No newspaper editor was silly enough to write the headline:

IBM stops selling personal computers–
future of PC industry in doubt!

Yet, earlier this month, after one of the larger long-term care insurers announced that it would stop selling new long-term care insurance policies, “experts” concluded that the future of long-term care insurance was “in doubt”.  The headlines read:

“Long-term care insurance begins to fade away”

“Is long-term care insurance doomed?”

“Is the long-term care insurance market sick?”

IBM made a simple business decision in 2004.  They concluded they were not nimble enough to profit from low-margin, price-sensitive, computer manufacturing.

Insurance companies also make simple business decisions. There are significant overhead expenses to create, market, and underwrite long-term care insurance.

These expenses are incurred regardless of how many (or how few) policies are actually sold.  If sales are too low, the overhead costs per policy make it less desirable for the company to sell new policies.  It’s MicroEconomics 101.

Fact:  More people own long-term care insurance today
than ever before in history.

More than twice as many individuals own long-term care insurance today as did in the year 2000.

The number of individually purchased long-term care policies has increased by 129% in the past 10 years.

Does that sound like a market that is sick?

While some LTC insurers’ sales have been down over the past few years, other long-term care insurers have had double-digit growth.  One of the leading long-term care insurers had a 36% increase in sales last quarter, compared to the 3rd quarter of 2009!

One highly-rated insurer that sold long-term care insurance for nearly 20 years, and then stopped selling new LTCi policies, started selling new LTCi policies again after significantly reducing their overhead and streamlining their business processes (something some insurers will have to do in order to be competitive again in this industry).

Medicaid and the CLASS Act are not the solution to the “long-term care tsunami” headed our way.  Government-approved long-term care partnership policies ARE the solution.

This recent announcement, however, has revived some common misconceptions about long-term care insurance.  In the next few posts, I will address these misconceptions:

1. Can my long-term care insurance policy be cancelled by the insurance company?
2. What happens to my long-term care policy, if my insurer stops selling new policies?
3. How do I know if the long-term care insurance company will still be in business when I need to make a claim?
4. What happens to my long-term care policy if the insurance company goes bankrupt?
5. What happens to my long-term care policy if the insurance company sells my policy to another insurance company?

(originally published Nov. 6th, 2010).

1. A 30-day Elimination Period usually costs about 20% more than a 90-day Elimination Period.  If you’re going to spend 20% more premium, you would be better off buying 20% more Daily Benefit.  Would you rather have a policy that pays $200 per day starting on day 31  –OR–  a policy that pays $240 per day starting on day 91?  The premium is about the same for each.  I’d pick the latter.
2. If you need acute care (e.g. short-term rehabilitative care) most medical insurance policies (including Medicare and Medigap policies) can pay up to the first 100 days in a skilled nursing facility.  With many of the better LTCi policies, those days of care paid for by your medical coverage can count towards fulfilling your Elimination Period.
3. If you need chronic care, (due to Alzheimer’s, Parkinson’s, Rheumatoid Arthritis, etc…) your care starts off slow and you’ll gradually need more and more care.  You may only need a few hours of care each day for the first 90 days with a minimal out-of-pocket expense.  Alternatively, some policies would allow home care provided by a family member to fulfill the 90-day Elimination Period.
4. Federal law requires that a tax-qualified long-term care policy pay benefits only when your care is expected to last 90 days or longer.  If your doctor certified that you were expected to recover in 89 days or less, a policy with a 30-day Elimination Period would not pay any benefits.Extra Tip:  Some policies offer a zero-day Elimination Period for care at home. With these policies, the Elimination Period is waived for care at home. Some policies include this feature automatically. Other policies make this available for an extra premium.  With some of these policies, the care received at home can fulfill the entire 90-day Facility Elimination Period.  

