Study Finds Group Long Term Care Insurance 15-36% More Expensive Than Individual

Atlanta, Georgia (PRWEB) September 05, 2013

It can be tempting to buy the long term care insurance plan offered at work: it’s convenient and sounds like a sensible idea, especially in midst of all the advertisement. Buyers may want to think twice, though, says long term care insurance marketplace LTC Tree. Examination of the latest policies and premiums shows that group plans typically aren’t the best deal on price or benefits.

Group plans often cause people to receive less benefits for more money, explains LTC Tree founder Darrick Wilkins, and even worse, puts them in an unstable rate class. While they may seem like an easy way to choose a policy, group plans usually aren’t the most worthwhile option.

Compared to group plans, individual long term care insurance policies are a better value in almost every way. The major hole in group plans is an inevitable part of the process: it isn’t that the rates are intentionally high. The flaw in the policies lies in the structure of enrollment.

LTC Tree’s Analytical Department compared five of the major group plans and found:
Couples’ premiums with good health were an average of 36.12% less than group plans.
Individuals’ premiums with good health were an average of 15.49% less than group plans.

Employers typically offer group plans to encourage their employees to plan for retirement and old age, a respectable intent. However, because the insurance provider allows open enrollment of policyholders, they are forced to accept all kinds of health types: smokers, people who are obese, have diabetes, or even cancer. For people in good health, this is bad news.

The open enrollment groups healthy people into the same rate class as the high risk people. While their good health would normally get them a discount with an individual plan, with the group plan, they are stuck in the same rate class as everyone else. Right off the bat, the insurance coverage is more expensive with no more benefits to show for the cost. Most importantly, rates for group plans have historically been increased on existing customers by a higher percentage than individual plans and the rate increases have been more frequent. In an individual policy, buyers can sometimes get discounts of 10 to 20 percent, depending on their health and the company’s criteria. This can make a significant impact in the premium rate and save a lot of money over time. Jumping on the group plan at work may seem easy, but in the long run, could result in way overpaying for coverage and being in a much more unstable rate class.

LTC Tree also analyzed how the adverse selection in long term care insurance open enrollment periods at the workplace has led to consequences later for some large group plans. The unhealthy people opt for the group plans because they can’t qualify for the individual and the healthy opt for the less expensive individual plans. Many have been forced to raise rates, some as high as 200%, in order to compensate for the increasing cost of care for the higher risk group. When these increases occur, a healthy person who was clumped in with these policyholders in the beginning sees their rates raise again, at no fault of their own. Skipping the group plan and choosing an individual plan if the person has relatively good health will place them into a more stable rate class, reducing the risk that their premium rates will increase later.

Background research into a policy can help consumers avoid mistakes like buying a group plan at work – a move that seems extremely savvy at the time, but may actually put you at a disadvantage. Comparing multiple providers is one of the most important parts of buying long term care insurance, says Wilkins. No matter what you do, look into different options before buying the first policy offered to you.

LTC Tree is an Atlanta-based long term care insurance supermarket that helps consumer navigate their long term care options online and encourages a no-pressure process.

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