What is your opinion of Long Term Care insurance?

In My Humble Opinion
1

I live in Virginia and we are being bombarded with a campaign by the Governor to purchase our own long term care insurance. Everyone between 50 and 70 got a “LTC” planning kit and there is more literature to come supposedly. The governor has begun a blitz of tv and radio spots encouraging this as well.

Is LTC somthing we should really have? What companies are best known for offering it? What criteria should you consider when making the choice?

The kit is very general, and the experience of your guys is always invaluable.

2

The actuarial profession in Australia has been doing quite a bit of work on long term care products over the past 10 years or so. So far the main conclusion seems to be that these products are likely to be so expensive that nobody will be prepared to buy them.

Is this product actually available from insurers in the USA?

3

LTC insurance is hugely important and very expensive.

Back when I was licensed to sell (2001) statistics showed that about one person in two would need LTC for between 12-36 months. That means, you have a 50/50 chance of incurring LTC expenses ($100/day is not unreasonable and probably a low estimate) before you’re dead.

Another way to say it: 50% chance of incurring $36,500 - $109,500 in bills that:

  1. are NOT covered by your health insurance (because your condition is not improving and thus by definition are a LTC case)
  2. is collectible debt–liens can be placed against real property (houses, land, etc)
  3. is not covered by Medicaid until you’ve pretty much exhausted your estate (they may let your spouse continue to ocupy the house, but when she/he dies nothing goes to the heirs)

That said, the particulars of what can be taken from an estate and how are treated 50 different ways in the US. Consult an estate attorney for details.

The price of a policy varies widely depending on your age and health at the time of the application. Most companies offer a discount if both spouses (sorry, all you homos :wink: ) buy a policy. If I were to pull a number out of the air I’d say a 50 year old in decent health will be shelling out $700-$1,000 a MONTH. But what is that next to the 50/50 odds of having to pay $36,500 + EVERY year until you fail to wake up?

Bear in mind, this is NOT only old folks who have to wrestle with this gamble. You can be a LTC patient if you are cruelly disabled/vegetative in a car wreck, have a stroke, break you neck in an equestrian accident…lots of stuff. There are 5, sometimes 6 “activities of daily living” used in the industry (eating, bathing, toileting, a few others), if you lose the ability to do any 3, your policy turns on and starts paying your daily benefit.

There are a lot of very good reasons LTC has become so common in the last 20 years or so. Medicine keeps people alive now where they would previously have died; families are smaller and more people have careers, which reduces the likelihood and quality of care that your kids/siblings can provide you; more baby boomers are getting old and putting greater demands on what LTC infrastructure existed–greater demands and demand for higher quality means higher expense; and people are just better informed about the reality of the strains such disabilities inflict on us.

Insurance Guy says: BUY it now before you get any older. Start with the same company that does your house & car insurance–they probably sell it already. Get yourself educated on the different policies, benefits and options, consult an estate attorney to verify exactly what you have to lose if you opt NOT to get the coverage.

Normally I don’t like government to get involved with insurance, but in this case I think your governor is doing the right thing–a governor is after all, a protector of sorts.

4

Inigo: Several years after my having paid Mom’s last $250K to her nursing home over 7 years, I’m mulling a policy for myself under a big group plan. Any thoughts on the 3 options, a. “auto-inflation”, b. “Non-Forfeiture” and c. “Monthly Benefit”?
Estimated monthly premiums for 65-year old male (if I wait until then) are
$300/mo for $100/day, 60-day exclusion for a,b,c yes for 10 yrs.
$240 for $100/day for abc yes for 5 years
$190 for $100/day for abc yes for 3 years
$445 for $150/day for abc yes for 10 years
$355 for $150 same 5 years
$285 for $150 same 3 years

And it appears that the premium has to be paid even after being “admitted”, right?

5

:: ahem :: I am not licensed to sell any line of insurance, any advice given by me with regard to Long Term Care insurance is not to be construed as fact, but as anecdote possibly given to error due to the lack of currency of my experience in this area…etc.

OK. Here’s some friendly advice on how to get yourself one of them there LTC policies:

DAILY/MONTHLY BENEFIT: Identify and visit some Long Term Care facilities in an area you would prefer to be cared for. Find out what their daily charge is for various levels of care. If you believe you are an Alzheimer’s risk, ask about the cost of that care specifically–and be sitting down before they tell you! Having done this basic research, you will have an idea of what you would have to pay should you break down tomorrow and require their services. For sake of illustration, let’s say that $125/day ($3,750/month) is about average for your area (and don’t be alarmed if you live in like, Seattle or Anchorage and you’re getting $200-400 as an average–that’s what you get for living in a really nice place).

