Archive for September, 2015

Can’t Qualify For Long Term Care Insurance. What Now?

September 28, 2015

Earlier this month, I met with a couple in their early 60s who clearly understood the need for planning.  The wife’s mother had spent the last years of her life in a Medicaid nursing home and neither one wanted the same.  Both husband and wife really wanted to buy long term care insurance.  But they could not…at any price!  Wife had been hospitalized with severe depression a few years earlier and was currently on two powerful anti-depressant medications.  Husband injected insulin daily, was significantly overweight, and continued to smoke despite being told that he must quit.  Husband quoted his doctor as saying: “You must either give up being diabetic or you must stop smoking”.  I didn’t think husband would do either.

Note to my readers: I take pride in finding coverage for people with difficult medical histories.  And I have been successful with cases in which other insurance agents/brokers have given up.  But: there is nothing I can do for a recent case of severe (not mild) depression or a diabetic smoker.

So what were the options?

  1. We looked at short term care policies.  Although underwriting is a little easier for short term care, I could not get either of these people approved.  Their health issues were too significant.
  2. Combination annuity and long term care insurance policies: The couple could not qualify medically for the policies with a multiple of the annuity account balance (leverage) available for long term care.  All they could get were annuities where the account balance…with no multiplier…could be used for long term care.  This did not solve their problem, so I recommended against it.
  3. “Traditional” life insurance with a long term care or catastrophic care (there is an important difference which I will discuss at a later date) rider:  Neither could be approved for the life insurance risk, much less the care rider.
  4. Self funding:  The couple had about $300,000 of combined net worth, not counting equity in their home.  They could dip into this retirement nest egg when either needed care…but $300,000 would not last very long.
  5. Reverse mortgage:  Both were adamant about wanting to leave their home as an inheritance for their children.  This ruled out a reverse mortgage.
  6. Rely on adult children to provide care when needed:  All three boys lived out of state (one had moved to Europe for his job).  Two pair of eyes rolled upward when I asked about this possibility.  Wife said she could not imagine being bathed by one of her boys.  Husband said none of the three could lift him…and that he would probably wind up on the floor if they tried.  Both husband and wife agreed that their sons now had their own families to take care of, and they did not raise their kids only to become a burden on them (The couple’s words.  Not mine.).
  7. Medicaid: As an abstract concept, far into the foggy future, Medicaid doesn’t sound like such a bad idea.  After all, you can save a lot of money.  However, I have never met anyone who at the moment of needing long term care services, has said: “I’m glad that I am going to spend the rest of my days in a Medicaid nursing home instead of in my own home”.  Usually because of lack of planning, but sometimes due to waiting too long to apply for long term care insurance, and sometimes because there is simply not enough money to pay for an alternative, Medicaid becomes the default.  Medicaid is the long term care safety net, at least for now.  Intensifying financial pressure on state and federal government budgets is the result of an aging, largely unprepared U.S. population.  No one knows what Medicaid eligibility requirements and benefits will look like even 10 years from now.  My guess is that Medicaid will soon become even less accessible and desirable than it is now.

The take-away: You must have a plan to pay for long term care services.  The default…Medicaid…is not the choice anyone would make…if they actually had a choice.  Plan now while you are still young enough and healthy enough to do so.

 

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence. Long term care insurance policies vary widely from company to company & often 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, 2015

Gender-Based Pricing Marches On

September 28, 2015

In the “old days” of long term care insurance (before about 2013) men and women paid the same price for the same long term care insurance.

Genworth started the move to charging men and women differently and did so nationally…sort of.  The Genworth former employee who filed  gender-based rates with the Colorado Division of Insurance messed up.  Note that all rates must be approved by the respective state insurance departments before they can be implemented.  The Genworth rate change request was filed incorrectly.  But the Colorado filing was later corrected and approved.

Here is what we have for new policies that are available (can be applied for) today:

  1. Genworth: Single women (or a couple with only the woman applying).  Women pay more than men.  Couples with both people applying and approved…same rate for both genders.
  2. John Hancock: Women pay more than men whether single or part of a couple.
  3. Life Secure: Women pay more than men whether single or part of a couple.
  4. MassMutual: MassMutual Colorado rates for new policies are lower than in other states with men and women currently paying the same.  Sources tell me that MassMutual has filed a request with the Colorado Division of Insurance for women to pay more than men, with new Colorado policies costing more for both.  I expect this to be approved any day now.  I have heard nothing about any rate increase on existing policies.  In the meantime, MassMutual offers very good rates, especially for women applying by themselves.  Call me right away to see if this opportunity is still available when you read this.
  5. MedAmerica:  Just launched a new long term care insurance policy series.  Women pay more than men.
  6. Mutual of Omaha: Women pay more than men whether single or part of a couple.
  7. Transamerica:   Women pay more than men whether single or part of a couple.

How can insurance companies discriminate like this?  It seems unfair.  Some of us (about half) are born as men and some as women.  Maybe gender based pricing is fair and maybe it isn’t.  I can only report what exists now.  The facts are that women go on claim (receive policy benefits) more often than men with consequently higher costs to insurance companies.  This was first documented by Genworth, later confirmed by other insurance companies and regulators.

Bottom line:  More and more insurers are charging women more than men for new policies.  This trend will continue as it has been shown to be economically justified.  Man or woman, if you are ever going to look into adding long term care insurance as an essential part of your financial protection portfolio, do it now!  Even with higher premiums than before, long term care insurance still makes sense as the best way to protect families and individuals against the retirement killing, and estate plan killing, costs of needing long term care services.  I have it to protect my family and I am glad that I do.

 

Disclaimer: Actual policy language, rather than the contents of this eNewsletter always takes precedence. Long term care insurance policies vary widely from company to company & often 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, 2015