Understanding the Potential Long-Term Care Cost for Seniors
If you’re getting older, you’ve probably thought about what kind of insurance you’ll need to cover health issues and medical expenses, from medications to specific procedures. But in some cases, for chronic conditions, disabilities or illnesses, long-term care will be necessary — whether this means staying in a nursing home, hiring a live-in caretaker or modifying your home to meet your needs.
However, long-term care cost is not covered by employer-based health care plans, and Medicare only covers some options, like short-term stays in nursing homes. So how can you go about paying for long-term care if it becomes necessary? That’s where long-term care insurance comes in — it’s a particular policy that you can buy which will help pay for the essential expenses, depending on what kind of plan you have and what your specific needs are.
What plans are available?
The first type of long-term care plan is an individual policy, which will vary in price and coverage depending on where you buy it. Just make sure that you’re buying from a licensed insurance agent or broker who has special training in long-term care, if possible.
It’s also possible to get long-term insurance through your employer, which may offer you a group plan or an individual policy at a discounted group rate. One benefit is that your family members might qualify if they pay premiums and pass medical screenings; another is that once you leave your job (for retirement or any other reason), you can keep the policy as long as you continue to pay premiums. You could get a similar offer from a professional or service organization you belong to, so make sure to check with any groups you’re in to see if they have such a membership benefit.
Another possibility is getting long-term care insurance through a State Partnership Program, which would allow you to continue to qualify for Medicaid while also letting you keep your assets. Finally, you can take out a joint policy with a spouse or family member, though this might be limited because of the maximum benefit that applies to total expenditures on long-term care for both people.
What services do they cover?
Long-term care insurance can cover a variety of services, all of which may not be offered in all plans. There could also be restrictions, such as some plans require the care provider to have a specific license or work out of a specific facility, while others will cover care by non-licensed professionals or family members. Make sure you look for a policy that will cover your specific needs and desires when it comes to the types of facilities and care options you want.
The main care options you will need to consider are nursing homes, assisted living facilities and home care. Nursing homes are live-in facilities that provide health care, daily activities and room and board, while assisted living is a more autonomous apartment-style option where personalized services (like meal delivery or health care) are available if desired. Finally, in a home care situation, someone will come to your home to help you with basic services like personal care and housework. Depending on what type of care you’re looking for, seek these services out in a policy.
Another service that may be offered is adult day care, which takes place outside the home and provides you with support services like health care and social activities if you need these in a limited capacity. Finally, home modification may be covered to help you install adaptations like ramps to help you better access and feel more comfortable in your home.
A few other things to keep in mind are whether the policy offers care coordination — which essentially ties in the different types of care by helping you locate services based on your needs — and future service options if a new type of care comes out after you’ve already bought the insurance policy.
How do I decide what to buy?
When it comes to deciding what type of insurance policy you should get for long-term care, consider money first — how will you be able to afford the premiums, and which policies fit better within your budget? You should also consider other financial aspects — your income, your assets and investments and your taxes — to determine whether it’s even viable for you to pay thousands of dollars a year for a long-term care policy. If you see that it may be difficult, consider what kind of support system you already have in place — family, friends and loved ones who may be able to help assist you in your daily living in a more informal way.
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Category: Long Term Care
Understanding Joint, Linked And Shared Long Term Care Insurance Coverage
There are significant differences between joint and linked long term care insurance policies. One type allows for couples to share a policy while the other allows a husband or wife to tap into the benefits of their spouse’s policy.
There are certain advantages to each type of LTC policy and through the help of an agent, couples can usually decide which insurance best fits their present and future needs.
Linked Long Term Care Insurance Coverage
Linked policies simply allow the first spouse to tap into the benefit pool of the second if all of the first spouse’s benefit dollars have already been spent on care. Thus, two policies are purchased – one for each spouse – and they are joined by a rider that allows couples to share benefit pools.
Long term care insurance coverage allowing for a linked benefit was most common far many years. Many consumers came to know these types of coverages as shared care. Several insurance companies offered shared care riders at an additional cost to the insured.
Knowing there were two available benefit pools helped reassure a husband and wife that extra dollars would be available if only one spouse became ill or injured and was on claim for an extended period of time.