1. Long-term care insurance is very flexible.  Every long-term care policy gives you many choices for your benefits.  You choose your:  Daily Benefit, Inflation Benefit, Policy Limit, and Elimination Period.  The richer the benefits you choose, the higher your premium.  The more modest the benefits you choose, the lower your premium.  You are in control of those choices.
2. Shop around. You can save thousands of dollars over your lifetime by shopping and comparing prices from several of the top long-term care policies.  Every long-term care policy has a unique way of calculating your premium based upon your age, your choice of benefits, and your health history.  When comparing several of the leading policies, with nearly identical benefits, premiums will often vary by as much as 70%.
3. Premium Payment Periods. You can choose one of four premium payment periods for your long-term care policy.  You can choose:  a stepped premium payment, a standard premium payment, a shortened premium payment, or a single premium payment.  A “stepped premium payment” method can start off about 30% less than a “standard premium payment” method.
4. Use pre-tax dollars. You can significantly decrease the “net cost” of your long-term care policy by using pre-tax dollars to help pay your long-term care insurance premiums.  There are now 10 different ways owners of long-term care insurance can save on their federal and state income taxes.  Depending upon your state and federal income tax bracket, this can decrease your “net cost” by 30% or more.
5. Buy a Partnership-Qualified Policy. Now that 40 states have “Long-Term Care Partnership programs” you do not have to buy an expensive “unlimited” long-term care insurance policy.  You only need to buy an amount of long-term care insurance equal to the amount of assets you want to protect for yourself, your spouse or partner, and/or your heirs.  The Long-Term Care Partnership programs provide dollar-for-dollar asset protection.  Each dollar that your Partnership-Qualified Policy pays out in benefits entitles you to keep an extra dollar of countable assets if you ever need to apply for Medicaid services.

The Daily Benefit is the single-most important feature in your long-term care policy. Choose it wisely!

The Daily Benefit is sometimes referred to as the “Starting Daily Benefit” or the “Original Daily Benefit” because your Daily Benefit will grow according to whichever Inflation Benefit you choose for your long-term care policy. (Or it won’t grow at all if you choose not to have any Inflation Benefit protection in your LTC policy.)

You choose how much you want your Starting Daily Benefit to be. (You also choose the Inflation Benefit.)

Most long-term care policies have many choices for the Starting Daily Benefit. You can choose a Starting Daily Benefit as low as $50 per day to as high as $500 per day. The choices for the Daily Benefit are usually offered in $10 increments.

The higher your Starting Daily Benefit, the higher the premium.

With some policies the Daily Benefit is referred to as a Monthly Benefit. For example, a long-term care policy with a $200 Daily Benefit is similar to a $6,000 Monthly Benefit.

Related articles

• How does your choice of Inflation Benefit impact the Daily Benefit over the life of your long-term care policy? (ltcfacts.org)
• How Much Does Long-Term Care Insurance Cost? (ltcfacts.org)
• What is a “Shortened Benefit Period” in a long-term care insurance policy? (ltcfacts.org)

One of the most important things to consider when choosing a long-term care insurance company is the financial ratings.

Secondly, you don’t want to overpay for LTC insurance.  There are some LTCi policies that can cost as much as 75% MORE than other policies with similar benefits.

You want to shop around and “get the best deal” on long-term care insurance.  But, you don’t want to sacrifice financial ratings.

I try to help each of my clients find the happy median:  a strong insurance company that offers quality coverage at a reasonable price.

Don’t take my word for it (or any insurance agent’s word for it) that an insurance company is financially strong.  Check out the financial ratings for yourself.  Each comparison that I do for each client includes links to each company’s financial ratings.

To receive your personalized comparison for LTC insurance policies, go to my secure webpage and answer a few important policy design and health questions.

I think we underestimate the importance of the example that we set for our children when they see us caring for our loved ones.

Here’s a link to a brief story about a 12-year old who’s seen care-giving up close for much of this life.  It’s entitled, “A Kids-Eye View of Alzheimer’s”.

P.S.  Most of the newer long-term care insurance policies today are designed to be able to pay family members to care for each other.  Contact me if you’d like more information about that type of LTC policy:  1.877.582.7761.

