LTC Group Plans – Pros & Cons
Most of our clients begin to research on LTC insurance cover group plans when they’re offered at their workplaces. This page clearly explains why going for group plans might not be the best option for you. Citing your good health, you can save a significant amount of money in an individual plan. For policyholders with good health, LTC individual plans are definitely worth it. Here’s a Wall Street Journal article that sheds some more light on that.
The Various Types of LTC Group Plans
We have various major types of group plans available in the market today. For the average LTC insurance customer, you might have a hard time comparing these plans. LTC Key provides the priceless assistance you need to evaluate the benefits in your group plan and compare with what’s available in the private LTC market. If you’re looking for this kind of hand-holding right away, simply fax us your benefit sheet, or just give us a call.
The Federal Insurance Group Plan
This long term care group plan was first administered by two reputable insurance companies namely MetLife and John Hancock. These two companies are widely known because they offer private policies with couples discount and health discounts.
As of January 1st 2010, changes were made so that this plan could only be underwritten by John Hancock. But with this change came a 25% rate increase, which led to massive complaints from federal employees. There has been a raging debate regarding why the Federal LTC rates were increased. Veteran insurance agents believe that this was to correct the prior under pricing. Initially, unhealthy individuals were allowed to join in even when personal policies were out of their reach.
Various Group Plan Insurers
There are so many options for group plans available. However, the most popular ones are offered by Genworth, Mass Mutual, John Hancock and New York life. These companies’ group plans offer discounts, but there’s a limit on other important options such as inflation protection.
The Verdict – LTC Group vs. Individual Policies
If you are healthy, you should prioritize the individual LTC insurance policy. Here’s why:
With open enrollment in the group LTC plans, the insurer is allowing smokers, and people with cancer, diabetes, and other serious health conditions to join in. Due to the higher risk involved on their part, the insurance firm charges more for coverage. If you’re a healthy person, you’re going to have to pay more for no reason at all. It’s just like purchasing car insurance while you’ve got a magnificent driving record, then being put into the same insurance group with youngsters and folks who’ve got speeding tickets and DUI’s.
For instance, in the Federal LTC Insurance Group arrangement for government employees that we mentioned above, there are people who are so healthy, and others who are so unhealthy. To safeguard against the higher risk, the insurance company results to charging more and paying lesser benefits. The first benefit that such group plans love to shrink is in-home health care (you get 25%-50% less in benefits). So essentially, you’re getting a penalty for using your Long Term Care Policy in the most comfortable facility – your home.
Based on comparisons done by our analytical department, an individual who’s healthy can get better benefits at every age brackets with an individual LTC policy as compared to Group plans.
The Risk Associated with LTC Group Insurance
Based on our calculations, there appears to be an inherent out-of-pocket monetary risk associated with Group LTC Plans. Let’s assume that you get 75% benefits for in-home care with your Group policy. By the time you get to use this care, let’s say that your per day benefits have grown to $600 (due to inflation protection). If you accidentally fall and break your hip, you’ll want to recover at home. That means you file a benefits claim. Now, since you only get 75% ($450), you’re going to have to cover the $150 deficit out-of-pocket. For one year, that’s $54,750 ($150 x 365) in out of the pocket expenses. And if your group insurance policy only pays 50% benefits for in-home care, you can double that expense. Assuming that you earn a fixed income like so many other Americans, how well is this plan helping you?
You Can Get a Bigger Spousal Discount with Individual Policies
Lack of partner and spousal discounts is another major complaint that we’ve witnessed with Group LTC plans. Individual policies allow you to get up to 40% in discounts if you buy coverage both spouses (husband & wife). This is even more enticing given that for most families, purchasing coverage for both partners is highly sensible. When both spouses have LTC coverage, they are better able to protect their savings. More so, the massive discount makes the plan even more affordable.
To wrap it up, you probably are better off buying an individual policy from the same company that’s selling Group LTC plans. And here’s the best part – you get to purchase a less expensive policy, and get more benefits (for instance, 100% benefits for in-home care). All you need to do is allow the company to assess your medical history.
The only time we recommend you purchase a Group policy is when you or a family member is prone to major health issues and fails to qualify for individual coverage. If you’re not sure of your insurability at this stage, simply drop a call and we can help you out.
We still can help you compare group policies available from various companies. But you’re just better off with an individual policy. So do yourself a favor. Get personal quotes from the top blue-chip carriers and compare everything right from the comfort of your home.