Group vs Individual Plans
Group plans are supposed to be cheaper but can be more expensive..
Comparing an individual policy to a group policy.
Example: purchased and paid premiums
for 10 years before needing to file a claim for in-home care.
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Based on annual rate: age 60, 3-yr, $150/day, 5% benefit increase, no discounts. |
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| Individual policy (Hancock, MetLife, etc.) (1) |
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Group policy (AARP, Federal, State) (1) |
| $2,705 per year premium (2) | |
$2,100 per year premium (2) |
| x 10 years paid in | |
x 10 years paid in |
| $27,050 total paid in 10 years | |
$21,000 total paid in 10 years |
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This means you pay X days before your insurance starts paying for home care. |
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| Individual policy | |
Group policy |
| Individual plan has 0 day deductible - waiting period for home care. (3) | |
90 or 30 days deductible - waiting period for home care. 90x$150, 30x$150 (3) |
| Your cost for Individual plan EP: $0 |
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Your one-time cost for Group EP: 90 day $13,500, 30 day $4,500 |
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How much insurance pays and how much you co-pay. |
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| Individual policy | |
Group policy |
| Individual plan pays 100% of $150 Daily Benefit x 31 days. (4) | |
Plan Pays 75% or 50% of $150 Day Benefit Benefit x days of care provided. (4) |
| Individual plan pays $4650/mo. You co-pay $0 |
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Insurance Pays $3487 or $2325 a month You co-pay $1163 or $2325 a month |
| Your out-of-pocket daily cost for 1st year: $0 |
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Your out-of-pocket daily co-pay for 1st year: $13,956 (75%), $27,900 (50%) co-pay |
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Including: premiums paid in, deductibles, out-of pocket co-pay. |
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| Individual policy | |
Group policy |
| $27,050 total paid in over 10 years | |
$21,000 total paid in 10 years |
| + $0 Deductible (0 days) | |
+$13,500 Deductible (90 days) |
| +$0 co-pay for 1st year | |
$13,956 (75%), $27,900 (50%) co-pay |
| $27,050 | |
$48,456 (75%) or $62,400 (50%) |
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Continuous care costs $4650/mo for however long needed. (5) |
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| Individual policy | |
Group policy |
| $0 | |
$13,956 (75%) or $27,900 (50%) co-pay |
Is a group long term care insurance plan even worth considering?
Yes and yes - yes because of the high-risk almost any LTC insurance is better than none, and yes if it's OPM (other peoples money) - if your employer or union is paying or co-paying the premium. Some people will get a low daily benefit individual policy to cover the 90 day deductible on group plans.
(1) Comparisons are generalized. Different individual and different group plans have different benefits and conditions. It is the intention here to show basic differences not accurate comparisons, see each plan for accurate comparison.
(2) Premium amount chosen for comparison only, premiums are determined by age and benefits chosen. This is an average policy rate for individual and group plans, in some cases the individual plan premium may be less than the group for similar benefits.
(3) Deductible period. Also called "waiting" or "elimination" period. You pay for care for X days before your insurance starts paying. Most group plans have a mandatory 90 day for all care including home and community care. Individual policies provide this as a rider for an additional cost.
(4) Monthly payout. Group plans often pay home care "per day" of care received not "per month," so if you don't receive care on a given day you don't get benefits.
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Daily Benefit - $200
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| Sun | Mon | Tue | Wed | Thr | Fri | Sat |
| $0 | $200 | $0 | $200 | $0 | $200 | $0 |
| With the above chart if your plan paid $200 for every day you got home care you'd get $600 for the week or $2,400 for the month. With pay by month you'd get $6,000 for the month. | ||||||
(5) Continuous care waiver of premium. Most plans have a waiver of premium when on claim, that means you do not pay the premium for the time you are on claim. Most group plans only pay a portion of your benefit for any care other than nursing home.
Other Considerations:
• Some individual policies also might have high deductibles and lower benefits. Ask about the waiting period and percentage of benefit payment for home care, community care, assisted living and nursing home.
• Group plans may not tax qualified, that is the premiums are not deductible and the benefits are considered income and are taxable. Most individual plans are tax qualified (tax-free benefits).
• Group plans pay less than your daily benefit amount unless it is nursing home care. Less than 10% of care is nursing home care, the remainder is home and assisted living care.
• Group plans have a mandatory waiting period before benefits start. Some individual plans have no waiting period for home care, the most common type of care.
• Group plans cost less when younger. Recent comparison showed the older you are when you buy-in the higher the premium would be for a group plan than an individual plan.
• Almost as important as the financial part of long term care insurance are the services provided by the insurance company to make sure you get the care needed. The Individual plan Care Coordinator is in-person not 1-800 phone based care.
• Individual Plans sold by the top companies rarely raise rates for policyholders and some companies have never raised rates. Group companies have a history of rate increases.
• CalPERS has raised rates multiple times in the last 5 years. Once someone has retired a rate increase can create a financial hardship. They may face having to drop the insurance after paying into it for years. Also See CalPERS 2007 Rate Increase, and About CalPERS
• Individual plans offer a 10% good health and 15-25% couples discount. Group plans have less discount or no discount. Some plans drop the couples discount if only one spouse qualifies for coverage.
• Individual plans offer survivorship for couples. Group plans may not have survivorship. (survivorship: after x years of owning policies if a partner dies the survivor’s policy is paid up for life, they never pay another premium for their policy.)
• Individual plans require only 2 ADL requirements for home, community, and nursing home. Some group plans have a 3 ADL (activities of daily living) requirement for nursing home which means although you may need help/care but you won't qualify for benefits until you're gotten worse.
• Some group plans have a cap on the Maximum Benefit Allowance
• Group plans have to take higher risk customers so they generally offer fewer and/or lower benefits to all policyholders. Individual plans provides the highest and most comprehensive benefits.
• Group plans do not cover 100% of home care, assisted living, adult day care, independent living. Individual plan pays 100% of benefits for all care.
SUMMARY: It is difficult to compare apples to apples with Individual plan and a group plan, if the group plan only pays 50% or 80% of daily benefits for home and community based care then you need to raise the daily benefit to receive the same daily benefit amount as you do with Individual plan.
For a 50% benefit group plan benefit you will need a $300/day policy to get $150 for home care. Most group plans have a $200 a day maximum, so you will be receiving a maximum of $100 a day for home care costs, which is less than the average cost for care.
Since over 90% of long term care is home and community based it is important to make sure you are choosing enough of a daily benefit for home and community care. Most all plans will pay 100% benefits for nursing home care.
To know what it would cost you and/or your spouse for long term care insurance an individual evaluation is required.
If you're considering offering group long term care insurance to your employees feel free to contact us. We can show you what to look for in a good group plan, contact us for more information.
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