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Group Long Term Care Insurance Plans

For the employer, these plans are usually guaranteed issue (no disqualifying health questions) for all full-time employees. With guaranteed issue, no employee gets discriminated against if he or she has a disabling or potential disabling condition. This can put participants at risk for future rate increases. With a group plan, a select set of identical benefits can be offered to all employees no matter which state they live in. Other benefits may be available but usually require medical underwriting and additional cost.

The advantage of true group to carriers is that company representatives do not have to be licensed agents in every state to represent the plan and enroll participants. One major disadvantage of true group plans is they are almost always voluntary plans-the employer does not make contributions. Carriers must charge higher rates as compared with individual plans to compensate for the fixed cost of installing and maintaining the plan. Administrative costs are high because true group premium income is small compared with the total number of participants. Higher rates are also necessary to guard against adverse selection caused by low participation (sick or disabled employees are more likely to enroll). This is confirmed by the following: The average purchase age for group coverage is 43 while the average age for individual coverage is 60. One would expect claims for individual policies to be much higher because older buyers would be expected to have poorer health. This is not the case. Industry-average loss ratios of 35.3% for group policies are about 35% higher than the 27.1% average loss ratio for individual policies. These higher group rates can be as much as double the rates for equivalent coverage with individually purchased, medically underwritten policies. On the other hand, employer groups with a high proportion of young employees and with 20% or better participation can often get premiums that are much cheaper than individually underwritten policies.

In addition to the risk of adverse selection above, employer group plans are normally not as comprehensive as individual policies. There are a few things that you will want to compare:

Most group policies have a 50% or 70% home care benefit…individual plans normally pay 100% regardless of where you receive care.

Most group plans offer “inflation options” and not automatic inflation riders, which means you can increase coverage every couple of years, but your premium goes up, which gets very expensive. With the automatic inflation the premium starts out higher but remains level even though the benefits grow every year.

With a group plan, a company representative will likely determine whether you are eligible for benefits. With most individual plans it is determined by your own doctor.

The rule of thumb is if you are healthy, buy an individual, comprehensive policy. If you are unable to qualify for individual coverage at an affordable rate due to health conditions, then a group plan may be the best fit for you.

Neil Gholson
Long Term Care Financial Solutions, LLC
1-877-380-8800 Long Term Care Financial Solutions, LLC

Article Source:http://www.articlesbase.com/personal-finance-articles/group-long-term-care-insurance-plans-989643.html

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June 24th, 2009 | Category: Personal Finance | 3 Comments »
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