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Long-Term Care Insurance Update

May 07, 2015 at 12:00 PM

Long-Term Care Insurance Update

I have said over and over again that as you enter your late 40's to 50's you should look into buying long-term care insurance.  But looking and buying are two different things.  You should only purchase LTC insurance if you know that you can easily afford the premium at the time of purchase and all the way until you are 81 (which is the average age of needing LTC).  

It is also very important before buying LTC insurance that you project that your premium will go up by 50 percent.  So the question is will you still be able to afford the policy if that 50 percent increase happens?  Yes, you read that right. It is probable that you can see your premiums increase by 50 percent.  So you really need to do your homework or use an agent that really knows the ins and outs of this marketplace.

Long-Term Care Insurance Premiums

The first question is:  Why are some of the LTC companies increasing their premiums so dramatically?

Here's what you need to know:

Insurance costs more when the loss is expensive to cover. The cost of long-term care has quadrupled in the last 30 years from $50 a day to over $200 a day and much higher in the Northeast and parts of California.  That combined with people living much longer and filing more claims than anybody ever thought, plus low earnings on premium reserves, has caused some insurance companies to have to raise rates to keep paying claims.

Long-term care insurance is guaranteed renewable, which means the insurance company can’t cancel your policy as long as you pay the premium on time, but the rates can go up on a class basis, like on everybody who bought the same policy in your state, not just on your policy.

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The next question is:  Are there companies that have not raised their premiums to people who have purchased a policy?  

To answer this question I went to Phyllis Shelton, my go-to expert for long-term care insurance−here is what she told me:

Some companies have never had a rate increase like Country Financial, LifeSecure, Mass Mutual, New York Life, and Northwestern Mutual or have only had a few increases like MedAmerica.  But if you already have a LTC policy and you get a rate increase, if you can’t afford the new premium, opt to reduce your benefits instead of canceling your policy. 

If you are shopping for Long-Term Care Insurance this is what I want you to know 

As insurance companies have learned more about how people use long-term care insurance, new policies cost more.  For example, since women file more long-term care insurance claims than men, most companies have started gender rating, which means women pay a lot more than men. Genworth still applies unisex ratings to couples, but most other companies apply it to all applicants whether single or applying with a spouse/partner. 

Four companies have not implemented gender rating yet: Country Financial, Mass Mutual, MedAmerica and New York Life.  Country Financial and MedAmerica are the only companies that will let you save 30-40% by buying a plan that doesn’t include home care. Single people especially may fare better in a “country club” assisted living facility vs. staying in their home alone. There’s a lot to be said about no home maintenance, cooking, cleaning or yardwork, and staying home alone can be dangerous and emotionally isolating as more help is needed.

Inflation Riders 

When buying a policy be sure and buy an inflation rider so that your benefits stay meaningful.  There are many ways to add inflation coverage today but having your benefits grow automatically each year is still the best way. Country Financial and MedAmerica have the best deals on inflation coverage, especially the 5% compound which is unaffordable with many companies.

Collecting Long-Term Care Insurance Benefits

First, let’s establish how you get a claim paid. Most policies have used the same criteria to pay claims since the IRS first recognized LTC insurance in 1997 so that the benefits can be tax-free.  You either have to be expected to need help with at least two of the basic daily living activities like bathing and dressing for at least 90 days or have a cognitive impairment so severe that you can’t be left alone.  

Once a person meets either the physical or cognitive reason for benefits to start, the insurance company works with the family to establish a plan of care, which involves deciding where it is possible for you to safely receive care−at home or in a facility.  If at home, the company will approve how many hours a day, and how many days per week, and will want daily notes from the home health aides to prove you received the care. 

Now what is important to understand is that you really need to know the track record of the company you are thinking about buying when it comes to actually paying for the services you deserve.  There are a lot of differences in how companies pay claims. 

For example, a company might:

  • Approve four hours a day, three days a week, whereas another company might approve eight hours a day for seven days a week or even 24/7 care.
  • Deny the claim if any information is missing and another company might try to get the missing information from the care provider without burdening the family with the request.
  • Require a new evaluation to continue paying benefits every 60 days for a condition that will never improve, such as severe dementia.
  • Follow restrictions in older policies to the letter instead of using a provision called “Alternate Plan of Care” that is in most policies that allows benefits to be paid outside the contract if it is cost effective.

These are just a few examples of what some policyholders have been dealing with, especially with a company by the name of CNA. CNA in my opinion looks for ways to deny your claims rather than ways to pay a claim. Thank goodness they no longer are selling LTC insurance policies.  If you have a CNA policy and they have been giving you trouble in paying your claims I would love to hear about it. 

Which policy to buy? 

For overall affordability and ease of collecting benefits, Phyliss Shelton recommends  MedAmerica and Country Financial for the best value at this time. However, they vary greatly in scope of coverage. MedAmerica offers worldwide coverage whereas Country Financial is offered in 23 states. (AL, AK, AZ, CO, GA, ID, IL, IN, IA, KS, KY, MI, MN, MO, NV, ND, OH, OK, OR, TN, WA, WV, WI)

I will ask her to re-evaluate this recommendation after the 2nd quarter of 2015 when they introduce new policies.

If you need help I personally would contact LTC insurance consumer advocate and educator Phyllis Shelton at GotLTCi.com for advice. There are many ways to pay for long-term care and Phyllis can discuss all of them with you. She is a tremendous resource and just to anticipate a question: I have no business arrangement with Phyllis and do not receive a penny from any policy you might purchase.  However when we went to buy an LTC insurance policy we sure did it through her.  Just saying!

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