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Hi. I am a 62 year old woman with Parkinson’s disease. I took an early disability retirement in 2007. I signed up for Calpers long term care insurance in 1997 after I attended a presentation at work. They said that Calpers was self insured and at that time was not asking about pre-existing conditions or requiring any doctor letters or file copies. They said the premiums were low and were going to stay low. So I signed up. Since then I have always payed the max amount in order to keep the max coverage. Now my symptoms are worse and I need to move to assisted living to get the help I need. I recieve Social Security disability and retirement disability from the state. Once I start receiving benefits from the LTC policy will my retirement or social security be reduced?
Hi Lynnette. I am so glad you contacted me. First, I am so sorry you are having to deal with Parkinson’s disease. Second, you were so smart to take out the CalPers policy when you were only 47 and still working. It’s so important to get LTC insurance as young as possible. Now for the good news and it sounds like you can use some. There is zero connection between your social security disability and retirement disability and your CalPers policy, so you will receive all three benefits with no reductions. More good news….your CalPers premium will stop while you are receiving benefits. You can check your policy to see exactly when that happens. I hope I’ve brought some sunshine to your day.
My husband is 68 yrs old and has alzheimers along with parkinsonism. We have no long term care insurance. Just medicare. He needs to be in an Alzheimers center for care but there is no way we can afford the $3000+ a month. what can we do?
You need to go see an elder law attorney if you have not already done so. You can go to www.elderlawanswers.com to search for one or one near you is Christina Applegate at www.applegate-elderlaw.com.
To get Medicaid to pay for your husband’s care, the process in Indiana is that Medicaid adds all of your assets together whether they are in your name or your husband’s name and gives you as the healthy spouse half of the assets up to a maximum of $113,600 and a minimum of $22,728. The sick spouse is allowed to keep $1500 in assets. (Your home and vehicle aren’t included in this asset assessment.) Assets would be money in your checking or savings accounts, cash value in life insurance policies, property outside your primary residence, CDs, money market accounts, investments – that kind of thing. So here are three examples:
- if you had $100,000 in savings, you would be allowed to keep $50,000, and you would spend down $48,500, which leaves your husband with $1,500.
- if you had $150,000 in savings, you would be allowed to keep the maximum of $113,600, and you would spend down $34,900, leaving your husband with $1,500.
- If you had $30,000 in savings, you would keep $22,728 and spend down $5,772, leaving your husband with $1500.
Your husband’s income will go to the cost of his care, except he can keep a personal needs allowance of $52 (soon to be $60 from what I can see). If he is a veteran, he is entitled to an additional $90 a month for his personal needs allowance.
You are allowed to keep enough of his income to give you a minimum monthly income of $1,892. You can keep more of his income equal to the amount of shelter costs you have above $568 a month. Shelter costs are things such as mortgage, rent, property tax, homeowners insurance, utilities, etc. For example, if your shelter costs equal $1,000 a month, you can keep an additional $432 a month on top of the $1,892 ($1,000 – $568 = $432). The higher your shelter costs, the more you can keep of his income up to a maximum monthly income for you of $2,841. Now, if you already have income in your own name above $2,841, you couldn’t keep any of his income…it would go to the cost of his care.
These numbers usually increase a little annually. If your husband is a veteran, there’s something called an aide and attendance benefit that might apply and the elder law attorney would know about that.
This is the basic explanation of how Medicaid eligibility works for long-term care, Darlene. You can apply online at http://member.indianamedicaid.com/. You can see on the right side of the page the link to apply http://member.indianamedicaid.com/apply-for-medicaid.aspx but I recommend talking to the elder law attorney first.
I hope you find this helpful and you have my very best wishes. If you would like to talk with me about long-term care insurance for yourself and you don’t have a knowledgeable long-term care insurance professional in your area, I would be more than glad to help you.
As a retired Federal Employee (age 70), I am eligible for the FLTCIP as is my wife who is 61. It seems like a good plan, and I was about to sign up when I just learned that it does not have a partnership with Colorado, where we live. I am looking at a $150 DBA at 5% compound, 90 day wait for both of us and 2 years for me and 3 years for my wife. But the CO partnership also seems like a good idea. I have quotes for United and Mutual of Omaha which are for pooled home care with a cash benefit, at 5% for 20 years, and about the same premium amount as the Fed plan. I would like your advice on what is more important? A good Fed plan? State partnership? Is 20 years at 5% a good plan for my wife? How important is a cash benefit? Dave, Colorado
Hi Dave – I believe the Partnership is extremely important and would encourage you to go that route. The FLTCIP is a really good plan but doesn’t participate in the Partnership in any state, not just Colorado. I also believe a cash benefit is extremely important as who knows what care will look like in 20 years? As for the 5% 20 years, it depends on longevity or Alzheimer’s in your family. You could do the 5% compound 3X for only $6.00 more a month. I would much rather see you do something with 5% compound vs. 3% compound for life because the 5% compound grows much faster so you are smart to be looking at that. 5% compound doubles your benefits in about 15 years whereas 3% takes 24 years. You both need inflation coverage, not just your wife though so be sure to get it on yourself. You can do 5% compound 2X and she can do 5% compound 3X. You have to take inflation coverage on yourself to have a Partnership plan because inflation is required for all applicants under age 76.
