LTCI—especially voluntary LTCi—will presentreal opportunities for sales, while offering real hope for millionsof Americans who might need the protection it provides or the peaceof mind it affords. In fact, as a matter of simple arithmetic, itmakes sense for agents and brokers to keep the long-term carebenefit in play.  

Consider this: Out of a population of more than 300 million,roughly 8 million have LTCI right now. The potential for newcustomers is simply a mathematical fact, particularly whenconsidering the reality that Medicaid-funded long-term care isunsustainable. And keep in mind the U.S. population is agingdramatically, and is set to pick up the aging pace further in thenext few years thanks to more than 78 million baby boomers. As agrowing number of individuals confront the need for long-term care,and as more of their adult children begin paying for it, theperceived value and pressing importance of insurance willautomatically increase. 

How critical LTCI really is  

There's another reason why there's hope for LTCI as a voluntarybenefit in particular, and it has less to do with numbers and moreto do with strategy and emotion. The passage of the PatientProtection and Affordable Care Act and the Supreme Court's decisionto uphold it have left many employers in the position of having togive their workers a great deal of bad news on the benefits front.In many cases, employees are hearing their core health benefitswill be reduced, or their payments increased. Voluntary benefits,including LTCI, can play an important role in providing a positivemessage for employers to present to their work force when negativeinformation generally dominates. By showing they're activelysearching for creative solutions through a variety of voluntarybenefit offerings, businesses can help offset some of the pain.

Of course, to make voluntary LTCI happen, agents and brokerswill need to clearly explain its importance to employers, andsubsequently they'll have to help educate employees in order toencourage enrollment. This sales process requires time, andthorough follow-up. Given the level of commitment involved, manyagents are reluctant to go down the long and winding long-term carepath, but with millions of potential new customers waiting at theend, they should take the long-term view and consider thejourney.

Aside from cost—a major concern—the greatest barrier to LTCIsales is information—or rather, misinformation. Many individuals,for instance, believe Medicare covers the cost of long-term careafter age 65. In fact, Medicare only pays for nursing home care for100 days, and then the patient is on his or her own. To educateemployers and employees about these facts, and about the overallvalue of voluntary LTCI, agents must get the word out, and to dothis they can turn to partners such as pProfessional employerorganizations for help. PEOs administer benefits and payroll, andoffer legal and employee assistance programs, and agents who offerinsurance products in tandem with the services of a PEO can helpboost voluntary product sales.

The truth is that long-term care can bankrupt families, drivingpatients into Medicaid or leaving their adult children in criticalfinancial condition. LTCI therefore makes sense not only from ahealth care perspective, but from a financial planning perspective,too. Making employers and their employees understand this is key toLTCI success.

Here are five points agents need to understand about long-termcare and the voluntary LTCI benefit:

1) What it is 

Long-term care is a general term that refers to services andassistance for individuals who have impairment in at least two ofthe defined activities of daily living: eating, bathing, grooming,toileting, transfer or ambulation. Services can be provided in afacility or in the home setting, and while Medicare and otherinsurance products cover immediate medical expenses, such as alimited hospital stay or doctor's visit, long-term care related tochronic conditions is not covered. Only long-term careinsurance—and Medicaid—will pay for the types of servicesassociated with chronic medical problems that interfere with dailyliving, and these services range from the basic, such as assistancewith eating and bathing, to the comprehensive, including skilledtherapy and nursing care. Long-term care can be provided over thecourse of months or even years.

Each year, an estimated 11 million U.S. adults need some kind oflong-term care, and according to the U.S. Department of Health andHuman Services, at least 70 percent of those over age 65 will needservices at some point. Paying for these services, which areexpensive, is accomplished in different ways: Some use out ofpocket dollars, while others rely on Medicaid orinsurance.  According to the Congressional Budget Office,about one-third of LTC expenses are covered out of pocket, 60percent by Medicaid, and only four percent by private insurancepolicies.

Simply put, wealthy Americans can afford to pay for daily care,while those who have few assets and who qualify for Medicaid canrely on the government. But what about the majority who lie inbetween these extremes? Without proper financial planning in theform of long-term care insurance, many are forced to spend theirway onto Medicaid, using all of their assets to pay for care out ofpocket until they have nothing left. Others are turning to familymembers for support—and many of those family members are barelyable to afford the burden.

LTCi is clearly the solution, and agents and brokers shouldconsistently position it this way.  Of course, a varietyof benefit levels and price points are offered, and thisflexibility makes the product more appealing to a wider audience –while also making it useful as a voluntary offering that fits in atypical workplace, which is defined by different ages and needs.Ultimately, driving the number of private policies above thecurrent four percent should be a concrete and consistent goal forthose in the insurance business, and an equally concrete goal forthe nation as a whole. 

2) Why LTC insurance matters

Widely available statistics demonstrate the growing use oflong-term care services and the increasing associated costs. Anyeffort to inform and educate employers and individuals about thevalue of LTCI should take full advantage of the facts.

