Archive for October, 2013

LTC Planning Options: Does My Medical History Matter?

October 26, 2013

Long term care insurance is often, but not always, the most cost-effective alternative when planning for long term care.  However, a person’s medical history plays a large part in determining if insurance is even available.

Really good history: No tobacco use, height & weight within fairly generous limits, no cancer (basal cell skin cancer is OK) or diabetes history, well-controlled blood pressure with no more than one blood pressure medication, no diagnoses of depression, no significant health histories, no hospitalizations in the past five years except for childbirth. Can likely qualify for the best long term care insurance rate class. Provided it is affordable, insurance almost always makes the most sense.

Not perfect, but nothing really significant: Can be diabetic but not injecting insulin (no tobacco use & must have good diabetic control), can have a history of mild depression, distant (more than two years since treatment) cancer history with no metastasis & no recurrence, arthritis that doesn’t limit activity, high blood pressure well-controlled with up to two medications. Will not be offered the preferred rate, but can likely qualify for the second-best rate class.  Hormone replacement therapy or taking statin prescription drugs to control cholesterol do not usually impact long term care insurance rates.

Medical history that makes long term care insurance unavailable: Oxygen use, surgery that has been recommended but not yet completed, Parkinson’s, multiple sclerosis, having a handicapped parking tag (the presumption is that you must already be disabled), any indications of dementia, amyotrophic lateral sclerosis (ALS/Lou Gehrig’s Disease), diabetes with poor control or with complications of diabetes, receiving social security disability benefits (again, the presumption is that you are disabled), currently using a walker or wheel chair, amputation due to disease, HIV positive or AIDS, two or more strokes, recent alcohol or drug abuse.  Long term care insurance is not available.  Every insurance company has its own underwriting rules, but the above generally applies to all. 

As an independent broker, I take pride in searching for the best solution despite major challenges, but there are some medical histories that I cannot overcome.

What to do when you or a loved one is uninsurable for long term care insurance?…but you correctly understand that planning is necessary?

  1. Consider a short term care insurance policy: Slightly less stringent underwriting.  Benefit period limited to just short of one year (360 days is common). Much lower cost than traditional long term care insurance. 
  2. Consider critical care insurance: Pays a lump sum benefit when diagnosed with a specified critical illness. Example: cancer, coronary artery bypass surgery, heart attack, stroke, Alzheimer’s disease, kidney failure,paralysis, coma, major organ transplant. Underwriting is easier than either long term or short term care insurance.
  3. Consider a home care service contract: Essentially pre-pay for discounted home care hours. No underwriting at all…if you can stand the one-time 180 day waiting period, and you pay the membership fee, you are accepted.
  4. Consider paying for care with personal assets: Could possibly work if you have enough assets.  However, money spent on care will not be available to provide income for surviving spouse/partner. Carefully thought out estate plans will not be carried out.
  5. Consider having adult children become caregivers: Do you really want your daughter (or son) bathing you? Adult children will generally provide care if asked to…but they won’t want to…and you won’t want them to. 
  6. Medicaid (not Medicare): The long term care “safety net”. Visit a facility that accepts payment from Medicaid.  Then visit one that does not.  Judge for yourself.  If given a choice, no one would voluntarily choose Medicaid over private pay.  Yet when all else fails, Medicaid is there, at least for now. To become eligible for Medicaid, you cannot have too much in assets (actually, very little), too much income, or too much functionality.   Medicaid is there for those who have waited too long to plan or have not planned at all. 

You do not necessarily have to purchase long term care insurance, but you must have a plan to pay for care when you need it.  Without an intentional plan, your “plan” becomes Medicaid by default.

© Raymond Smith, The Long Term Care Specialist, 2013

Comfortably and Sustainably Affordable

October 24, 2013

People often ask me how much long term care insurance they should buy.  My answer is: “You should buy the richest policy benefits that you can comfortably and sustainably afford.”.

“Comfortably Affordable”  Purchase of a long term care insurance policy should not require you to change your lifestyle.  For example, suppose you normally go to a restaurant for dinner twice per week.  If after buying long term care insurance, you can then only afford to dine out once per week.  If that were to happen,  you would be spending too much on insurance.  Here’s food for thought (pun intended) as I contradict myself:  The cost of that second restaurant dinner every week will pay for a good basic policy for a couple.  So I suppose that if you value the peace of mind and asset protection that come with long term care insurance more than that second dinner out, it may make sense to purchase the policy.  Getting back on track…generally you should not have to modify your lifestyle in order to pay for long term care insurance.  Perhaps a better example would be having to cancel your regular family vacation if you buy the insurance. 

“Sustainably Affordable”  Consider your ability to pay the long term care insurance premiums both now and when you are well into your retirement years.  I will not have helped you at all if you to apply for a policy today that you eventually drop after a few years because it is no longer affordable.  Colorado Division of Insurance, Appendix B, amended Regulation 4-4-1 (and insurance regulations of most other states) has this to say about long term care insurance premiums and income: “If you will be paying premiums with money received only from your own income, a rule of thumb is that you may not be able to afford this policy if the premiums will be more than 7% of your income.”.  With regard to assets, the regulation states: “If you are buying this policy to protect your assets and your assets are less than $30,000, you may wish to consider other options for financing your long-term care.”.  My own criteria are more stringent.  If your individual income is less than about $30,000 ($60,000 for a couple), and/or your assets are less than $40,000 ($80,000 for a couple) you should probably not be buying the insurance.  Exceptions would be if someone else, such as an adult child or an employer, will be paying the policy premium.

We now know something about the range of premiums you should consider.  So how should a long term care insurance policy be designed?  What benefits should be included?  Look for a near-future article that will address these questions.

© Raymond Smith, The Long Term Care Specialist, 2013