Effects of long-term care insurance on employee motivation, satisfaction, and retention.
Companies are always trying to have the edge over their competition. One way to accomplish this is by finding employees who are hardworking, competent, and loyal. Once employees like this are hired and trained, it is important for employers to retain them. Employees need to feel satisfied with their jobs and motivated to come to work every day and perform well. One technique employers use to retain, motivate, and satisfy their employees is to offer benefits. Some benefits are mandatory, such as worker's compensation and unemployment, but voluntary benefits, including medical, vision, and dental care, are highly valued by employees (Whitham, 2010). One voluntary benefit, long-term care insurance (LTCI), is especially important to employee retention.
LONG-TERM CARE INSURANCE
Long-term care insurance provides coverage for disabilities and chronic illnesses that are not treated in a hospital. In such cases, patients may be unable to care for themselves because of the prolonged nature of the illness or disability. Long-term insurance covers many services and helps pay for the care needed; LTC services include respite care, nursing home care, home health care, adult day care, assisted living care, and hospice care (Society for Human Resource Management, 2012). LTCI is purchased to protect the person's and family's savings and investments.
Necessity of Long-Term Care Insurance
The cost of care is incredibly high and continues to rise. In 2008 the median cost of a private nursing home room was $67,525 per year, whereas the 2013 average rate was $83,950 per year (Genworth Financial, Inc., 2013). This is an increase of $16,425 with a 4.45 percent compounded annual growth rate. The yearly rate of an assisted living facility in 2013 was $41,400, the rate for a home health aide was $19 per hour ($44,479 per year), and the hourly rate of adult day care was $65, an annual rate of $16,900 (Genworth Financial, Inc., 2013). Because of such high costs, most families cannot easily afford to provide medical care for more than one individual at a time. By 2020, it is estimated that 15 million Americans will require some form of long-term care, yet less than 3% have a long-term care policy (Miller, 2011). The population of those 65 and older is projected to reach 71.5 million by 2030, twice the size of this population in 2000, and by 2040, the number of older Americans with disabilities will have doubled (American Association for Long-Term Care Insurance, 2009). In 2009, 42% of those above 65 years old had functional limitations, and 18% had trouble with one or more activities of daily living (American Association for Long-Term Care Insurance, 2009). With the population aging, there needs to be affordable health care provided to them. It is estimated that between 35% and 55% of people above 65 may require a nursing home at some point (Murtaugh, Kemper, Spillman, & Carlson, 1997). Of those, the average stay lasts 1.8 to 2.8 years and there is a 12% to 21% likelihood of patients staying five years or more (Murtaugh et al., 1997). Kemper, Komisar, and Alecxih (2006) found that people over 65 will need on average three years of long-term care (LTC) before they die and that much of this LTC will be uninsured and given by family members at home. Around two-thirds of the total LTC needed will be home care or paid home care, with the other one-third provided by a nursing home (Kemper, Komisar, & Alecxih, 2006). Though 55% of health care costs will be paid by public programs or private insurance, nearly half, or 45%, must be funded by the individual or the individual's family (Kemper et al., 2006). With private rooms in nursing homes costing almost $84,000 as of 2013, many people cannot afford to pay almost half of that amount and will need a good LTCI policy (Genworth Financial, Inc., 2013).
Benefits of Long-Term Care Insurance to Employers
LTCI is a voluntary benefit, meaning that employers are not obligated to offer it to employees. According to the Society for Human Resource Management's 2013 Employee Benefits survey (2013), only 31% of employers currently offer long -term care insurance, down 8% from 2009. Only 1% of employers say they plan on offering LTCI in the next 12 months (Society for Human Resource Management, 2013). It was 22nd out of 40 offered health care and welfare benefits (Society for Human Resource Management, 2013). For those who do offer LTCI, they do so for two cited reasons. First, the employee usually pays 100% of the premium unless an employer decides to subsidize it (Stanger, 1998). The insurance company also assumes responsibility for most of the work, so LTCI usually incurs little to no cost to communicate and administer. Second, with the workforce aging, more employees are faced with caring for a member of the family (Stanger, 1998). Having this service for the employee or a family member will benefit the employer, as those employees with LTCI will be able to reduce time spent caring for aging family members (Stanger, 1998). In MetLife's (2012) 10th Annual Study of Employee Benefits, 91% of the employers surveyed indicated that benefits could be used to achieve objectives and retain employees, and 51% of employees want their employers to offer such voluntary benefits (MetLife, 2012). In addition, the majority of employees (62%) would rather pay more for their benefits than lose them, and 58% of the employees surveyed felt that benefits drive retention (MetLife, 2012).
