Thinking about Long-Term Care Insurance

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By the year 2020, only five years from now, an estimated 12 million people over the age of 65 will need long-term care in this country. Most will be cared for at home by family members.

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Lucy took care of her mother for seven years, a loving responsibility that became more challenging as her mother’s health and abilities declined. She is grateful that more than a decade earlier, her father opted to buy long-term care insurance.

It helped, she says, but wasn’t a perfect solution. For instance, it didn’t kick in until her mother met certain requirements about caring for herself, such as not being able to bathe without assistance. Up until that point they had to pay for home-care services themselves, at an average rate of $20 an hour. In the final years of her mother’s life, insurance paid for one-third of the home care services she needed.

“For nearly a year, we needed someone eight hours a day, five days a week, and in the last week of her life, we needed round-the-clock help,” says Lucy. “If we didn’t have the insurance policy I would have had to quit my job to care for her or place her in a nursing home.

If she lived in a nursing home, the policy would have paid half the daily rate, which really irked me. Being cared for at home was so much better for my mother and yet the policy only paid a third – but at least we had that much.”

Look at the details

Some long-term care policies don’t cover home care at all, so it’s important to double-check any plans you’re considering. Policies issued in Maine have to contain certain minimum requirements and are regulated by the Bureau of Insurance.

In addition to traditional long-term care policies, insurers in Maine can also sell partnership policies through the Long Term Care Partnership Program. A partnership policy may prove helpful if you ever need to apply for MaineCare (Medicaid).

According to the Bureau of Insurance, if you have a long-term care partnership plan, you may be able to keep assets of a greater value than normally allowed for enrollment in MaineCare.

A state-approved partnership plan allows a policyholder to deduct the amount of any benefit that is used from their total assets when they are being evaluated to receive MaineCare.

Take, for example, a man with $300,000 in assets (such as stocks and bonds) who has been in assisted living for five years and uses a long-term care partnership plan worth $300,000 to pay for care. When the funds from his plan are used up, he could apply for MaineCare to continue paying for long-term care. Because he used the approved partnership program to pay for his care in the past, he can keep an additional $300,000 of his assets and still qualify for MaineCare.

Another thing to be aware of is that in order for a long-term care policy to pay for home-care benefits, the care provider must be either licensed or registered by the state. In Maine, all private pay, non-medical home-care agencies are registered.

Remember, we are talking about long-term care insurance for non-medical home care, which regular health insurance and Medicare do not cover. If you’ve decided that you want to buy a policy, be sure to read everything carefully, ask lots of questions and think it through thoroughly before making a selection.

Things to consider when buying long-term care insurance

• Work with an agent who is a specialist in the field of long-term care insurance. Ask for references and make sure to check them.
• Consider dealing with an independent agent, who doesn’t work for a specific insurance company, and will provide you with quotes from several companies.
• If you prefer to work directly with an insurance company, get quotes from several different companies. Compare carefully.
• Although it’s hard to predict the future, don’t buy more insurance than you think you will need. You may have enough income to pay a portion of your costs and will only need a small policy for the remainder.
• Don’t buy too little insurance. While you can usually decrease your coverage, you might not be able to increase it, especially if you become ill.
• The maximum benefit period varies widely. Choose coverage for the maximum number of days or the amount of benefits that you can afford. In Maine, you can’t buy anything less than a two-year policy.
• Most policies require you to pay out-of-pocket for a certain number of days before coverage starts — on average, 60-90 days. Make sure the deductible makes sense for you and that you can afford it.
• Make sure you can afford the premiums.
• Make your decision rationally, not out of fear or in reaction to any scare tactics.

How much are the premiums?

The premium for long-term care insurance can be quite costly, especially if you wait until you’re older to purchase a policy. The rate depends on age, health status and amount of coverage you want.

Kerry Peabody, a long-term care insurance specialist with Clark Insurance, provided me with a sample of annual premium prices for a couple in “standard” health.

Sample policy details

• $4,500 monthly benefit amount, which is available to help pay for home care, adult day care, assisted living facilities, or nursing home care.
• The “pool of money” that would be available for long-term care services is $162,000 each.
• Three-year benefit period
• Three percent compound inflation rider — benefit increases automatically over time to help keep pace with increasing care costs. (If the couple purchased this plan at age 55, by age 85 a “pool of money” equaling about $393,000 would be available, and they could use up to $11,000 of benefits each month.

Sample annual premiums

Combined, annual premium for a couple in “standard” health

If purchased at age 50: $3,007
If purchased at age 55: $3,200
If purchased at age 60: $3,906
If purchased at age 65: $4,743

The price does not increase each year because you grow older. Once you put your policy in force, your rates are “locked in” at your original age. Prices can change, but only with approval from the state insurance department.

Long-term care insurance does not make sense for everyone. Lucy and her husband decided it did make sense for them, but with better provisions than her mother’s policy. Of course, that meant higher premiums, but they did their homework and struck what they thought was a reasonable balance. They both hope they’ll never have to use it, but aren’t willing to take the risk.

The best advice is don’t wait until you need it to start thinking about it. In fact, looking into long-term care insurance should be just one aspect of planning for the future. Retirement comes sooner than we all expect.

(This article originally appeared in the Advantage Home Care blog, which Diane Atwood also writes. Premium costs were updated from the original.)

Diane Atwood writes the blog Catching Health with Diane Atwood, which received a Gold Lamplighter Award from the New England Society for Healthcare Communications and a Golden Arrow Award from the Maine Public Relations Council. Find it at catchinghealth.com.