Advantages And Disadvantages Of Linked Care
The advantage is fairly straightforward in that there are two separate policies that can be shared in succession thus doubling the amount of money and time available to one of the insureds.
However, it is important to know that both policies cannot be used at the same time by the same spouse. The benefits can be drawn upon separately by each respective spouse, but the two policies will not payout simultaneously for one person who is on claim. The first policy must be exhausted before the second policy will offer benefits to the same insured.
The primary disadvantage to a linked long term care policy is cost. Two separate policies must be purchased (one for each spouse) and then a shared care rider must also be purchased allowing the coverages to be linked.
In some cases, less coverage can be purchased by each spouse and then linked, but that may not help if more dollars are needed over a shorter period of time from one of the policies.
All considered, linked policies can be very valuable to an insured couple. While the coverage costs more overall, the benefits that can be paid out over time can more than make up for the price if only one spouse needs extended care and exhausts his or her own pool of money.
Joint Long Term Care Insurance Policies
Long term care insurance that is joint will be equally owned by a husband and wife or qualifying couple. In this case, only one policy (or benefit pool) is purchased from the LTC provider and both couples can draw from the policy simultaneously or separately when care is needed.
Joint insurance policies offer the same types of riders that linked policies do; such as inflation protection, restoration of benefits, non forfeiture clauses and the like. However, only one pool of money is available for both the husband and wife.
Typically, joint long term care is more flexible in that extra shared care riders are not needed. Both spouses can make claim at the same time and draw benefits up to the daily or month maximums allowed for by the policy.
Additionally, insurance companies offering joint policies have also introduced hybrid life and annuity plans that can be owned and drawn from by both spouses. Hybrid plans are popular as they offer present and future value to the insured in the event long term care is never needed by either spouse.
Advantages And Disadvantages Of Joint LTC
The primary advantage of a joint policy is lower yearly premiums. It is unlikely, although not impossible, that both spouses will need extended long term care coverage. By purchasing a joint policy, couples can reduce their overall premiums and share the same benefit pool unlike a linked plan. And there would be no need to purchase a shared care rider.
The disadvantage is if more care is needed than was originally purchased. In the event that both spouses become ill or injured at the same time, the insurance may simply not provide enough benefit to cover such significant expenses. While it would provide some benefits, it can still leave the family without enough readily available resources at their disposal.
When considering a joint plan, it is wise to purchase a little more daily benefit and to also consider a stronger inflation rider (5% compounding for example) in order to account for LTC expenses for both spouses simultaneously. A larger inflation rider will help the benefit pool grow and allow for more daily or monthly dollars payable for care.
LTC Information And Quote Request
Hyers and Associates is an independent insurance agency specializing in traditional and hybrid long term care insurance policies. We offer, direct to consumer, coverage from several highly rated and well known LTC providers.
Contact us today to request quotes and/or to compare coverage options.
Category: Articles, Long Term Care, Retirement Planning
Paying for Long Term Care Expenses – Medicare, Medicaid and Medicare Supplement Insurance Benefits
There are some common misconceptions concerning who is responsible for long term care expenses. Oftentimes consumers erroneously believe that government run Medicare and private supplemental insurance will pay the costs associated with extended care. Unfortunately, this is not the case.
Medicare, when combined with some supplemental Medigap policies, will only cover a maximum of 100 days of prescribed skilled care in an extended care facility. After 100 days has passed, there are no additional benefits from either of these two insurance programs.
What does Medicare Pay Toward Long Term Care?
Medicare is not designed to provide benefits for long term care expenses for any significant period of time. Parts A and B only provide full coverage for skilled care for the first 20 days of accident or illness. After 20 days, Medicare pays roughly 80% of the total cost for up to another 80 days. And after 100 days of care, there are no additional benefits for that stay.
It is important to understand that Medicare only provides benefits for extended hospital or medical facility stays when skilled care is prescribed. This would be care that is monitored by a doctor or qualified nurse. Medicare does not provide benefits for custodial or intermediate care.
Custodial and intermediate care might also be administered by a nurse and monitored by a doctor, but generally consist of help with the most common activities of daily living. These activities consist of bathing, eating, dressing, transferring, toileting, etc.