Employers should look to their employees for those benefits they desire if they wish to retain their employees. One motivational theory employers might reference is Maslow's (1943) Need Hierarchy Theory. Needs theories like Maslow's try to find the internal factors, both physiological and psychological, that drive human behavior (Ramlall, 2004). Maslow (1943) believed that there were five basic needs: physiological needs, safety, love, esteem, and self-actualization. Employees' needs for voluntary benefits would fall below the need for safety and security in the financial realm. If employees know they have particular benefits, they might feel better and more comfortable. Another job may offer higher pay, but if it does not have the voluntary benefits employees seek, they may be less likely to leave their current jobs in order to maintain feelings of security.
Issues Involved with Long-Term Care Insurance
LTCI does have some disadvantages. Even though the principal reason employees purchase this insurance is to remove the burden of care from a spouse or children when they can no longer take care of themselves, there are hidden burdens associated with this process that cannot be avoided. These burdens include paperwork, phone calls, and a maze of requirements one must navigate to collect benefits from the insurer (Bernard, 2013). If the individual is unable to complete this work alone, it must be done by the individual's spouse or children.
There are unique attributes to long-term care plans that make these plans different from other insurance policies. As a result, their policies can be complex and difficult to understand. The deductibles typically have waiting or elimination periods of 30, 60, 90, or 100 days, so a person must pay the initial fee upfront before the policy can start (Bernard, 2013). Applicants must also require substantial assistance to qualify and, depending on how they answer certain policy questions, their claims may b e denied. Often the primary caregiver must be licensed, so attempting to assign that role to a relative or friend will result in a claim denial (Bernard, 2013). Also, assisted living facilities were not widely available when some policies were written, and families may discover that only "skilled nursing facilities" are covered (Bernard, 2013). Issues also arise when the policy requires a nurse to be on duty 24 hours rather than 12 hours and on call for the other 12. Lastly, if the agency does not chart the patient's records, the insurance company will not pay (Bernard, 2013).
A second issue with LTCI is its cost. According to Morgan Stanley Wealth Management (2014a), a policy worth $288,000 with a 3% compound inflation protection and a $6,000 monthly maximum would cost a 55-year-old man $2,376 annually, a 55-year-old woman $3,241, and a 55-year-old couple $3,799. At age 70, the cost of the same plan per year would be $6,734 for a man, $9,186 for a woman, and $9,507 for a couple (Morgan Stanley Wealth Management, 2014b). There is the "Good, Better, Best" approach to LTC planning for people in their 50s and 60s. The "Good" coverage gives each spouse $164,000 of benefits, and the "Better" coverage allows the addition of future coverage (AALTCI, 2014). The "Best" option is the most expensive but has an automatic inflation growth feature. Cramer and Jensen (2006) found that the price of LTCI was a small but important factor in the decision to purchase the insurance.
A third issue is that long-term care insurance is cheaper if purchased before the age of 60, as long as a person is medically healthy. LTCI operates like auto insurance in that it has no surrender value, so if it is never used, no money is ever given to the individual (Geewax, 2012). As a consequence, many young people do not see the benefit of purchasing LTCI until they are older. In 2011, 3.5% of the policies purchased were bought by individuals 44 years old or younger, but 56.5% of the buyers were 55-65 years old, with a mean age of 57 (Carrns, 2012). Because the benefits do not accrue like other types of life insurance, this could cause some people to wait and allocate their money towards other finances or luxury items (Carrns, 2012).
