Who needs long term care insurance? What does it pay for and how much does it cost? When should I think about purchasing it? The answers to these common questions are important considerations for people who are trying to plan ahead for potential future health care costs. Some reasons to plan ahead for long term care include: the possibility that you may live a long life; the possibility of becoming frail in later years; the potential physical, emotional, and financial consequences of caregiving responsibilities on your spouse or children; and you desire a greater chance of being able to remain in your own home or to have the ability to choose between a variety of options for care. Long term care insurance (LTCI) is one method that can be used to help pay for ongoing health care needs.
Long term care insurance is not appropriate for everyone. Whether or not to purchase a policy depends on your age, general health, retirement goals, income, and assets. The average age of people who purchase long term care policies is 58, but some purchasers may be in their early seventies. Younger applicants will have less expensive premiums. LTCI policies involve medical underwriting, and that’s a good reason to move forward at a younger age. Someone with a chronic health condition such as diabetes or obesity may not qualify.
Premiums for LTCI policies cost several thousand dollars per year, so if you have limited income or assets, the purchase of a LTCI policy may not be the best use of your funds. Long term care insurance is a good investment for people who have adequate resources, but don’t want to spend the money to pay for health care, don’t want to rely on government benefits, and wish to have outside caregivers to reduce the workload on family members.
Long term care insurance is often thought of as a way to pay for care in a nursing home, but Medical Assistance (Medicaid) is a government benefit that will pay for this type of care. There is another government benefit, available only to wartime veterans and their spouses, which can be used to pay for other types of long term care, such as personal care homes, home health care, and adult day care. This does not eliminate the need for LTCI, but a wartime veteran should need less LTCI than others would.
LTCI is most advantageous as a payment source for care outside of a nursing home, which may not be affordable for an extended period of time if one has to pay the full price out-of-pocket. The types of services that are covered, and where they will be covered, will vary by policy and may vary from state to state. Choose your policy carefully if you believe you might move during your retirement years.
Pennsylvania has a “Long-Term Care Partnership” program which encourages Pennsylvanians to purchase long-term care insurance by providing asset coverage equal to the benefits paid by the policy. In order for an insurance policy to be considered in the Partnership program, the insurance company must get approval from the Pennsylvania Insurance Department. Not all insurance companies participate. A person whose Partnership policy pays for $100,000 of care would be entitled to keep $100,000 more in assets than otherwise permitted if they need to apply for Medical Assistance in the future. Unfortunately, unlike some states including New York, which offers a twenty percent state income tax credit for premiums paid for LTCI, Pennsylvania offers no tax incentives to buy LTCI.
Policies may be purchased from a variety of sources. Insurance companies and independent agents may sell policies in person, by mail, or by telephone. Independent agents may be able to provide quotes from several different insurance companies based on a single pre-qualification form. Some employers, state governments, and associations may offer group LTCI plans, and the federal government also offers a program for employees, military service members, and qualified relatives. Premiums through group plans may be discounted, and plan options may be available that otherwise would not be if you were shopping for an individual policy. If purchasing insurance through a group plan, find out what happens if you leave the employer or association. Will you be allowed to keep or convert your coverage? How will your premium be affected? Insurance companies/agents should be licensed to sell LTCI in your state, and rating agencies exist which can help you analyze the financial strength of the insurance companies you are considering. Each company’s history of rate increases may be another factor to consider when evaluating policies/premiums from several different companies.
Sometimes, a LTCI policy may be “combined” with a life insurance policy. The long term care expenses are paid using an accelerated death benefit. This tool will pay a certain percent of the policy’s death benefit (either per day or per month) toward the cost of qualified long term care expenses. Additional long term care coverage which is greater than the amount of the death benefit may be available through the purchase of a rider on the policy. Keep in mind that as an accelerated death benefit is used to pay costs while you are alive, the benefit amount your beneficiaries will receive when you die is reduced.
Every state has its own laws and regulations concerning insurance, so when shopping for long term care insurance, you may want to check with your state’s Insurance Department for additional consumer information. In Pennsylvania, the website is www.insurance.pa.gov, and the telephone number is 717-783-0442. Our article next week will cover types of LTCI policies and the benefits and options that determine policy rates.
Karen Kaslow, RN
Keystone Elder Law