It is appropriate that as baby boomers start to turn age 65 this year, we discuss one of the most frequently overlooked aspects of health insurance. That is the need to have protection from the catastrophic costs associated with Long Term Care (LTC).
Basically put, LTC can cover a whole myriad of settings and situations. These include care in one’s own home, assisted living facilities and also the skilled nursing facilities a.k.a. “The Nursing Home”.
The three basic methods for paying for these costs are, personal savings, Medicaid and LTC Insurance (LTCi). In the 25+ years LTCi has been available, it has now grown to paying around 8% of all LTC expenses, with the remaining balance pretty evenly split between personal/family savings and Medicaid.
The government at both the Federal and State level have promoted the purchase of LTCi policies. They recognize that by people taking personal responsibility for their potential future needs it directly saves the taxpayer (you and me) from footing the bill via Medicaid.
The Federal Government came out with a plan for Federal employees and retirees marketed through John Hancock about 8 years ago, details, eligibility and premium quoting software can be found at www.ltcfeds.com.
Gov. Christine Gregoire also sent a letter out to all residents ages 50~70 in the State a few years ago extolling the virtues of LTCi, also with contact information for researching options.
Many employers offer LTCi as part of their benefit package, with limited sales success.
So, with so many groups advocating the purchase of this type of insurance why has it faced such resistance?
My belief is that people are in denial that it could ever happen to them, and they also mistakenly think that either Medicare or their private insurance will cover them. When faced with the facts and statistics it quite quickly dispels those notions, and forces them to face the possibility, however unpleasant that it could happen to them. Generally both Medicare and private insurance will only cover a very limited timeframe and then only if a person requires skilled services, such as therapy or skilled nursing.
Most LTC needs are considered custodial, that is care that could be provided by a person without any special skills.
Over 50% of all people who reach age 65 will need some form of LTC during their lifetime, and for a married couple that jumps to over 80% that one of them will need care.
I sold my first LTCi policy in 1989 and I still have clients on the books from that timeframe. I sold my in-laws policies when they were both 54, and even now over 15 years later their premiums are still less than $500 per year per person. Wow, I wish I could sell plans that reasonable today.
A few years ago I ran a full-page ad in the Gazette where I showed how my clients had in excess of $1,000.000 in paid LTC claims. Since then I haven’t kept track but the number of claims is still a constant.
Most of the programs I offer have a defined benefit expressed either in a number of years or a dollar amount. I have sold some unlimited plans and have even had one client receive care in her own home for over 10 years.
In the past year I have had three elderly ladies exhaust the benefits they purchased, and while this is an unfortunate situation their families were thrilled that the plans paid as well as they did for so many years.
Who needs to purchase LTCi? Most couples should consider LTCi as it will help protect the savings and income and thereby the lifestyle of the healthy spouse. For a single person the choice is more personal. If it is important to protect their nest egg for beneficiaries, or they want financial peace of mind, then it is appropriate to review their options.
When shopping for LTCi one of the most important criteria to consider is the company behind the plan. I have seen many companies both big and small enter and leave the industry and likewise seen premium increases, sometimes (in my opinion) of an unjustifiable percentage cause turmoil and anguish for policyholders.
Equally important is the consideration of inflation protection. You purchase a policy now in the hope that it may be many years in the future before you need to access the benefits.
I do strongly recommend people review their options as without this valuable protection all your hard work and savings could be used with an unforeseen confinement.
All insurance agents who wish to offer LTCi have to take an 8 hour course every two years to be certified by the State Office of the Insurance Commissioner (OIC).
A complete listing of companies offering LTCi is available on the OIC website at www.insurance.wa.gov/publications.
This article appears in the Sequim Gazette February 2, 2011