The fourth issue is that many people do not think they will require long-term care. Fewer than one in three persons 55 and older believe they will have a higher than 50% chance of requiring nursing home care (Health Insurance Association of America, 2000). There is also the issue that many people desire to remain in their own homes rather than stay at a nursing home. It was found that one in four households gives informal care to an older relative (Schmidt, 1997). Much of the long-term care services are provided by adult daughters who are around 48 years old and work outside the home (National Alliance for Caregiving, 2009; Schmidt, 1997). One third of this group takes care of more than one person and provides around 18-22 hours a week of care (National Alliance for Caregiving, 2009; Schmidt, 1997). Spouses, however, are usually responsible if they are still alive and able to care for their partners. Spouses will devote around 40 to 60 hours per week doing chores, preparing meals, and providing personal care, whereas adult children will do around 10 to 22 hours per week of caregiving and these efforts are focused on care management, transportation, and shopping (Merrill, 1997; National Alliance for Caregiving, 2009).
The final reason people refrain from buying LTCI is that they believe that government healthcare programs or other insurance companies will provide sufficient coverage (Cohen, 2003). A survey found that 55% of adults 45 years and older thought that Medicare would cover extended nursing home stays (AARP, 2001). Medicare, however, does not cover "age related [illnesses] or other chronic conditions." It will cover up to 100 days of LTC directly following hospitalization (Doerpinghaus & Gustavson, 2002). Medicaid will pay for LTC, though only for those with low economic security. Applicants must have limited incomes or savings or have used all their financial resources in order to qualify for coverage under Medicaid (Kemper et al., 2006). In fact, in 2002 public funds made up more than $115 billion of the long-term care spending and Medicaid's share was about $85 billion (Georgetown University, 2004). As the Baby Boomers age, it seems unlikely that Medicaid will be able to provide the funding for the amount of LTC they will need.
CURRENT STUDY AND HYPOTHESES
For the current study, information related to long-term care insurance was collected to determine if having LTCI leads to greater employee motivation, retention, and satisfaction. With the aging population and increasing expenses of care, it is important for employees to have healthcare options to choose from to help themselves as well as their families. By providing such options via LTCI, businesses will become more aware of the powerful effects these benefits have for their companies.
The following hypotheses are therefore proposed:
H1-O: Having long-term care benefits will not aid in employee motivation.
H1-A: Having long-term care benefits will aid in employee motivation.
H2-O: Having long-term care benefits will not aid in employee satisfaction.
H2-A: Having long-term care benefits will aid in employee satisfaction.
H3-O: Having long-term care benefits will not aid in employee retention.
H3-A: Having long-term care benefits will aid in employee retention.
A fourteen-question survey was created by the authors containing two separate question paths, depending on whether LTCI was offered by the company. The survey took no more than ten minutes to complete. An e-mail link to the survey was sent to 4,411 employers across the United States; 225 companies responded to the online survey. The study sample came from the Saint Francis University Career Services office and those companies that had had contact with that office at some point within the past few years. Participating businesses had to meet the definition of a small business of 500 or fewer employees; thus, 77 of the respondents were excluded (Beesley, 2012). Of the 148 remaining respondents, 32 (21.6%) offered LTCI and 116 (78.4%) did not.
Independent-Samples T-Test Analysis
The independent variable in this study was LTCI. The dependent variables in this study were employee motivation, satisfaction, and retention. An independent-samples t-test was chosen to be performed because the hypotheses asked whether offering LTCI would correlate with employee motivation, satisfaction, or retention. Questions pertaining to LTC's effects on motivation, satisfaction, and retention were reverse coded. An independent-samples t-test evaluates the difference between the means of two independent groups to determine if the mean value of motivation differs significantly from the mean value of satisfaction (Moore, 1995). Initially, it appeared that an independent-samples t-test was not appropriate for the small sample sizes, which ranged from 21 to 23 employers and 110 to 113 employees, and that perhaps a Mann-Whitney U test would be more applicable. After examining the graphs of distribution, however, it was found that all variables were distributed equally across a bell curve and that a t-test would suffice.
Hypothesis One asked whether offering LTCI would aid in employee motivation from the employer's perspective. An independent-samples t-test was conducted to compare employee motivation between companies that offered long-term care insurance and those that did not. There was no significant difference in the scores for offering LTCI (M = 3.1, SD = 0.95) and not offering LTCI (M = 2.7, SD = 0.85); t (131) = 1.86, p = 0.065. These results suggest that LTCI does not have an effect on employee motivation as seen by employers, so the null hypothesis is supported.
