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Headline: IBM stops selling computers–future of computer industry in doubt!

Posted by Scott A. Olson on March 7, 2012 in LTCi Basics

In December of 2004, the company that set the standard for personal computers (remember “IBM-compatible”), stopped selling personal computers.  After dominating the PC market for most of two decades, IBM abruptly left.

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).

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4 Reasons why a 90-day Elimination Period usually makes the most sense

Posted by Scott A. Olson on March 1, 2012 in LTCi Basics, The Deductible

4 Reasons why a 90-day Elimination Period usually makes the most sense:

  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.  
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How much does long-term care insurance cost?

Posted by Scott A. Olson on February 12, 2012 in LTCi Basics, Tailoring your policy

Here are a few facts which may surprise you:

  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.
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What is the “Daily Benefit” (a.k.a. “Monthly Benefit”) in a long-term care policy?

Posted by Scott A. Olson on January 9, 2012 in Daily Benefit

Daily Benefit = the amount of money your long-term care insurance policy can pay for each day that you receive qualified care.

 

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.

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Assessing Long-Term Care Insurance Companies

Posted by Scott A. Olson on September 29, 2011 in LTCi Basics

The president of Homewatch Caregivers recently interviewed Jesse Slome and me about “Ways to Assess Long-Term Care Insurance Companies”.  The article has some great tips.

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.

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Caregiving’s effect on our children

Posted by Scott A. Olson on August 27, 2011 in Get to know Scott

When I was a caregiver my son was 9 years old at the time.  Between my work responsibilities and my caregiving responsibilities, I was being pulled in many different directions.  I had less time to focus on him.  It was easy for me to think that the stress of caregiving and its impact on our family would have a negative effect on him.

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.

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Another elder law attorney weighs in on long-term care insurance

Posted by Scott A. Olson on June 27, 2011 in LTCi Basics

Mark Clements, an elder law attorney in Lakeland, Florida, has been practicing elder law for over 30 years.  Here are his thoughts on long-term care insurance:

“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

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