One of the most widely publicized statistics comes from AARP,which, like HHS, indicates there's a near 70 percent probabilitythat individuals over age 65 will eventually need long-term care.HHS also notes that more than 40 percent of those who need LTCIwill need full-time care in a nursing home setting. Another AARPtalking point emphasizes the impact that long-term care can have onfamilies: 10 percent of family caregivers who are employed movefrom full-time to part-time employment because of theirresponsibilities. Since many individuals lack LTCi and cannot payfor full-time care out of pocket, they turn to family members forhelp. As a result, it's not only impaired individuals who areaffected by the decision to purchase or not purchase LTCi—it is thewhole family. Agents should keep in mind that employers oremployees are not only targets of information and education, theyare conduits as well. In other words, if individual employees arenot ready to purchase LTCi, they may encourage their parents to doso.

While the likelihood is higher that those over 65 will needLTCI, the reality is that the need can exist at any age. There isless pressure on younger consumers to purchase insurance for apotential need that seems far away, but the need is there, and it'simportant to mention.

Equally important to mention in order to emphasize the LTCi needis the cost of care. A study conducted by Genworth estimates theaverage cost of one year in a nursing home is more than $74,000,and with an average nursing home stay lasting over two years, thecost of a long-term care need could exceed $200,000. Other studiesput the annual cost of private nursing home care at more than$87,000. According to the MetLife Mature Market Institute,assisted-living facilities average more than $41,000 per year, anda home health aide charges $21 per hour.

The data suggests that in a nation that is rapidly aging, theexpense of long-term care is unsustainable, and that Medicaidcannot be the solution. Insurance, therefore, is a critical safetynet that deserves another look.

3) Who is buying it and why

Many experts suggest individuals should buy LTCI when they're intheir 50s. Clearly, the cost of insurance will be higher with age,and buying coverage early enough is important to keep the costdown. Unfortunately, because the market is still small, insurershave in many cases raised their rates for policyholders, making aonce-affordable policy more expensive than anticipated. Confrontingthe issue of policy cost, and understanding who is buying LTCI andwhy is critical for a successful sale.

 Today, many of those buying individual LTCI policiesare looking at hybrids that combine life insurance and long-termcare or long-term care and an annuity. Qualifying for thesepolicies is easier, and in relative terms the price can be better.These policies also appeal to consumers because they offer aguaranteed payout to the individual or heirs regardless of whetherthe long-term care benefit is used.

 When marketing long-term care insurance as a voluntarybenefit, it's important to understand the concerns and needs ofpotential employer customers and their employees. The fact thatmore consumers are turning to combined products suggests twoimportant issues: first, cost is clearly important, and LTCIpolicies can be expensive. Lower-cost options with lower benefitslevels should be explored.  Second, the value of thestand-alone LTCI product is still not understood, and so employeesand employers need to be educated, as discussed earlier. Consumershave come to see the value in life insurance, but still don'tunderstand how catastrophically expensive long-term care can be forthemselves and their loved ones.

 The audience for voluntary benefits in general isanother key point that agents should review.  Today, manysmall and medium-sized companies are increasingly looking tovoluntary benefits as they struggle to provide paid health benefitsto their employees.  A study by Colonial Life suggeststhat small businesses represent the best new market for voluntaryproducts, with 43 percent of those surveyed expressing an interestin voluntary programs.

4) The impact of health reform

The Community Living Assistance Services and Support Act, orCLASS Act, was enacted as part of the ACA in 2010. Lawmakersdrafted the CLASS Act to provide a voluntary LTCI program workerscould pay for through payroll deductions. As part of theinitiative, the U.S. Department of Health and Human Services wasrequired to conduct an assessment of the program to determine if itwould be financially sustainable. After this review, the departmentdeclared the CLASS Act unworkable, and ended the program before itwas implemented.

While the end of the CLASS Act means private insurers will notface a government-sponsored competitor at this time, it alsosuggests that voluntary LTCI faces financial challenges in theprivate sphere as well. In addition, had the CLASS Act lived on,agents could use the government program as an illustration of theimportance of long-term care, and could compare their offerings tothe government's program. 

Ultimately, the demise of the government's voluntary long-termcare insurance program should be a clarion call for agents andbrokers to step up promotion of their own voluntary offerings inorder to fill the void. Some awareness of and interest in voluntaryLTCI is out there, and building more of it should be a priority. Inaddition, because the PPACA has led to higher health insurancecosts for some employers, a voluntary product for long-term carecould be a welcome addition to the benefits menu.

5) Making it happen

Long-term care insurance is certainly a product that fallsoutside of the comfort zone—for many agents selling it, and forprospective buyers. With higher price points, rates that can besubject to increases, and a longer sales time, LTCI presents achallenge for agents and brokers. For prospective buyers, thinkingabout the possibility of a chronic illness or injury can beunpleasant, and easy to put off until later.

Placing the issue on the front burner requires a concertededucation and awareness effort. By targeting small employers andmid-sized companies searching for new voluntary benefit offerings,agents can make the case for LTCI. Emphasizing the many availablestatistics regarding the cost of long-term care and the relativelikelihood of needing it's critical. Once an employer beginsoffering the voluntary insurance product, outreach to employees isequally critical.

Since smaller organizations are a growing target for voluntaryprograms, and since these organizations often lack an internal HRdepartment, it will be up to the agent to push the communicationsenvelope – through e-mail, notices and employee meetings. Asmentioned, PEOs often carry out this exact function, serving as theoutsourced HR department for companies of all sizes.

Agents pursuing voluntary LTCI clearly face a challenge, but bylooking at the larger picture and future trends, the potentialrewards come into focus. 

Jay Starkman is the founder and CEO of Engage PEO. DorothyMiraglia is the vice president of Engage Insurance Agency.