Hypothesis Two asked whether offering LTCI would aid in employee satisfaction from the employer's perspective. An independent-samples t-test was conducted to compare employee satisfaction between companies that offered long-term care insurance and those that did not. There was a significant difference in the scores for offering LTCI (M = 3.3, SD = 1.00) and not offering LTCI (M = 2.9, SD = 0.82); t (133) = 2.38, p = 0.019. These results suggest that LTCI does have an effect on employee satisfaction as seen by employers, so the null hypothesis is rejected.
Hypothesis Three asked whether offering LTCI would aid in employee retention from the employer's perspective. An independent-samples t-test was conducted to compare employee retention between companies that offered long-term care insurance and those that did not. There was a significant difference in the scores for offering LTCI (M = 3.2, SD = 0.98) and not offering LTCI (M = 2.7, SD = 0.82); t (129) = 2.40, p = 0.018. These results suggest that LTCI does have an effect on employee retention as seen by employers, so the null hypothesis is rejected. Specifically, the results suggest that employers believe LTCI helps in employee retention and satisfaction, but not employee motivation.
Additional analyses were performed. A correlation is a statistical tool to see how two items are related. The moderate negative correlation between the percentage of employees enrolled in LTCI and the age bracket of the employees enrolled, r (21) = -.38, indicated that the greater number of employees enrolled in LTCI, the younger the employees were. This correlation reached a near significant trend (p = .09). The moderate positive correlation between percentage of employees enrolled in LTCI and employee motivation, r (23) = .39, indicated that the greater number of employees enrolled in LTCI, the higher employee motivation was. This correlation reached a near significant trend (p = .07).
Next, the correlations between the percentage of employees who enrolled in LTCI when offered and the number of employees, employee motivation, and employee satisfaction were established. The weak positive correlation between the number of employees and possible enrollment in LTCI, r (111) = .21, indicated that the greater number of employees a company had, a greater percentage of employees would enroll in LTCI. This correlation reached significance (p = .03). The weak positive correlation between possible enrollment in LTCI and employee motivation, r (109) = .24, indicated that the increased probability of more employees enrolling in LTCI would reflect higher employee motivation. This correlation reached significance (p = .03). The moderate positive correlation between possible enrollment in LTCI and employee satisfaction, r (111) = .34, indicated that the increased probability of more employees enrolling in LTCI would reflect higher employee satisfaction. This correlation also reached significance (p = .00).
The goal of this study was to explore the effects of LTCI on employee motivation, satisfaction, and retention. It was hypothesized that offering LTCI would increase employee motivation, satisfaction, and retention. The current data offer some support for this. Companies reported that offering LTCI increases employees' satisfaction and retention but not motivation. It seems that employers believe offering LTCI helps retain employees and keeps them satisfied at work. This finding not only is important to a company's bottom line but also provides some evidence that these benefits would be an asset to the company and should be considered by more companies.
There were two near significant trends shown with employees who were enrolled in LTCI. One trend indicates that younger employees were more likely to be enrolled in LTCI when a higher percentage of employees were enrolled in LTCI. One reason for this could be that younger employees were more concerned about taking care of their families and securing their children's financial resources, whereas older employees may be less concerned because their children have reached financial independence. However, older employees will more likely need LTCI in the near future and may not realize the financial toll LTC could take on their families. The second trend reveals that the greater percentage of employees enrolled in a LTCI plan reflected a greater increase in employee motivation as seen by the employer. With a larger sample size, it may be possible to determine if this potential significant trend is indeed significant, as the small sample size already suggests some relationship between these two variables.
The significant correlation between the company's staff size and the increased probability of employees enrolling in LTCI plans points to other avenues for further research. Even though these businesses are still categorized as small businesses, the larger small businesses believe their employees would take advantage of this benefit. Examining employees' attitudes towards LTCI would be a good starting point for an additional study on the potential benefits of offering LTCI. The significant correlations between increased enrollment if LTCI were offered and greater employee motivation and satisfaction for those enrolled show that these companies believe that LTCI is a positive company attribute valued by employees. Verifying such relationships may also yield data that may persuade other companies to offer LTCI.
Caroline Sandrick, Saint Francis University
Jonna Contacos-Sawyer, Saint Francis University
Brennan Thomas, Saint Francis University
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|Author:||Sandrick, Caroline; Contacos-Sawyer, Jonna; Thomas, Brennan|
|Date:||Jan 1, 2014|
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