A great majority of Americans are living to a ripe old age and that's got many large corporations concerned. With many of them providing some of their retired employees with long-term health care benefits, their concern is financial.


"It costs a fabulous amount of money for companies to provide health care benefits for its former employees," explains Alexa Smith, president of the Research Department, New York City. "That's because people are living longer and the diseases which people once died from are now being controlled, but at a huge cost. People are also spending more time in nursing homes and receiving in-home medical care and having meals delivered," all of which contribute to corporations' financial liability.

But how concerned are corporations about long-term coverage care and what are they doing about it, if anything?

Those were two main issues addressed in focus groups involving employee benefits officers of large corporations in Chicago and Philadelphia. The research was conducted in August, 1987, by the Research Department for Nashville-based EQUICOR EQUITABLE HCA Corporation, an employee benefits company that sells group benefits and managed health care products.

EQUICOR is a product of a merger between Hospital Corporation of America (HCA) Health Plans Division and Equitable Group & Health Insurance Co. Like a lot of other insurance companies, says Smith, EQUICOR wanted to know what corporations were thinking about in terms of long-term care coverage, what their needs were and if they were presently thinking of any long-term health insurance products.

Sites and sample

Chicago and Philadelphia were chosen as the sites to do the four focus groups - two in each of the cities - because both have a large number of major employers with a substantial number of retirees, says Karen Krett, market research manager at EQUICOR's New York office.

The large corporations represented in the study were involved in a variety of industries and had 1,000 employees or more. The employee benefits officers representing these companies were chosen on the basis of their being the highest ranking officer of this type in their company and/or knew the most about their company's long-term benefits products.

While EQUICOR had a hypothesis for different types of long-term health care products when it went into the focus groups, it wanted to fine tune its concepts, explore any needs among the respondents, and keep an open mind to new product ideas.

Basically, EQUICOR's interest was to discover how concerned these companies were about long-term care coverage; what their awareness was of both long-term care and retiree benefits; what health issues concerned their retiring employees and what kinds of products they were asking for; and how might these companies need help in dealing with the financial burden of long-term care coverage.

The company's officers were divided into two distinct groups regarding their company's attitude and concern about long-term health care.

"Some were concerned about it and others had their head in the sand," says Smith. "It was surprising to us that things were so divided, from companies which provided zero benefits to those which had an extensive, conscious offering. We thought there would be more of a middle ground, but not in this case."

"Some benefits officers weren't even thinking about long-term health care coverage and others were very concerned about retiree benefits and their responsibility to their employees," adds Krett. "Their thinking was very progressive."

Size and type

The differences in attitudes, says Smith, appeared to vary depending on the size and type of the company. Larger companies, for example, were more aware of the different types of long-term health care benefits and offered such benefits to their employees. They also knew that they would incur substantial liability for providing these benefits and were also concerned that a legislative mandate is "lurking down the pike insisting all companies provide long-term health care," says Smith.

Smaller companies saw it more as a responsibility of the family and community to care and provide for older people and that it was unfair for them to be required to do so. Other types of companies, such as hospitals, were not interested in long-term benefits because such organizations experience high employee turnover and lack sufficient capital for such benefits.

For those companies which did provide some retiree benefits, there were basically two types of packages offered:

1. A percentage of medical benefits that was previously offered to the employee while working at the company, and

2. Medicare supplements.

Some were currently taking steps to cut off benefits because the expenses were so open-ended, says Smith. "They had a need to contain the costs in some way."

Case-by-case

Nevertheless, most of the companies decided on what packages would be given on a case-by-case basis and half of them did offer some type of preretirement planning.

"This usually involved a meeting which employees nearing retirement had with the company's benefits officer who explained what kind of coverage would be provided. Other company meetings centered on such issues as how to make new friends and how to deal with leisure time," says Smith.

"Most all of the companies also communicate with retirees in some way, such as a company newsletter, or by inviting them to company outings and picnics."

Cafeteria packages

No matter how much or how little the companies provided in the way of benefits, the concern in general was cost. As a solution to it, many seemed to agree on flexible benefits packages, also called "cafeteria" packages, says Smith. These give employees a range of benefits to choose from, for example, health care, vacation, life insurance and long-term coverage. Flexible benefits function as a type of trade-off, because employees must choose a limited number of benefits, thus give up their opportunity to have others.

While EQUICOR has not launched a new product or marketing strategy based on the findings from the research, the research does provide support and direction for future product development, says Krett.

It has also helped EQUICOR confirm that there are many different attitudes among corporations about long-term health care, says Smith, which were very valuable to know about. This kind of information could not have been obtained with a written questionnaire.

"Focus groups put you in touch with ideas in a direct way, in the voice of your audience," says Krett. "They give you a good range of your audience's thoughts and feelings and are a good way to get in touch with your target market and address their concerns."

"There's a brainstorming quality about focus groups, too," continues Krett, "and an important access to language which is very revealing and which you can't get quantitatively in a structured questionnaire.'