Annual premium at standard health is $3989 and about 15% less if you can qualify for the preferred health discount. If you need to convince yourself of the value, just multiply your premium by 20 years and compare the premium to the benefits you will have at that time. Your 2 year plan starts out at $108,000 + your wife’s 3 year plan starts out at $162,000 for a total of $270,000. In 20 years, the $270,000 will have grown to $689,000! So $3989 x 20 years is only $79,780 vs. $689,000 in benefits at that time. Pretty great deal, isn’t it? Of course you are subject to class rate increases along the way but you can see the concept. There’s a huge difference between $80K and $689K. And don’t forget that the premium stops when one files a claim. You can make it stop on both of you when only one of you files a claim for an additional $80 a year in premium. I am using the United of Omaha plan so you can go over this information with your agent.
There are no single premium plans left in traditional long-term care insurance. You can do it with a combination long-term care insurance/life insurance product or a combo annuity/ltc product. Some people really like these as it gets rid of the “use it or lose it” of long-term care insurance. If you don’t need long-term care, either the death benefit or annuity account value will go to your beneficiary. (12-17-12)
After a claim is made for LTC in-home care for an alzheimer’s patient and the LTC insurance has accepted and is paying the claims, when do the premiums stop? M. Foreman
It depends on the policy, but usually when benefits start. Some older policies delay the waiver of premium until 90 days after benefits begin. Also, some older policies only waive the premium when the claimant is in a nursing home. The time of the waiver will be stated clearly in the policy. If you no longer have it, you should ask the insurance company to send a copy. While you are asking for that, also ask when the premium is waived. This is a great feature of long-term care insurance, isn’t it? Many newer policies allow you to pay a little extra and have the premium stop on both spouses/partners when only one is on claim. If that one dies however, the premium returns. Now, if you don’t want the premium to return, you can add another option called “survivor”. It costs about 9% additional premium and means in most plans that after 10 years if one spouse dies, the surviving spouse has a paid-up policy.
Each state has a guaranty fund. Here is the national website: http://www.nolhga.com/ It describes the entire insolvency process. Basically, the guaranty association cooperates with the commissioner and the receiver in determining whether the company can be rehabilitated or if the failed company should be liquidated and its policies transferred to financially sound insurance companies. Once the liquidation is ordered, the guaranty association provides coverage to the company’s policyholders who are state residents up to each state’s limit. There is a great FAQ section on the national site.
This is an extremely rare situation with LTCI. Conseco Senior Health Insurance Company and Penn Treaty are the only ones not taken over by another carrier to my knowledge. Conseco is in an independent trust managed by the state of Pennsylvania. Penn Treaty’s home page addresses the issue in case they are ordered into receivership. http://www.penntreaty.com/Rehabilitation/GuarantyAssociationCoverage.aspx There is also a link to the coverage limits for LTCI and Med supp from the Penn Treaty site. Most states have at least $300K for LTCI. These issues happened due to liberal underwriting, high commissions, low premium. That formula simply doesn’t work for the LTCI market and it sure doesn’t work in a bad economy. Companies can’t get away with that fatal combination anymore thanks to the NAIC Rate Stabilization that was passed back in 2000. It has taken a decade for states to adopt it but it has some teeth in it. However, NAIC is working on additional rate stabilization regulation. That section starts on p. 144 of my new book. You can get it here: http://www.gotltci.com/online-store/
In one of your answers, you suggested looking into buying a small plan from an insurance company to supplement the insured’s CalPers plan and to decrease the benefits on the CalPers plan when there is another rate increase. That is exactly what I’d like to do. I have reduced my lifetime protection to 10 years and am looking at modest plans to supplement the CalPers plan. However, even though I have been paying CalPers LTC premiums from almost the first day of its inception, CalPers is telling me that my CalPers plan would always be secondary to the new plan. And, the LTC insurance broker is telling me that the plan that has been in effect the longest would be the primary. What can I do in this situation?
That is an excellent question. Even though that’s unusual, I don’t see any problem with it operating that way. It would be like having a primary and secondary health insurance that many couples have, or with Medicare, Medicare pays first and a Medicare Supplement pays 2nd. You would file the claim with the new policy and then send the Explanation of Benefits to CalPers when you file with them so CalPers could pay the balance up to the benefit level you have with CalPers. However, you want to compare what it would cost you at your current age to buy a supplemental policy vs. accepting the CalPers rate increase. LTCI costs a lot more now plus you are older. If you do pursue a supplemental policy, you might like a plan that pays at least part of the benefit in cash so you can use the money however you need it without providing proof of services. Some companies that allow a partial cash benefit in California are MedAmerica’s FlexCare product (50%) Transamerica’s TransCare II (30%) and John Hancock (15% in addition to the regular benefit).
I did confirm that CalPers does indeed intend to be secondary to anything except MediCal (Medicaid), so your CalPers contact is correct. You can look this policy language up in your CalPers policy…should be under Exclusions…but here’s the gist of it:
“We will not pay benefits which (1) duplicate payments from any insurance coverage or (2) are payable under Medicare or would be payable….etc. We will pay the difference between Your actual expenses and the benefits payable by all other sources (except…MediCal/Medicaid…), but our payments will not exceed the amount we would have paid in the absence of other coverage. ….”