If a doctor prescribes intermediate or custodial care or help with the activities of daily living, then Medicare offers very little coverage for these services. Only those who are receiving skilled care will receive benefits from government run Medicare Parts A and B – and only for 100 days.
Does Medicare Supplement Insurance Pay Long Term Care Expenses?
Private Medicare supplement insurance is designed to provide benefits for some of the common gaps not covered by Medicare. However, it only provides benefits for skilled care as well. Supplemental insurance policies do not provide benefits for custodial or intermediate care.
There are ten modernized Medicare supplements to choose from – Plans A-N. The six plans that fully cover skilled nursing care coinsurance not covered by Medicare are labeled C, D, F, G, M and N. Plans K and L cover 50% and 75% of the bill respectively.
Skilled nursing facility coinsurance is the amount due in days 21-100 of a hospital or facility stay. In 2014, the coinsurance amount due per day is $152.00 after day twenty. Each year, Medicare usually increases the skilled care coinsurance amount by a small amount.
Will Medicaid Pay for Long Term Care?
Yes, so long as you spend down almost all of your individual assets and at least half of the assets shared with your spouse. Additionally, Medicaid will usually attach to the surviving spouse’s share of the assets (including the home and property) after passing.
The Medicaid spend-down and recapture process is a grueling one and can be very painful financially and emotionally for spouse and family. Not to mention the notion that the care received in some state run Medicaid facilities may not be up to family standards.
Government Medicaid assistance received after the estate spend-down process is usually a last resort for most families. It can be avoided with proper insurance planning ahead of time.
What About Long Term Care Insurance?
Long term care insurance coverage is the only insurance policy that provide benefits for skilled, intermediate and custodial care. Most policies pay for care received in-home or at an accredited medical facility. In some cases, policies will also provide benefits if a family member is the caregiver.
Long term care insurance policies come in several shapes and sizes. There are traditional plans that draw from a pre-purchased pool of money and there are hybrid plans that are connected to a life or annuity policy.
Most modern policies provide tax advantages to the insured at purchase or when the benefits are drawn and in some states the insured can protect a matching amount of money in their estate through qualified partnership plans.
In order to receive benefits from most long term care policies, the insured must have difficulty performing at least 2 activities of daily living or be diagnosed with a cognitive impairment. These requirements are usually corroborated by a doctor or medical expert.
Long Term Care Coverage and Benefits
LTC insurance plans usually have a short waiting period before the carrier will provide benefits as determined and agreed upon in the policy. Policies pay out in different ways but can be purchased to provide monetary benefits for several years or up to a lifetime. All policies payout a calculated amount of money daily, monthly or yearly and many adjust benefit payments for inflation.
There are several bells and whistles that can be added to long term care insurance plans at purchase. Insurance companies have designed benefit types with the insured, the spouse and the family in mind. It is important to remember that you must be in reasonably good health before a long term care policy can be purchased.
Illustration and Information Request
In summary, government Medicare when combined with the best available Medicare supplements (including Medicare Advantage) provide very limited benefits for long term care coverage and only provide benefits for doctor prescribed skilled care.
Those who have assets to protect, are concerned about a surviving spouse, want to pass their estate to family members or charity, and wish to avoid the Medicaid spend-down process should consider some type of long term care insurance plan. Traditional and hybrid plans can provide substantial benefits for the insured and protect a lifetime’s worth of accumulated wealth.
Hyers and Associates is a full service independent insurance agency offering several types of long term care insurance. Contact us today for more detailed information, quotes, brochures and illustrations.
Category: Articles, Long Term Care, Retirement Planning
Hybrid Annuity & Life Insurance Policies
Up until a few years ago, consumers had few choices when it came to long term care insurance (LTCi).
Traditional policies that provided a certain amount monetary reimbursement were the norm. Policies could be designed to cover expenses for a few months or much longer period of time – even providing benefits for the insured’s lifetime.
For example, consumers could purchase coverage that would provide $100 a day in benefits for a period of three years. When calculated, the $100 daily benefit multiplied by 365 days in a year for 3 years would create a $109,500 “pool of money” available for care.