“Having practiced Elder Law for more than thirty years, it becomes more and more apparent to me that our current “needs based” system that provides government benefits to pay the cost of long-term care may become a thing of the past. As “baby boomers” approach their senior years, they should consider the purchase of Long Term Care Insurance to help pay the cost of their long term care needs.

“One of the great benefits of Long Term Care Insurance is that you can access funds when the needs arise for assistance at home. It has been my experience over the years that most people prefer to live at home rather than in an assisted living facility or a skilled-care nursing home. When it is possible, consideration for care in the home should be given to the elderly and if Long Term Care Insurance has been purchased the elder maybe able to realize that goal.

“Even under our current Medicaid system, very little benefit is available for persons residing at home. In the early years Long Term Care Insurance policies were not very good. However, as the insurance industry has become more comfortable with the cost of long term care, the under-writing development of policies has improved greatly. I recommend that those approaching their senior years consider the purchase of Long Term Care Insurance before the costs become prohibitive.”

Mark Clements
Certified Elder Law Attorney by
The National Elder Law Foundation

Here is a link to his post:

http://www.elderlawlakeland.com/my-blog/Long-Term-Care-Insurance.html

Here is a link to his website if you live in Florida and need elder law services:

http://www.elderlawlakeland.com/

Scott

I’ve been a caregiver.  Caregiving is one of the most rewarding experiences in life.  It is also one of the toughest (both emotionally and financially.)

I don’t regret the time I spent as a caregiver.  But, if I had to do it all over again, I’d do it differently.

We need to consider the consequences on our families if we do not prepare for an unexpected long-term care event.

Planning for long-term care is not just about making sure you get the best care possible–it’s also about making sure your loved ones are not suddenly thrust into a role for which they are not prepared.

Adult Children Losing $3 Trillion in Caring for Aging Parents – ElderLawAnswers Articles.

Scott

Here’s a link to brief article where he a North Carolina elder law attorney lists 3 reasons why it makes sense to buy an LTC insurance policy sooner, rather than later:

http://www.craigebrawley.com/long-term-care-insurance

Scott

P.S.  Another elder law attorney, with over 30 years of experience, advocates for LTC insurance.  Here’s a link to his brief commentary on long-term care insurance:

http://www.elderlawlakeland.com/my-blog/Long-Term-Care-Insurance.html

Over the past few years many of my clients have been answering that question like this:

“Well, my dad has a long-term care policy and it’s paying for his assisted living facility right now.  I want a policy that will do the same for me.”

Or, “My mom has 24-hour home health aides right now.  If it wasn’t for her long-term care policy, we’d have to put her in a nursing home.”

Millions of long-term care policies were bought in the 90′s.  Many of those policyowners are now making claims.  In fact, just ten of the leading long-term care insurers combined to pay over $3.9 BILLION in long-term care insurance claims in 2010.

I shared that statistic with someone recently and he asked, “But how many claims do they deny?”

Recently, the federal government conducted an audit of long-term care insurance claims practices and released their findings in a 20-page report.  The audit was conducted over a 22-month period in 2008 and 2009.

The federal audit reviewed both approved and denied claims from seven of the leading long-term care insurers.  These seven insurance companies are currently paying over 70% of long-term care insurance claims.  They audited EVERY denied claim for some of the insurers in the study.

You can read the 20-page report at the Dept. of Health & Human Services website.  I’ve provided a link below.  Here are a few important points made in the report:

“…there is a low incidence of disagreement between the clinical audit team and the insurance company adjudicators, particularly when it comes to denied claims.”

“…There is a greater probability of approving rather than denying a questionable claim.”

“…Regarding denial decisions, we found that in all cases, there was no evidence to suggest that the individual met the tax-qualified criteria for benefit eligibility in their policy.”

“…This would suggest that companies are consistently applying their clinical contract language to their claims decisions.”

In other words, the claims are being paid! The reason some claims are not paid is because the policyholder does not meet the federal guidelines for “benefit eligibility” in the policy.

Here’s a link to the study at the Dept. of Health and Human Services website:

http://aspe.hhs.gov/daltcp/reports/2010/claims.pdf

This is a very important topic.  I welcome your comments and discussion below!