What is your opinion about a shared policy for couples compared to each person getting an individual policy?
You are asking about the shared care benefit and I think it’s a great concept. It came about as the unlimited benefit period became more expensive (only a few policies even offer it now). With a couple, the chances of both needing a lot of care are slim, but who knows which one will actually need care, right? With the shared care benefit, you don’t have to know as you can access to each others benefits.There are three ways this works in today’s policies. 1) Each person has a benefit pool and if one dies, the other one inherits all unused benefits. Or if one exhausts his benefit pool, he can start using the benefits of his spouse’s pool. 2) Each person has a benefit pool and there is a third benefit pool the same size that each person can hit first come first serve. 3) The couple shares one benefit pool. You have to be careful on that last one so you don’t buy a small pool; i.e. three years which would be easy to use up between two people.
The Long-Term Care Partnership really helps the situation as in most states, if you do run out of benefits, you have the option of turning to the state for help and being able to protect your assets equal to the benefits paid out if your LTC insurance policy is approved for the Partnership in your state. You can also use it in most other states for the asset protection, as long as you meet that state’s functional or cognitive criteria to access that state’s long-term care benefits.
What if your Long Term Care insurance goes bankrupt? or you were told that your premiums would never go up and they have increased so much in the past 11 years (from $69 to $189) you can no longer afford the premiums. Can I get my $13,000 back and cancel? My policy is with CalPers Long Term Care. G.P. Idaho
I’m sorry that you have experienced so many rate increases. No, you can’t cancel and get your premiums back. But maybe I can help you feel a little better about your situation. You have paid $13,000 in premium over 11 years. The cost of care in Boise, ID is about $200 a day for 10 hours of home care and $224 a day for semi-private care in a nursing facility. Even assisted living facility is around $3000 a month. So the premium you’ve paid over 11 years would only pay for a couple of months of daily home care or nursing home care at current costs or four months in an assisted living facility. I don’t know what your benefits are but I’m sure they would pay for much, much more than that if you have a claim, and your premium should stop when you start receiving benefits. Without your policy, Medicaid in Idaho will pay if you spend down your assets to $2000 and if you are married, your spouse could only keep half of your assets up to a maximum of about $110,000 this year. Your choice of care under Medicaid will likely be more limited than if you use your CalPers benefits to pay for your care.
As for the bankruptcy question, there is a state guaranty fund in each state that may provide help for an insolvent insurance company, but these funds have been rarely tapped for long-term care insurance. Many more banks have gone under than insurance companies. However, you didn’t buy from an insurance company. You bought from a self-insured plan. You are in a unique place compared to the rest of the industry since you are dependent on what the California LTCI plan does for its employees and retirees. It is a plan rated all by itself instead of mixed in with many other insureds like would be the case had you bought it from an insurance company. Even so, you should have never been told that your premium would never go up as it certainly can based on claims experience vs. premiums coming in, and the CalPers plan was unfortunately quite underpriced when it was first brought out.
I don’t know your age or your health, but if you are really worried, you might look into buying a small plan from an insurance company to supplement what you have, and decrease your benefits on the CalPers plan if you get another rate increase to lower the premium. However, I can’t make that recommendation without seeing what you have now and knowing more about your health to see if that would even be an option for you. At any rate, you do have the option of decreasing your benefits to lower your premium now and I would certainly advise that before letting your coverage go. If you would like my help further, please email rhonda@GotLTCi.com to set up a telephone consultation so I can ask you some questions and customize a recommendation.
How can I find out WHO has the largest number of insurers – therefore least likely to raise rates or discontinue selling insurance in the next 20-30 years, based on the law of large numbers. Surely this is listed somewhere? Thank you! Carol
Hi Carol – the National Association of Insurance Commissioners publishes The Long-Term Care Insurance Experience Reports each fall for the preceding year. It has the number of people insured and the ratio of premium to paid claims for each insurance company three different ways: by each product, by type of product such as individual or group, and for all lumped together but segmented by years sold. This is the organization that all the state insurance commissioners belong to (www.naic.org) and the report sells for under $200. The California Dept of Insurance has a report about which companies have had rate increases at this link http://www.insurance.ca.gov/0100-consumers/0060-information-guides/0050-health/ltc-rate-history-guide/rate-history-long-term-care.cfm.
If our employer doesn’t offer LTC, where do you recommend we get it? No doubt some companies are better than others…where do I get a recommendation? T.S.
Congratulations for contacting me and realizing how essential it is to seek more information about planning for long-term care with long-term care insurance! Do let your employer know you are interested in having it available as a benefit as sometimes the employer will seek a plan out for you and the other employees with a one-time opportunity for limited health questions.
Only if your lifestyle is important to you.
