What Is Long-Term Care Insurance? Employer Guide

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What Is Long-Term Care Insurance for Employers -- Hollowtree blog

What Long-Term Care Insurance Actually Covers

Long-term care insurance (LTCI) pays for services that standard health insurance, Medicare, and disability policies do not: custodial care, assisted living, home health aides, adult day care, and nursing home stays. Benefits are triggered when an insured person can no longer independently perform activities of daily living (ADLs), a standard the industry uses to assess care eligibility. The U.S. Department of Health and Human Services estimates that 70% of Americans over 65 will need some form of long-term care during their lifetime, with the average duration of care exceeding three years.

The national median cost of a private room in a nursing home reached $116,800 per year in 2025, according to Genworth's Cost of Care Survey. A home health aide averages $75,504 annually. These figures are rising at roughly 3-5% per year, outpacing general inflation, which is why inflation protection riders are a critical component of any LTC policy. Without insurance, these costs fall directly on the individual or their family.

Why Employers Are Adding LTC to Benefits Packages

Employer-sponsored long-term care insurance has grown significantly as organizations recognize three core advantages.

First, retention impact. In a 2024 LIMRA survey, 68% of employees said they would be more likely to stay with an employer that offers LTC benefits. For mid-career professionals aged 40-55, the demographic most aware of aging-parent care costs, LTC insurance ranks as a top-three most valued voluntary benefit.

Second, tax advantages. Under IRC Section 7702B, employer-paid LTC premiums are deductible as a business expense and are generally not included in employees' taxable income, subject to age-based limits set annually by the IRS. For 2025, these limits range from $480 for individuals under 40 to $5,960 for those over 70.

Third, caregiver productivity. AARP research shows that 61% of family caregivers also work, and they lose an average of $522,000 in lifetime wages and benefits due to caregiving responsibilities. Employees with LTC coverage experience less financial stress and reduced absenteeism related to eldercare obligations.

Group vs. Individual LTC Policies

Employers have two primary approaches to offering LTC insurance. Understanding the differences between these approaches helps determine which structure best serves your workforce. A growing third option explores employer-paid versus employee-funded LTC insurance models, and many successful programs use group LTC insurance enrollment strategies to maximize participation regardless of which option you select.

Group LTC policies provide simplified underwriting (often guaranteed issue during enrollment periods), lower per-person premiums through risk pooling, and administrative simplicity. The trade-off is less policy customization and potential portability limitations if an employee leaves the company. When evaluating group plans, key design decisions include choosing the right benefit period and selecting an elimination period that balances premium cost with out-of-pocket exposure.

Individual LTC policies offered through the workplace give employees access to multi-life discounts (typically 5-15% below retail rates) while maintaining full policy ownership and portability. Underwriting is required but often streamlined compared to direct-to-consumer applications.

A growing third option explores employer-paid versus employee-funded LTC insurance models, each with distinct cost and tax implications. Additionally, hybrid life/LTC policies, which combine a life insurance death benefit with an LTC rider, These address the use-it-or-lose-it concern that has historically limited LTC adoption, since the death benefit pays out if LTC benefits are never used.

How to Evaluate Whether LTC Belongs in Your Benefits Package

As advisors, we recommend employers evaluate four factors when considering LTC insurance.

Workforce demographics: If your employee base skews 35 and older, LTC resonates strongly. Industries with long-tenured employees (healthcare, education, government, financial services) see the highest enrollment rates.

Competitive positioning: In industries where talent competition is intense, LTC insurance differentiates your benefits package. Most competitors still do not offer it, which creates a genuine advantage.

Budget structure: Employer-paid LTC is a tax-deductible expense, but voluntary (employee-paid) programs through payroll deduction cost the company nothing beyond administrative setup while still providing employees significant value.

Existing benefits gaps: If your current package includes health, dental, vision, life, and disability but not LTC, your employees have a significant coverage gap. Long-term care is the single largest uninsured financial risk for most working Americans.

Key Takeaways for HR Leaders

Long-term care insurance is not a niche product. It addresses a near-universal risk with significant financial, retention, and tax implications. For help evaluating specific carriers, see our comparison of the top LTC insurance carriers. Whether offered as an employer-paid benefit or a voluntary payroll-deduction option, integrating LTC benefits into your overall employee package requires understanding how to select appropriate benefit periods. Adding LTC to your benefits portfolio signals to employees that your organization understands and addresses their real financial concerns.

Contact Hollowtree to discuss how LTC insurance fits into your benefits strategy, or learn more about our enrollment process.