Life Plan Communities Offer Mix of Contract Types and Refunds

Members | May 31, 2016

Consumers can choose from a mix of contract options when they explore whether to move to a Life Plan Community, according to a new report from Ziegler, a LeadingAge Gold Partner, and Love & Company, a senior living marketing firm.

Consumers can choose from a mix of contract options when they explore whether to move to a Life Plan Community, according to a new report from Ziegler, a LeadingAge Gold Partner, and Love & Company, a senior living marketing firm.

“Today, the community that offers only a single contract option … is in the minority,” says the 2015 CCRC Consumer Contract Preference and Buying Behavior Study.

The new report is based on a 2015 survey of 89 Life Plan Communities in 25 states. The survey was designed to gauge current trends and practices in pricing strategies for Life Plan Communities. In addition, researchers used in-depth interviews with a select group of organizations to dig deeper into the survey findings.
 

Contract Types


More than half of the survey respondents said they offer at least 2 of the major contracts types, including Type A (“life care”), Type B (“modified”), and Type C (“fee-for-service”).

This mix of contract offerings is a new development in the field, according to the report. Only 18% of respondents said they have offered multiple contract types for more than 15 years.

Almost half (45%) of survey respondents reported offering a rental option, according to the report. Rental options became more popular during the economic downturn of 2007-2009. However, many Life Plan Communities continued to offer this option even after the economy and real estate market became stronger.

Prospects do not appear to conduct an independent analysis of contract types before making their selection, says the report. Instead, consumers tend to purchase the contract type that the community has offered for the longest period of time.
 

Refunds


The economic downturn also prompted Life Plan Communities to begin offering multiple refund options, and most communities have continued this practice, says the report. These refunds include a traditional option in which the refund declines over time, as well as a high-refund option that could refund as much as 100% of the entrance fee in return for a higher premium.

Consumer selection of refund options depends on 2 factors:
 

  • The pricing relationship between the traditional refund and the high refund. Consumers are less likely to select a high-refund plan if that plan’s premium is priced at 70% or more above the traditional plan.
  • The pricing relationship between the high-refund entrance fee and local home values. Demand for the high-refund plan tends to be low if that plan’s weighted average entrance fee is 20% higher than local home values.


Almost half (43%) of survey respondents reported that they pay entrance fee refunds within a specified period after the resident leaves the community. A lower percentage (17%) of communities reported that they pay refunds within a specified period after the resident leaves independent living. In addition:
 

  • 35% of survey respondents reported paying the refund after the independent living residence is resold.
  • 39% retain control over the refund when a resident moves to health care, in case it is needed to cover unpaid fees.
  • 4% allow the resident to use the refund to pay health care fees, whether or not the resident is running low on funds.

 

Community Features

 


Survey respondents were nearly equally split between single-site communities (51%) and communities that were part of multi-site organizations (49%). The majority of respondents reported that they are not-for-profit communities (86%) that have been in existence for more than 20 years (80%).

More than half (53%) of survey respondents reported providing assisted living only in a dedicated setting. Fewer survey respondents offer assisted living only within the resident’s home (12%) or offer “continuing care at home” (11%).