Of all of the messages you’ve read over the past few weeks about your new group long-term care insurance plan, this one may be the most important. Becoming a primary caregiver overnight can alter your lifestyle dramatically. Consider this simulated “real-life” situation:
Bob and Mary work full time. With two children in college and one in high school, that’s understandable! They are keeping up just fine, until Mary’s father who has always been in good health, has an unexpected stroke. After a short hospital stay, he is admitted to a skilled nursing facility to help him recover from the stroke. Mary can’t believe it when she learns that Medicare and his Medicare supplement stop paying after about five weeks of care in the skilled nursing facility, after which her father has stabilized. In fact, he is recovered enough to stay home as long as there is someone around. He waits anxiously for Mary to take him home.
• Will Mary quit her full-time job to care for her father?
• Will she go part-time? Now the expenses that she and Bob must meet are greater because elder care needs are
added to college tuition needs.
The answer to the question in the title of this article is “Absolutely, yes, positively, even if you have to pay the premium.” Paying the premium is much less expensive than providing the care yourself or paying someone else to provide it at upwards of $4,500 per month or more. The exception to this is if your parents have less than $100,000 in assets not counting their home and car, they may be able to qualify for Medicaid, but their choices for care will be very slim. That’s why many children pay the premium so their parents won’t be confined to the limited choices offered by the Medicaid system. It’s also why some parents buy policies on their “20-somethings” if they know that adult child will become their responsibility in the event of a head injury or other traumatic event.
One of our friends was in a nice assisted living facility shortly before she passed. We were told by their staff that depending on what type of LTCI a person has it may only cover rent, and food but not medical care. Is that true, and if so what questions do we need to ask our insurance agent about this before purchasing a policy?
Hi Nancy – the room and board is the bulk of the charge in an assisted living facility and it can vary by how much care a person needs. For example, it is common for the cost for an Alzheimer’s patient who requires constant care to be higher than someone who needs help with bathing and dressing every day. An Alzheimer’s patient could cost $4500 a month, for example, vs. $3500 a month for someone who needs help with two activities of daily living (ADLs). Providing help with ADLs, medication management and supervisory services for cognitively impaired patients are all covered expenses by long-term care insurance. Medical care like doctor visits/hospital stays are eligible expenses under Medicare, Medicare supplement, Medicare Advantage or whatever health insurance the person has. Physical therapy, speech therapy and the like can be covered by long-term care insurance, depending on how it is billed.
Now, if you want to hire caregivers to stay with you in an assisted living facility, that will come out of your pocket. If you want it to be covered by long-term care insurance, buy an all-cash policy so you can spend the monthly benefit however you need it. MedAmerica (subsidiary of the Blue Cross plan in Rochester, NY) is the main one available now. The product is called Simplicity. Prudential allows you to take up to 60% of your monthly benefit in cash so if you buy a large enough monthly benefit, you can make that work. Both companies sell their products through brokers so your insurance agent can get them for you. The next best thing is an indemnity policy that gives you the daily or monthly benefit regardless of the charge. That way you can use the difference between your benefit and the charge for room and board and pay for caregivers.
I personally have LTC with Met Life and am wondering if I should keep it. It is about 5-6 years old now so my husband and I are both older. We are ages 53 and 55. Would you replace them or do you think Met Life will find a buyer and the policies will survive with minimal increases. I really appreciate your prompt response and always have admired your advice as a LTC specialist. Thanks for sharing. C. Cole
I think it was purely a financial decision for MetLife. People are living much longer to collect these benefits and hardly anyone gives up the policy. Low investment earnings add to the problem. You know, Getahn, here’s an angle. We keep saying a large company that is diversified (sells a lot of different products) is the safest. However, just like CNA did several years ago, this is a great example of how a large company can sell off the long-term care insurance if they aren’t getting the profit they want. Companies that have done a huge amount of long-term care insurance have more at stake and are looking to stay in. Examples:
- MedAmerica Insurance Company (the company that has the State of TN plan, the State of New York plan and Blue Cross and Blue Shield of Tennessee has it on their own employees plus offers through BCBST health insurance agents) is a wholly-owned subsidiary of the Blue Cross plan in Rochester, NY (Excellus Health Plan). LTC insurance is all MedAmerica does since 1987, so they’re totally committed.
- John Hancock announced a few weeks ago they plan to implement an average rate increase of 40% on 80% of their long-term care insurance business subject to each state’s insurance department approval, and left the large group market. But the good news is they didn’t leave. John Hancock is heavily invested in long-term care insurance with the 2nd largest block of policies in the nation.
- Genworth is the oldest company selling LTCI (since the mid-70s) and have the largest block of LTCI policies in the nation. Obviously they are fully committed and recently went into the large group market
- Bankers Life – another company that has sold LTCI second longest and has 3rd largest block
- Prudential has sold since 1987 and continues to hang in both the large group and individual market when most carriers have left the large group market
- Unum has the largest presence in the smaller group market
- Mutual of Omaha/United of Omaha just introduced a new product series and is obviously in the LTCI market for the long haul.
There are many other carriers that are totally committed and haven’t had a rate increase ever…Berkshire Life (Guardian), Country Life, Massachusetts Mutual, Northwestern Mutual, and New York Life are great examples. State Farm has had one rate increase but remains committed.
But yes, the LTCI industry will survive this, and the carriers who stay and are committed will just do better as they will get the business that would have gone to MetLife.
