Long-Term Care Insurance

In a voluntary private insurance market, employer-provided or even employer-sponsored benefits offer a very natural and efficient way to pool risk, achieve marketing and administrative savings, and effectively negotiate better terms and plan designs. Employers devote tremendous resources choosing and negotiating plan arrangements. Generally, larger employers have been able to obtain more comprehensive benefits for a lower "premium" than smaller employers, and virtually all employment-based groupings offer more coverage for the same "premium" as do individual policies. Such efforts are, of course, voluntary, although encouraged by the labor market and tax policy.

Long-term care insurance has not been sold as a "term" product but as a "whole life" type product, meaning that its price is contingent on the age at which the policy was initially purchased and not the current age of the policyholder. For this reason, long-term care insurance is substantially less expensive when purchased at a younger age. Unfortunately, to maintain this premium, one must retain the policy until it is needed, perhaps thirty years after the initial purchase. Maintaining the value of any employee benefit when moving from one employer to another is a substantial hurdle, but is particularly problematic with a product like long-term care insurance.

For most insurance products, such as health care, disability, and even life insurance, the insurance protection is often limited to a relatively short period of time such as the month in which the premium is paid. The vested rights of pension benefits might be transferable, but the value remains at what it was the day the employee left the firm. Only the cash-value of defined contribution plans are relatively easy to move, but here too there are complications when much of that value is in company-held equity, particularly when the company is privately held.