NON-FORFEITURE: Because the LTC policy often pays out after you’ve demonstrated a reduction in your personal marble inventory, this option seems pretty useful. Here’s how it works, IIRC: Inigo Montoya, as we all know, will soon be living alone as his wife has run off with the local paperboy. Eventually, alcohol abuse will take its toll on his mind and he will to succumb to elevating blood amonia levels due to a failing and rock-hard liver. He will stop taking care of himself and forget to pay his bills. His LTC policy will lapse for non-payment of premium. Several months later, the milkman will find him lying face down in a pool of vomit following a massive stroke caused by consuming too much high-cholesterol cat food. Inigo is no longer able to perform 4 of the 5 activities of daily living as described in his LTC policy and so needs to be admitted to a facility but–Oh damn! His policy lapsed! But it was due to an organic mental condition (Advanced Hepatic Encephalopathy) which caused him to neglect to pay his premiums. The milkman, who for reasons unexplained feels indebted to Inigo Montoya, pays the back premiums to reinstate the LTC policy and viola! The policy gets turned on, Inigo gets admitted, and his cheating, heartless wife (whom he never had the heart to legally divorce) swoops in and sells off the house and moves to Cancun with her paperboy lover. At this point I wish to point out that it is important to consider the duration you would like the benefit–“lifetime” is an option for most plans, and it doesn’t cost much more than a 5-year plan. Frankly because only in the rarest of instances does someone stay longer than 5 years at a LTC facility. They get better or they go to a morgue. Typically. You will want to find out exactly how the non-forfeiture option works for any given policy. Some exclude inorganic mental illness (like depression) because it’s too easy to buy the policy, pay on it for a year, let it lapse and then want it reinstated 10 years down the line when it turns out you actually need it. Depression has no/few demonstrable physiological traces, and so this can not be verified as the real reason for the lapse. Elevated blood amonia, Alzheimer’s, certain types of senile dementia–all of these are readily verifiable and so will not normally void the nonforfeiture option. Still reading? Good. Don’t buy this option, it’s expensive. Instead, have duplicate premium notices sent to someone else–sibling or son/daughter–who can take action should they notice you’ve missed a payment. Most companies will do this.

AUTO INFLATION: is called other things and operates a couple different ways, but the gist of it is that it increases your daily/monthly benefit every year to keep pace with inflation. This is a GOOD thing. The two ways I’ve seen this option work are (I forget the terminology) “arithmetic” increases, which add a set dollar amount every year (i.e. $7/day) or increase the base benefit (the $125 example) by a fixed % every year; and “geometric” increases, which add an amount to last year’s benefit. Inflation tends to follow the geometric path, meaning that the cost of a can of Cycle-4 will increase 4% every year over last year’s price. Whatever. Choose this option, and go for the biggest increases you can get.

Lastly: Once the policy “turns on” you are no longer responsible for paying the premiums. Now it’s the insurance company’s turn. So kick back, try to pay attention to “Wheel Of Fortune” and enjoy the gourmet chow and senior socials you’ll be getting for the rest of your days. LTC facilities are pretty cool these days, a far cry from the urine-scented linoleum palaces of old.

6

I have pretty extensive experience working with people who are seeking LTC policies and looking at the costs and benefits for employers who wish to offer a group policy as a benefit to their employees. Unfortunately I don’t have a whole lot of time to devote to a long post at this point, fortunately **Inigo Montoya ** hit many of the key points.

I am a licensed financial professional, but this is just background information. At this point you should certainly have learned that there could be a trained monkey typing this.

Why is the state promoting LTC?

The State of Virginia is intersted in promoting LTC because they don’t want people falling back on Medicaid to provide for their care in their old age. As the boomers age this will be an enormous stress on the system that will be very difficult for the government to assume. By shifting the burden onto payors of premium and private insurance the state avoids a lot of responsibility and future costs.

Do You Need It?

Insurance is needed when you face a financially unacceptable risk. If the costs of LTC, should you need it, would break you and your spouse financially you probably should consider it. Therefor, a couple with assets of $2 million may well pass on the insurance as they can self-insure and save the money that would go to premium. A couple who has almost nothing would be paying too much to protect too little in assets to make the insurance a logical choice. It tends to make the most sense for the middle class who has a solid retirement plan, but one that is not foolproof enough to withstand the costs if one person needs care. I would recommend you talk to a good insurance agent or financial planner. This is one area where the cost of the insurance is no more if you buy it directly or if you go through an agent so it makes sense to use the resources available to you.

How much does it cost?

**Attention Inigo!!! ** You are overestimating the cost of insurance, it is expensive, but not ruinously so. For example, I am looking at the costs under a group plan. A 50 year old could cover themselves at $250 per day for 5 years with return of contribution and a benefit bank and home health care coverage and inflation protection (in short could select almost all of the options) for about $150 per month or $1,800 per year. If they were to buy it privately it would be more expensive, but assuming they were healthy it would be in the ballpark of the group coverage cost.

There are a few major carriers who underwrite LTC policies. The company with the most experience writing policies is GE, though they tend to be expensive if you are not buying it as a couple. Others include Aetna, UNUM, Allstate and John Hancock.

7

Yeah, looking back at my first post’s estimate of the cost makes me question the quality of the crack I’ve been getting lately. :rolleyes:

I just called my insurance guy. Premium for age 50, non-smoker, ok health, with spouse discount $125/day, compounding increased benefit (AUTO INFLATION), 60 day elimination period (how long you have to be messed up before the policy turns on):

$110.42/month for a 5-year benefit, $138.75/month for a lifetime benefit

Rates for this company are the same for boys and girls. A preferred rate is available if you are in very good health, and of course worse rates are also available if it looks like you’re courting disaster. So, it’s a bit spendy but not much worse than car insurance. Actually, it’s potentially a *better * deal than car insurance because the odds are 50/50 you’ll need to use your LTC policy for over $30k, and it’s nowhere NEAR that likely that you’ll need your car insurance for the same kind of payout.