Faculty Benefits Committee Meeting

Minutes, September 27, 2004

3:00 – 4:30

 

The following committee members were present: Michael Chang, Chuck Donbaugh, Michael Elliott, Blair Funderburk, and John Grovenstein.

Review of Long Term Care Insurance

A number of questions were raised and discussed. These included:

1.      Is long term care insurance a meaningful benefit for employees? Does it provide a good return on investment?

·        Opportunity cost for paying for life insurance is investments in a 403b or 457b. Right now, very few employees are contributing the maximum allowed to these savings plans. From preliminary modeling, it appears as though the long term care policies that we have considered would provide maximum payoff (for a five-years of coverage) equal to 3.5 times the equivalent value of investing in a 403b policy and 1.25 times the equivalent value for a more likely period of payout equivalent to 2.5 years of long term care.

·        data on the likelihood of needing long term care is highly speculative, since medical technologies and government policies governing long term care are both changing rapidly. Data from Across the States reports on the age of United States nursing home residents and their limitation levels. In 1996, 4.4% of  persons age 65 and over were nursing home residents. The rate ranged from 7.3% in North Dakota to 1.9%. Most residents are over 80 years in age. However, this data (and no other data we have been able to identify) indicates the likelihood of a particular individual to need long term care.

·        In 1996, about 70 percent of U.S. nursing home residents had four to five limitations in ADLs. Currently about half of the cost of nursing home care is provided by Medicare or Medicaid. Somewhere between 1/3 and ½ (estimates vary) of long term home care costs are covered by government programs as well.

2.      Can Georgia Tech find a good carrier?

·        We feel confident that good carriers exist. MetLife and John Hancock are amongst the two largest providers.

3.      Can Georgia Tech present the policy to employees in a manner that is clear and promotes good, rational decision making, given that the policies are so complex?

·        This will prove challenging, but is doable. How much should we rely on the long term care insurers to provide this information, given their interest in selling policies?

4.      What would participation look like if we offered the insurance?

·        What other universities offer these policies? What percent of employees participate? What are the initial requirements for participation? Which particular segments of the employee population tend to buy these policies?

5.      What is the history of increase in premiums for these policies?

Next Meeting

The fall semester meetings will be held on Mondays, from 2:30 to 4:00, on the following dates: October 25th and November 22nd.