You’re also probably wondering about rate increases, but the big picture is, LTCI carriers have had one or maybe two rate increases over a 20 year period. Can any other product say that? Medicare supplement goes up every year. Car insurance, auto insurance, and certainly health insurance! The only people having real problems are the agents who weren’t clear about the ability of carriers to have a class rate increase, and now is when that comes back to haunt them.
The industry is responding to the rate increase situation.
United of Omaha has a new product that allows one to buy a plan that is paid up in 10 years and a 10 year rate guarantee, so it’s guaranteed premium.
State Life Insurance Company (owned by OneAmerica) has plans that combine long-term care insurance with either life insurance or a deferred annuity that allow the applicant to extend the benefits beyond when the death benefit is exhausted (for life insurance) and when the account value is paid out (for an annuity). Benefits can be extended all the way up to unlimited and have 5% compound inflation. The premium for the entire thing is guaranteed on both types of policies. There are other combo products as well with various guarantees built in.
I have delayed purchasing LTC insurance and will be 68 yrs. old this year. Should I lower the amount of monthly coverage and/or the period of payouts or both just to get some protection?
At least you are thinking about long-term care insurance now! Pat yourself on the back for that. Don’t lower the monthly coverage unless you can make up the difference between the cost of care in the area in which you intend to live out your life and the monthly benefit you purchase. You can shorten the length of time first if you have to make an adjustment. About 85% of the claims are taken care of in four years or less. There are policies, however, that allow you to take 40% of the monthly benefit in cash each month in lieu of the rest of the benefit. If you are able to do that, you will certainly make your benefits last longer.
You might want to review the section about benefit period under “Your Customized Benefit Selection Process” which is under the main category of “LTC Cost and Benefits” on www.GotLTCi.com. Above all, don’t skimp on inflation coverage. In addition to plan design, your insurance professional will also ask you some questions to see if there are any concerns about you being able to qualify medically for a policy.
I have just turned 68, and my wife and I are trying to determine what is most important in a longterm healthcare policy. You stress the importance of getting the inflation protection, as well as being sure that we can afford the premium when we stop working. At our age (wife is 67) what do you recommend?
Assuming you are healthy enough to qualify for long-term care insurance, you will want to consider a monthly benefit that is large enough that you can make up the difference between it and the cost of care. At your age, you can consider 5% simple inflation which costs less than 5% compound unless you have exceptional longevity in your family or are in great physical shape but have Alzheimer’s in your family. Both of these characteristics can translate to a really long life and that makes the inflation benefit even more important for you.
I think we can easily expect the cost of care to triple in the next 20 years. A 5% compound inflation factor will make the monthly benefit of the LTC insurance policy triple in the same time frame, whereas the 5% simple will make the monthly benefit double.
After determining the cost of care in area in which you expect to need care, then choosing a monthly benefit that is enough so you can make up the difference at claim time, you can choose the benefit period/policy maximum that is affordable.
If affordability is a problem at that point, you may be able to consider a facility only policy which costs significantly less than a comprehensive plan. The facility only policy doesn’t pay for home care or adult day care, but it pays for the beautiful assisted living facilities we see being built in so many places, which still makes a nursing home a last resort. Assisted living can be very attractive as spouses can stay together and it doesn’t look like a nursing home.
With further knowledge of your personal situation, I may be able to offer you some options. If you do not have a local insurance professional who specializes in long-term care insurance to help you, please email Rhonda@GotLTCi.com to set up a personal, no-obligation consultation with me.
I saw the huge bills created as my mother got sick and ultimately died. Now, it absolutely terrifies me that one day I might be in that same position. I hope you can shed some light on a way to get LTC insurance if your are not financially well off. (I am single with no kids.)
It’s especially difficult for single women to contemplate being alone without adequate care as we age. The type of policy that could work best for you would be a facility only policy. It pays for assisted living facilities as well as full scale nursing facilities. It doesn’t pay for home care, but a single person who needs enough care to qualify to receive benefits from a long-term care insurance policy usually can’t stay home very long without needing more home care than the policy can pay. It can also be difficult to manage your medication, cook for yourself, clean your home, mow your lawn, etc. Being socially isolated can lead to depression as well.
A facility only policy costs significantly less than a plan that pays for home care which is called a comprehensive policy. I would rather see you use your precious premium dollars to buy enough coverage to stay in a really nice assisted living facility instead of diluting them to pay for home care which you may never use. The other tremendous advantage of being able to have assisted living care is that you have a personal unit for privacy but you can mingle with others, which often prevents the depression that can occur when living alone and not being able to get all the help you need to not only take care of yourself, but your home as well.
With further knowledge of your personal situation, I may be able to offer you some options. Please email Rhonda@GotLTCi.com to set up a personal consultation with me.
