Tuesday, January 22, 2008

Personal debriefing on long term care insurance

I did debrief a specialist in Long Term Health Care insurance today. Several interesting points came out. I want to keep them general, and some of them will need to be filled in with more details as time goes by.

First, long term care is itself a complicated and evolving concept. Therefore companies don’t publish a lot of committal information about it, and like to set up in person interviews with potential customers. That makes it hard for the public to fully understand the problem, and for policymakers to deal with it. We have not seen the 2008 presidential candidates discuss it as much as we would expect, because the subject is mysterious and filled with potential political and social traps. Furthermore, the business of selling long term coverage requires professionals with strong and extremely patient “people skills” and social facility, beyond the analytic nature of the job, and it may not suit the temperament of many retirees who (like me) might have the technical knowledge for the job. The actual underwriting decisions are made in corporate offices, not by the agent making the presentations, although the agent can do some preliminary screening for customer eligibility.

One development is that a few states are exploring the concept of Medicaid “partnerships” with the long term care insurance industry. The states include Idaho, Florida, California, Utah, New York, and (as of fall 2007) Virginia. The programs may allow asset protection in conjunction with LTC insurance should the LTC be exhausted and the person go on Medicaid. Other states, like Massachusetts, seem to be looking into this, along with the possibility of mandatory LTC insurance for much younger workers, as is happening abroad (previous post).

Typically, companies offering LTC insurance have a maximum age, which may range from 79-83. Policies tend to offer a fixed pool of benefit money (in the hundreds of thousands) that may be indexed for inflation in some policies. There may be a deductible or a per-day copay, but the need for LTC care is viewed as a one-time event, and deductibles typically do not have to be repeated (as with normal medical insurance). Premiums do not continue to be paid once benefits start, unlike the case with medical insurance. Companies have very strict underwriting standards based on medical evaluation and medical records. Applicants might have to agree to some continuous monitoring. One question that remains is whether, in time, insurance companies will work out deals with LTC providers to offer care at discounted or preferred rates, which is generally the case with medical care contracts. The process can take some months.

It seems that someone in my situation (age 64) might be able to get a meaningful policy for $100 a month, but it would provide a very limited total potential amount of protection. State partnership rules (mentioned above) are strict about who can be considered to join them.

A number of large insurance companies offer LTC. AARP works with Genworth Financial, which has some distant connection to General Electric, which owns NBC.

A possible place to start looking for coverage in the DC area is Valltci.


Scott A Olson, CLTC said...

Long Term Care Partnerships are a brilliant idea. When states establish an LTC Partnership program they encourage their citizens to own LTC Partnership policies. The result is that fewer Baby Boomers will have to rely on Medicaid to pay for their long term care services. The Medicaid budget will not overwhelm taxpayers and Medicaid will be protected for the truly needy.

Those purchasing long term care insurance Partnership policies will have more choices for their care. Additionally, the assets and retirement savings of the policy owner will be protected from nursing home and other types of long term care expenses. This will increase the financial security of the healthy spouses ("community spouses") as well as protecting assets for their children and heirs.

It is difficult enough to deal with the emotional burden when a spouse or family member needs long term care. Long Term Care Partnership policies will help to alleviate much of the financial burden as well.

Four states have successfully run LTC Partnership programs for years, namely, California, Connecticut, Indiana and New York.

Other states have recently passed similar legislation including Arkansas, Colorado, Florida, Georgia, Maryland, Minnesota, Nebraska, North Dakota, Oklahoma Pennsylvania and Virginia.

The funny thing about long term care insurance is that the price of a policy can vary a lot from one insurance company to the next. Each long term care policy has a different way of charging premium based upon health history, marital status, choice of benefits, and even state of residence. It pays to shop.

What most people don't realize is that group long term care insurance policies are usually more expensive and have less benefits (particularly less benefits for home healthcare) than individual policies. It pays to shop and compare all types of insurance, but especially long term care insurance.

Scott A. Olson, CLTC

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