Archive for July, 2012

Changes in Long Term Care Insurance Availability?

July 25, 2012

Yes.  Especially generous policy benefits are no longer being offered.  Underwriting (risk evaluation by an insurance company) is becoming more strict.  Discounts on new policies are being reduced.   

Genworth Life Insurance Company.  For applications signed after July 29, 2012:  No more unlimited (lifetime) benefit periods.  No more preferred discounts for especially healthy applicants.  No more ten-pay (policy is paid-up after ten years) & premium paid only to age 65.  Tighter underwriting.

MassMutual.  Effective for new applications: Unlimited & ten-year benefit periods no longer being offered.  More restrictive height & weight chart.  Optional rider, Return of Premium on Death, no longrt available. 

Transamerica.  Unlimited benefit period and ten-pay options not available on new policies.  Spousal discount reduced.  Preferred health discount reduced for single applicants.  Premiums being increased 15% on new policies.

Prudential & Met Life.  No longer selling new long term care insurance policies.

Why is this happening?  Continued low interest rates are the primary culprit.  Insurance companies take on a long term care risk that is likely to materialize far into the future.  Policy pricing is highly dependent upon premium dollars being invested for a good rate of return.  Low interest rates make that difficult.  This yesterday morning I heard a major insurance company say they were struggling to get to a 4.0% investment return.  Higher policy utilization…people are going on claim earlier, and for longer periods, than the actuaries thought would happen.  What a concept.  Policyowners are actually drawing benefits!

What does this mean for consumers?  First: Consider yourself fortunate if you already own long term care insurance with a large (perhaps unlimited) pool of money.  You soon will be unable to replicate what you have.  Second: If you are sitting on the fence, trying to decide whether or not to apply for long term care insurance…now will get you better benefits, and at a lower cost, than later.  Not only will waiting result in more limited benefits being offered, but the premium will be higher because of industry trends and you will become older and potentially less healthy than you are today.

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence.  Long term care insurance policies vary from company to company & within the same company.  Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your tax advisor or attorney for these matters.

 

© Raymond Smith, The Long Term Care Specialist, 2012

Long Term Care…a (concise) Overview

July 25, 2012

A client asked me to write a short overview of long term care…so that he could better explain the concept to his wife.  The feedback I received was positive, so I thought I would share this article with my readers.  Here is what I wrote, with some minor revisions to protect privacy: 

WHAT IS LONG TERM CARE?  Long term care is not treatment to get you well again.  Treatment to get you well again is medical care, which is covered by health insurance, and after age 65 by Medicare.  Instead, long term care is the assistance you need to get through the day after the physicians and therapists have done all they can for you. 

One example would be a person of any age who has a stroke.  Doctors would first deal with the emergency situation.  Occupational and physical therapists would then work with the patient to recover as much lost functionality as possible.  At some point, it would be agreed by all that the patient is as good as he or she is ever going to be.  “…as good as…ever going to be” means that ongoing help is needed with the Activities of Daily Living (bathing, dressing, eating, continence, toileting, transferring).  Or perhaps the patient is left with a “Severe Cognitive Impairment” (most often Alzheimer’s disease or other forms of dementia).

Long term care services consist of assistance with the Activities of Daily living or needed supervision (to keep the patient safe) because of cognitive impairment.  Assistance with Activities of Daily Living and supervision for people with severe cognitive impairments is “custodial care”.  All custodial care is long term care.

WHERE DOES LONG TERM CARE HAPPEN?  Mostly at home, but also in adult day care, assisted living facilities, nursing homes (technically called skilled nursing facilities) and hospice.  If given a choice, most people would prefer to receive their long term care services at home.

HOW MUCH DO LONG TERM CARE SERVICES COST?

Current national median cost of care:  Home Care, $19 per hour.  Assisted Living, $3,300 per month.  Nursing Home: $6,753 per month.

Current Denver-Metro median cost of care: Home Care, $22 per hour.  Assisted Living, $3,948 per month.  Nursing Home, 7,194 per month ($86,323 per year).

IMPACT ON RETIREMENT AND ESTATE PLANS?  $86,000 per year, in today’s dollars, will not be available for retirement or estate plans.  If not planned for, how would the unexpected cash flow shortage be made up?  Where would the money come from?  What happens to plans to leave assets to family or favored institutions?  

HOW ARE LONG TERM CARE SERVICES PAID FOR?

Health insurance does not pay for long term care.  Please look up “Custodial Care” in your health insurance booklet.

Family members and friends will provide care if they have to…but at great cost to their own health and financial well-being.  Care giving takes a well-documented toll on the caregiver’s health.  A caregiver’s earning power is diminished because she (usually a “she”) cannot focus on her work, cannot accept positions of greater responsibility, and cannot work longer hours or travel. 

Medicare (after reaching age 65):  Medicare does not pay for long term care except in very limited circumstances.  After/if jumping through all the hoops, Medicare may pay some nursing home costs for up to the first 100 days.

Medicaid:  Must spend down assets to qualify.  Medicaid is a welfare program.  In Colorado, a married couple cannot have more than $113,640 (2012 limit) in countable assets.  A single person (including widows and widowers) cannot have more than $2,000.  Countable assets include everything owned by the married couple or individual except: equity in a home, a pre-paid burial plan, home furnishings, and some smaller items.  Note: Medicaid is complicated.  Consult with a qualified elder law attorney for eligibility specifics.

Personal assets:  If a married couple has at least $3 million in net worth ($1.5 million for a single person), they probably could self-fund the cost of long term care services…but why would they?  Most people who have accumulated wealth have a good idea of where they want their wealth to go…and that is not to a nursing home.

Long Term Care insurance:  For pennies on the dollar, pays for the cost of long term care services.  Covers home care, adult day care, assisted living, nursing home and hospice.  Can include inflation protection to increase benefits as care costs rise.  Preserves choice and dignity.  Keeps parents from becoming a burden to their children.  Policies are individually tailored to meet individual needs and budgets.  

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence.  Long term care insurance policies vary from company to company & within the same company.  Raymond Smith, The Long Term Care Specialist, does not give legal or tax advice.  Consult your tax advisor or attorney for these matters.

 

© Raymond Smith, The Long Term Care Specialist, 2012