You will want to read my books, of course! I wrote The ABC’s of Long-Term Care Insurance just for YOU…and for anyone who wants to understand long-term care insurance as quickly as possible. Then you can go to Long-Term Care: Your Financial Planning Guide to get all the “between-the-lines” stuff…but it’s still easy to understand: big print, East Tennessee vocabulary
I work for the federal government and after pricing their ltc insurance I think I can do better with individual policies for my wife and myself. I read your Complete Financial Security Plan brochure and was quite interested in the boldface sentence about not deleting the inflation coverage. I had always included the 5% compounding when asking for a quote. It seems to about double the premium. This morning a New York Life agent suggested increasing the daily benefit $70 or $80 a month and not use the 5% compounding. That might last me about 10 years before having to buy additional coverage and be a lot cheaper. Do you agree or disagree? Can you steer me toward any particular company? I am 53 (in good health). My wife is 43 (has been diagnosed with Raynaud’s Syndrome but is not disabled in any way and works 40/hrs a week). I looked at a company that is rated very highly but again the 5% compound doubles the premium.
Just let me say this, looking at LTC insurance without inflation coverage is like looking at a health insurance policy that only pays hospital room rates at what they cost today, and you would never consider that, would you? Terrible advice from the other agent, the cost is tripling in 20 years and you are only 53 years old, 30 years from now when you’re 83 you’ll be looking at costs of probably $850/day and that much benefit isn’t even offered today. If anything, you need to bump up your daily benefit a little more than the average cost in your area, because the inflation on the policy is 5% compound, and the government projection is more like 5.8%. Also, think very hard about the federal plan, I think that may be the way your wife can get coverage and that’s a wonderful gift.
My husband and I are interested in LTC insurance. We met with a representative this past Tuesday who told us about their LTCI plan covering nursing home, assisted living, in-home care and dementia. My husband just turned 50 and I am 44 years old. We both are non-smokers. The representative quoted us $1930 premium with a built in simple 5% increase annually to cover inflation. Is this rate high, average or low for this kind of coverage?
The premium is on the low side. You didn’t tell me the daily benefit, benefit period, elimination period or level of home care that you’re looking at, but I will tell you that you are much, much too young to even consider a 5% simple inflation factor. I recommend 5% compound to most people and nonnegotiable for people 70 and under. My books (The ABC’s of Long-Term Care Insurance and the more detailed Long-Term Care: Your Financial Planning Guide) are available on this website if you want to see details on how to compare benefit features…but just know that the inflation coverage is one of the most important considerations to deal with. If the benefit is too small at claim time and you can’t make up the difference, you will be very unhappy. Make sure you have an adequate daily or monthly benefit, an elimination period (deductible) that you can afford at future prices, not just today’s prices, and the 5% compound inflation coverage. After that, adjust the benefit period to what is affordable. (Note: Suze Orman’s The Classroom at www.suzeorman.com has a wonderful section about inflation coverage. You can get a password to it from her book The Money Class.)
Premium is partially based on your age and marital/partner status, but it’s also determined by at least five decisions you have to make based on your personal needs. For your information, the five decisions are 1) waiting period, 2) monthly or daily benefit amount, 3) home health/community care, 4) inflation, 5) benefit period. Other decisions could be some form of limited pay policy to protect yourself from future rate increases once your policy is paid up. You can get a 5-15% discount for being in really good health. If you want a lifetime benefit period, now’s the time to get it because the insurance companies won’t be offering it much longer. Better to get a meaningful daily or monthly benefit with the best inflation benefit then buy the benefit period you can afford. If you are married or part of a couple you can do shared care, which allows each person access to the other’s benefits.
Insurance companies vary on this issue. If you have recovered from cancer or heart problems for example, some companies want you to be recovered two years, some five years. But if you are recovered with no treatment and no complications, you can usually get a policy. Progressive conditions are uninsurable, such as Parkinson’s, Alzheimer’s or severe rheumatoid arthritis, and multiple conditions such as diabetes and heart problems or multiple strokes. Companies are becoming stricter on osteoporosis because it is common with older women. Conditions like hypertension are usually insurable if well under control. A few companies will accept insulin-dependent diabetics (commonly up to 50 units/day), and some companies will accept diabetics controlled by diet. The younger you are when you apply, the better the chance you will be accepted and/or qualify for a preferred health discount of 5%-15%, and that’s nothing to sneeze at!
Normally no, the insurance company usually just checks your medical records and the insurance company pays your doctor for that information. However, the insurance company may ask you to see a doctor if you have not seen a doctor in many years. And many companies require a face-to-face assessment for cognitive impairment if you are past a certain age, usually 72. People who apply for long-term care insurance over the telephone can expect a medical person, such as a nurse, to bring the application by to witness the signature and observe your overall health condition. The nurse will give you a cognitive test as well, so don’t be offended by that. And please, do NOT joke about losing your car keys…that’s a quick way to get the nurse to leave and recommend you not be accepted for long-term care insurance!
Not today, there is a concern, however, that they might start especially regarding family history involving Alzheimer’s. That is why it is so very important to purchase long-term care insurance as quickly as you can if you have anyone in your family with Alzheimer’s, just in case the insurance companies decide to ask that question.
Better companies provide a window of time for existing policyholders to upgrade to the improved benefits with either no additional underwriting or light underwriting. Typically any extra premium needed will be based on attained age, but some companies have allowed existing clients to get the new policies at issue age with no additional underwriting. Other companies require you to apply for the new policies just like any other new policyholder. It is a good idea to ask the agent about how the company you are considering handled existing policyholders with the last policy improvements.
