It is appropriate that as baby boomers start to turn 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 can cover a myriad of settings and situations. These include care in one’s own home, assisted-living facilities and also the skilled nursing facilities aka “the nursing home.”
The three basic methods for paying for these costs are personal savings, Medicaid and long-term care insurance. This insurance has been available for more than 25 years and it now pays about 8 percent of all LTC expenses, with the remaining balance pretty evenly split between personal/family savings and Medicaid.
Governments at both the federal and state levels have promoted the purchase of LTCi (long-term care insurance) policies. They recognize that when people take personal responsibility for their potential future needs it directly saves the taxpayers from footing the bill via Medicaid.
The federal government came out with a plan for federal employees and retirees marketed through John Hancock about eight 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 benefits package, with limited sales success.
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 they could ever need long-term care, and they also mistakenly think that either Medicare or their private insurance will cover them. The facts and statistics quite quickly dispel those notions and force them to face the possibility, however unpleasant, that it could happen to them. Generally both Medicare and private insurance will cover only a very limited time frame 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.
More than half of all people who reach age 65 will need some form of LTC during their lifetime and for a married couple, that jumps to more than 80 percent 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 time frame. I sold my in-laws policies when they were both 54, and even now, more than 15 years later, their premiums are still less than $500 per year per person. Wow, I wish I could sell plans that reasonably today.
A few years ago I ran a full-page ad in the Gazette where I showed how my clients had in excess of over $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 more than 10 years.
In the past year, I have seen three elderly women 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 a nest egg for beneficiaries or the person wants financial peace of mind, then it is appropriate to review the 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 I have 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 up with an unforeseen confinement.
All insurance agents who wish to offer LTCi have to take an eight-hour course every two years to be certified by the State Office of the Insurance Commissioner.
A complete listing of companies offering LTCi is available on the OIC website at www.insurance.wa.gov/publications.
Phil Castell can be reached at 683-9284 or PhilCastell@msn.com.
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