Public awareness of long-term care insurance (LTC) is growing due, in part, to the realization that the government cannot or will not pay for long-term care costs. The increasing number of people joining the sandwiched generation (or working people responsible for the care of elderly family members) is another factor prompting employees to look to their employers for help. Many employers are responding by offering long-term care insurance. Is LTC something you can cling to should you require long-term care, or is it more likely to leave you stranded without adequate coverage? Read on to find out.

Policy ABCs
According to the U.S. Department of Health and Human Services' Survey of Employers Offering Group Long-Term Care Insurance to Their Employees: Final Report (2000), about 40% of employers offer some form of LTC insurance, but see only 2% employee participation. This may be due to a lack of understanding regarding this insurance type, so let's take a closer look at what makes up an LTC policy.

Generally, the basic provisions of employer-sponsored LTC and individual policies are similar except that in the case of the employer-sponsored polices, the employer buys the LTC for the benefit of its employees. In any case, the primary goal of LTC is to preserve and protect assets in the event of an illness or injury requiring extended care. (To read more about LTC basics, see A New Approach To Long-Term Care Insurance, Failing Health Could Drain Your Retirement Savings and LTC Coverage Not A No-Brainer.)

The following are highlights of the individual and employer-sponsored LTC policies' features and benefits.

Policy Similarities

• In order to qualify for benefits, the insured must not be able to perform two of six activities of daily living (dressing, bathing, eating, etc.), or must be suffering from severe cognitive impairment such as dementia. 
• A waiting or elimination period must be satisfied before benefits are available. 
• Both types of policies usually offer some type of inflation protection.

Policy Differences

• Group policies may limit or exclude benefits found in individual LTC policies, such as limited or no coverage for home care, assisted living or hospice care.
• Inflation protection may be curtailed or not offered at all. Instead, employees have the option of buying more coverage at a higher premium.

Employer Benefits

• Adding LTC makes for a more attractive employee benefits package, which can help recruit and retain workers and increase morale. 
• Employer-paid premiums are tax deductible, with some limitations depending on the type of business entity. 
• Employers can select employees for coverage, and offer it as part of a key man or executive benefit package because LTC is a non-qualified employee benefit, and is not subject to ERISA or employee discrimination rules.

Employer Tradeoffs

• Statistically, only 4-5% of eligible employees continually opt for employer-sponsored LTC  (U.S. Department of Labor Bureau of Labor Statistics, Long-Term Care Insurance Gains Prominence, 2004).
• Many employees expect the employer to contribute toward the cost of the LTC, which may not be intended by the employer.
• Employers face added administrative costs associated with offering LTC to employees.