Most new tax-qualified plans won’t allow a cash-back return of premium feature if you terminate your policy without using it, because you will be taxed on any premium that you get back that you deducted on our taxes. Instead, tax-qualified policies usually offer an option called a shortened benefit period, which is like a premium account. This means that if you cancel your policy after at least three years, the insurance company must pay a claim at any point in your life equal to the amount of premium you paid in. Costs are increasing so fast that this benefit may not be very meaningful compared to the extra premium, which can be as much as 30%, that you will pay for this feature. Few people have bought the return of premium feature. The odds are very high that you will use the coverage, especially if you buy home health benefits, and many people would rather put the premium difference in a mutual fund, an annuity, etc., so they can be sure of not losing it if they have a claim. A couple of policies return the premium even if you have had a claim for people who are willing to pay the substantially extra premium this feature costs…normally about 50% extra.
Yes. Also, Long-Term Care Partnership plans will pay benefits in other states but the asset protection feature if you have to apply for Medicaid is not available in California and New York, as neither of those states will agree to reciprocity. A few companies sell policies that will pay benefits outside the U.S. or at least in Canada.
It works like health insurance. It depends on who files the claim. If the home health agency or the nursing home files the claim, the benefit is paid to them. Many of them are happy to do so because it means they get their money faster! If the family prefers to file claims and then pay the bills, the insurance company pays the family.
Many insurance companies refund the balance of the premium for the year.
How long did you say the government looks back to see if assets have been transferred before you can get Medicaid?
The answer is 60 months (30 months in California). If a transfer for less than fair market value is discovered, a penalty period is determined by dividing the amount you gave away by the average monthly cost of care in your area, and that’s how long you have to wait before Medicaid will pay. For example, if you give away $300,000 and your state used $5,000 as the average cost, that would result in a penalty period of 60 months (5 years) before Medicaid would pay your bill. Also, states are required to do estate recovery at the death of the second spouse that can include a lien upon the house (in most states). But remember, the big issue with Medicaid is your loss of choice. When you are on Medicaid, you go where there is a bed, which very likely may not be the nursing home of your choice, and your option for extensive home care or care in an assisted living facility (in most states) is gone.
I have long-term disability insurance. What is the difference between that and long-term care insurance?
Both employer-provided and private disability policies only provide money to replace income lost due to a disability. Long-term disability insurance is intended to pay living expenses, such as a mortgage, rent, utilities, food, etc. It doesn’t provide an extra $4,000-$6,000 a month to pay for long-term care. Also, group disability insurance is usually tied to employment and you lose it when you leave your job. Long-term care insurance, however, pays specifically for long-term health care, such as home health and nursing home care and is a policy you can always keep no matter where you bought it. Finally, if your employer is paying the premium for your long-term disability insurance, you will be taxed on the benefits if you have a claim. This isn’t true with long-term care insurance. The benefits are tax-free.
I’m not even close to retirement and I’m healthy. Why should I consider long-term care insurance now?
Long-term care insurance products are age-related and health underwritten. This means you can only get a policy if you are healthy and the younger you are, the lower the premium. You will pay longer, but you’ll pay less premium than if you wait to say, age 65 to purchase a policy. Adults of all ages need to seriously consider a policy. And remember, over 40% of those receiving long-term care are under 65. Finally, there’s a hidden cost of waiting that most people don’t think about. Today you might be able to buy a policy for $140 a day to cover the cost, but ten years from now, you would have to buy a policy for about $240 a day, plus you would be paying premium for ten years older than you are now! A quick example is a 50 year old person who has a spouse or partner could buy a three year benefit period with the $140 daily benefit for $94 a month today but in 10 years, a $240 daily benefit would cost about $200 a month! And if you develop a serious health condition between now and then, no amount of money will buy a policy for you. Better to buy now while you are insurable.
Why are we just now hearing about how important long-term care insurance is; why hasn’t it been around?
Long-term care insurance has been around since the 1960’s, but meaningful policies were developed just in the last decade in response to the escalating demand for long-term care brought about by an aging population, changes in family structure, and the big shift away from the hospital setting.Long-term care insurance has been around since the 1960’s, but meaningful policies were developed just in the last decade or so in response to the escalating demand for long-term care brought about by an aging population, changes in family structure, and the big shift away from the hospital setting.
Rates can only go up on entire classification of policyholders. Obviously, policies with very low rates will probably increase a lot sooner than policies with middle-of-the-road rates. Companies that practice competitive pricing, conservative underwriting and that are financially very strong have the best chance of holding down rates in the future. Conservative access to benefits such as the requirement in tax-qualified policies for a 90-day certification also plays a significant role in holding rates down.
Let’s assume that a couple each year could faithfully put money aside for their long-term care needs. A fifty-year old couple that saved $1,600 a year, the premium for a policy that would pay about 2/3 of the cost for three years, and earned 10% for 30 years would have saved enough money to only pay for about one year of care at future prices. And, that amount would have to work for two people, not one year for each of them! Also, you probably didn’t accumulate the money you have by spending it when you didn’t have too? Do you plan to carry a homeowner’s policy when your mortgage is paid off?
