Data and Research October 26, 2017

Americans’ Greatest Fear About Aging is Covering LTC Costs

Many mistakenly believe government programs will cover long-term care costs, which may be why a mere 20% have taken any steps to find LTC insurance.

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Not having enough money to pay for health care or long-term care is the greatest fear adults have about aging, Genworth found in a survey of 1,200 people. Despite these overwhelming apprehensions, only 20% of Americans have taken any steps towards figuring out how to finance or actually financing long-term care costs.

In addition, only 50% feel they should be responsible for their own care as they age, with the remainder feeling it is the responsibility of the government, their family or community or faith-based organizations.

“As these findings suggest, many people will not be prepared financially to handle the impact of growing older, which means the burden of caring for them will fall to their families, friends and communities,” says David O’Leary, president and CEO of Genworth’s U.S. Life Insurance division. “That’s why it is so important for people to talk to their families about who will care for them, educate themselves about the cost of care and develop a plan for how they will pay for it.”

Additional Misunderstandings

Sixty-six percent of Americans mistakenly think government programs will fund long-term care, despite the fact that Medicare only pays a limited amount and Medicaid has strict financial eligibility requirements. In addition, 45% of respondents either confused Medicare and Medicaid or did not know the difference between them.

Forty-percent underestimated the hourly cost of professional help in the home, and 52% did not know that a long-term care insurance policy can cover help in the home.

Sixty-one percent of respondents did not know that long-term care can be personalized and that the insurer can help them find quality care providers.

Genworth says that 70% of the people who are turning 65 today will need long-term care at some point in their lives. Nonetheless, only 52% of Boomers think they will need these services. However, Millennials and members of Generation X are more realistic, with 64% and 65% of these demographic groups, respectively, conceding that they may need long-term care in the future.

Genworth discovered that Millennials, who already are facing the prospect that Social Security may not exist by the time they retire, are the most likely group to have taken action to obtain long-term care insurance.

“People are never too young to begin preparing for how to pay for long-term care costs, which as often overlooked as a major retirement expense and can quickly wipe out a person’s savings,” O’Leary says. “Understanding the costs is a good first step, followed by a conversation with a financial professional about potential funding options that will protect assets against long-term care costs.”

Genworth has developed a video, “Let’s Talk,” to help families confront the delicate subject of long-term care. The company also points to a website from the government that explains Medicare and Medicaid coverage: longtermcare.gov. For a link to Genworth’s offerings, go to genworth.com/longtermcare.

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Benefits October 26, 2017

Employers Still Shifting Some Health Care Costs to Employees

But, self-funding health insurance is becoming more popular as a way to cut costs, United Benefit Advisors finds.

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Premium renewal rates (the comparison of similar plan rates year over year) for employer-sponsored health insurance rose an average of 6.6%—a significant increase from the five-year average increase of 5.6%, according to the 2017 United Benefit Advisors (UBA) Health Plan Survey.

Average employee premiums for all employer-sponsored plans rose from $509 in 2016 for single coverage to $532 in 2017 and from $1,236 to $1,272 for family coverage (a 4.5% and 3% increase respectively). Average annual total costs per employee increased from $9,727 to $9,935. However, the employee share of total costs rose 5% from $3,378 to $3,550, while the employer’s share rose less than 1%, from $6,350 to $6,401.

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“To mitigate these rising costs, employers are shifting more premium onto employees, offering more lower-cost consumer directed health plans (CDHPs) and health maintenance organization (HMO) plans, increasing out-of-network deductibles and out-of-pocket maximums, and leveraging continued extensions on the ability to ‘grandmother,’” says Peter Weber, president of UBA. “We’ve also seen reductions in prescription drug coverage to defray increasing costs even further.”

For a second year, prescription drug plans with four or more tiers are exceeding the number of plans with one to three tiers, UBA found. Nearly three-quarters (72.6%) of prescription drug plans have four or more tiers, while 27.4% have three or fewer tiers. The number of six-tier plans has surged, accounting for 32% of all plans, when only 2% of plans were using this design only a year ago.

“While employers chose to hold contributions, copays and in-network benefits steady, they dramatically shifted prescription drug costs to employees. By increasing tiering and adding coinsurance (vs. copays), employers were able to contain costs,” says Weber.

Median in-network deductibles for singles and families across all plans remain steady at $2,000 and $4,000, respectively. Single out-of-network median deductibles saw a 13% increase in 2016, and a 17.6% increase in 2017, from $3,400 to $4,000. Both singles and families are facing continued increases in median in-network out-of-pocket maximums (up by $560 and $1,000, respectively, to $5,000 and $10,000).

Self-Funding Gaining Popularity

The number of employers using self-funding grew 48% for employers with 25 to 49 employees in 2017 (5.8% of plans), and 13.4% for employers with 50 to 99 employees (9.3% of plans).

Overall, 12.8% of all plans are self-funded, up from 12.5% in 2016, while nearly two-thirds (60.9%) of all large employer (1,000 or more employees) plans are self-funded.

“Self-funding has always been an attractive option for large groups, but we see self-funding becoming increasingly desirable to all employers as a way to avoid various cost and compliance aspects of health care reform,” says Weber. “For small employers with healthy populations, self-funding may be particularly attractive since fully insured community-rated plans under the ACA don’t give them any credit for a healthy group.”

The 2017 UBA Health Plan Survey Executive Summary is available at http://bit.ly/2017UBASurvey.

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