It is rare, but there are a few versions of paid-up insurance available. One version is really a lump sum life insurance policy or annuity which will work if you put enough money in it, at least $100,000 or so for a 60 year old couple. There are a few long-term care policies approved in some states that have 10-pay or 20-pay options that have a guaranteed premium.
You said I could lose my policy if the insurance company goes out of business. What about the state’s guaranty fund?
States have a fund that will pay claims when a company goes under. However, payments could be at a percentage of what you are entitled to, depending on how much money is available in the guaranty fund. The money in it comes from when the insurance department assesses all the companies that sell health insurance in the state to help an ailing company. Ask your insurance professional for how the fund works in your state or go to the national website for guaranty associations at http://www.nolhga.com/
Effective January 1, 1997, the Health Insurance Portability and Accountability Act of 1996 provided tax incentives to both individuals and employers to purchase long-term care insurance. The law clarifies that benefit payments more than $300 per day ($9000 per month) in 2011 are tax-free as long as they do not exceed the cost of care. For individuals, a portion of the long-term care insurance premium based on your age is counted as a medical expense. Medical expenses in excess of 7 ½% of your adjusted gross income are tax deductible. Employers have better long-term care insurance tax incentives. Owners of C-Corporations can deduct 100% of the premium on themselves and their spouses, including limited pay plans that pay the premium up in 10 or 20 years.
Self-employed business owners can deduct an age-based amount of long-term care insurance premium in the same category as health insurance ($340 < age 41; $640 < age 51; $1,270 < age 61; $3,390 < age 71; $4,240 age 71+). Employers of any kind will receive a tax deduction for 100% of any portion of LTC insurance premium paid, and neither the contributions nor the premium will be taxable income to employees. Alternatively, the age-based amount of premium can be paid with pre-tax dollars from a health savings account. All of these provisions are available only with tax-qualified policies. (Policies issued prior to January 1, 1997 are “grandfathered” which means you get all of these tax advantages automatically and are considered tax-qualified policies.) Ask your insurance professional to show you the statement that the policy is intended to be tax-qualified on the written literature about the benefits that he or she gives you.
Non-qualified policies will pay for short-term conditions because they do not have the 90-day certification requirement. They may also pay a claim quicker for you because some of them pay when you need help with only one Activity of Daily Living. If the ADL list includes bathing, it will be very easy to get a claim paid. Some non-qualified policies will pay if you don’t need help with any ADLs and you are not cognitively impaired, your doctor just has to say you have an illness or injury for which you need care. You know the old saying, “If it sounds too good to be true, it usually is.” Not only are companies who pay benefits out too quickly at risk for rate increases, but some may struggle to stay in business when the baby boomers start filing long-term care insurance claims. Long-term care was never intended to pay for short-term conditions. That’s for health insurance, Medicare, Medicare supplement or HMOs to pay. LTC insurance is for the 90-day and longer episodes. That’s why it’s called “long-term care.”
Section 1201 of the Medicare Drug Bill, Public Law No. 108-173, added Section 223 to the Internal Revenue Code to permit eligible individuals to establish Health Savings Accounts (HSA’s) for taxable years beginning with 2004. Health Savings Accounts are available to anyone with a deductible of at least $1,200 with a maximum contribution of $3,050 for an individual plan with annual out-of-pocket expenses (deductibles, co-payments, not premiums) not exceeding $5,950 (Family plans: at least a $2,400 deductible with a maximum contribution of $6,150 and out-of-pocket max of $11,900).
Any unused amounts at the end of the year in HSA’s are allowed to grow tax-deferred, which is much better than the “use it or lose it” feature of a flexible spending account.
Americans who have high-deductible health insurance plans (HDHPs) in the amounts specified above may deposit up to the maximum contribution above in a pre-tax account and may use that money to pay for any IRS-approved medical expense, plus three types of insurance premium: COBRA premium, health insurance premium only if the applicant is receiving unemployment, and “qualified” long-term care insurance premium, which means the age-based amounts. As of 2007, the month-to-month accumulation is gone; i.e. if one is eligible in December, he/she can contribute the entire allowed amount for the entire year.
In addition, individuals over 65 may use HSA dollars to pay premiums for Medicare Part A or B, Medicare HMO, premium for employer-sponsored health insurance (including retiree health insurance), but not Medicare supplement premiums. (Note: Americans who are eligible for Medicare can’t set up a Health Savings Account, but if they set one up prior to becoming eligible for Medicare, they can keep it – they just can’t make new contributions after becoming Medicare-eligible.)
Medicare Part D
I don’t understand how the Medicare Advantage program is going to work when so many HMOs have stopped taking Medicare patients.
HMOs have lost money on people who are chronically ill, because the government’s allowance for each person on Medicare only varies by geographical region, not by the person’s health condition. That means that HMOs receive the same amount of money for well people, and sometimes it isn’t enough to take care of the sick people. HMOs are now paid based on the person’s health status in addition to geographical region, which makes it more attractive to HMOs to accept Medicare patients. This could change under the Patient Protection and Affordable Care Act of 2010.