This pool of money would pay for care in a nursing home, assisted living facility, adult day care, or in the personal residence of the policyholder once certain criteria had been met. In some cases, these funds could be used to reimburse care provided by a family member.
When the pool of money was depleted, the traditional policy would provide no more benefits. If the policy was never used however, the owner would lose the investment of his or her premium payments. Thus, some seniors opted not to purchase these policies, deciding instead to rely on their families or current savings in the event that care became necessary.
Return Of Premium Insurance Rider
With the cost of health care rising rapidly, and a single day in a nursing home costing $175 or more in most major cities, self insuring is a risky proposition. Relying on family is an alternative, but not necessarily a viable one. Unfortunately, most families do not have the time, funds, or ability to provide around the clock care to a loved one.
The insurance industry realized that consumer needs were not always being met with long term care policies. While traditional policies were satisfactory for some, many seniors wanted more guarantees in the event their policy was never used.
Thus, these traditional policies added a “return of premium” rider. If the policy was not used over a set period of time, say 10 years, then the insurance company would return a portion (if not all) of the premiums to the policy owner or a family member. This, like any other rider, came at an additional expense to the purchaser.
Long Term Care Insurance Hybrid Policies
In response to customer and agent demand, insurance companies have designed what can be best described as hybrid or linked policies. These policies combine the benefits of an annuity or life insurance policy with a traditional long term care contract.
With hybrid policies, the consumer has the guarantee of long term care benefits, but if no care is needed, the contracts all offer the promise of monetary benefits to the insured and his or her beneficiaries.
Hybrid Life Insurance Policies for LTCi
Hybrid life policies come on a few different shapes and sizes. One policy links long term care to a single premium life insurance policy. With this plan, the insured deposits a desired one-time premium into a policy. Depending on the age, gender and health of the client, an immediate pool of money is created for long term care. At the same time, an immediate death benefit is created by the life insurance contract.
Take, for example, a healthy 65 year old non-smoking woman with $175,000 in liquid assets. If she deposits $50,000 into the single premium hybrid life account, approximately $87,000 in long term care benefits would be created immediately. There would also be a death benefit to her beneficiaries of approximately $87,000 created from the life insurance component of this account.
At an additional on time cost, this same woman can select a benefit rider that would provide approximately $260,000 in long term care benefits as oppose to the original $87,000. She would also have access to her original $50,000 investment should the funds be needed elsewhere.
In this example, she receives guarantees on her investment as well as protection from the high costs associated with a nursing home stay. In addition, she would still have $125,000 in assets at her disposal that could be used for a traditional or long term care annuity.
There are several types of hybrid life plans; this is but one example. Some allow for joint ownership while others must be purchased individually. Working with an independent agency like ours, consumers can compare several variations of these linked products.
Annuity Hybrid Long Term Care Accounts
Another example of combination type plans links long term care benefits to a single premium deferred annuity. This product begins as an annuity with either a lump sum single premium deposit. If no care is needed, the annuity gains interest like any other fixed annuity and is available for the insured’s financial needs.
However, if the owner/annuitant needs care in a nursing home or elsewhere, a formula will be used to determine the monthly benefit amount available. Continuing on the example used earlier, a healthy 65 year old woman who deposited $150,000 into this account would have the advantages of tax-deferred, safe and insured growth in the annuity and approximately $4,700 a month in long term care benefits for 36 months.
At an additional one-time cost, a benefit rider can be added to the policy providing a $4,700 monthly benefit for her lifetime. Concerning these types of policies, the additional benefit rider is usually a wise purchase in order to obtain maximum guarantees.
Hybrid Long Term Care Annuity Multiplier
The newest addition to the hybrid marketplace is another variation of the long term care annuity. This product also functions exactly like a fixed annuity, but has a long term care multiplier built into the policy.
There is no premium rider attached to this medically underwritten annuity policy. Instead, a portion of the internal return in the contract is used to pay for the long term care benefit. Long term care coverage is calculated based on the amount of coverage selected when the policy is purchased.
The insurance company offers a payout of 200% or 300% of the aggregate policy value over two or three years after the annuity account value is depleted. For example, a policyholder with a $100,000 annuity who had selected and aggregate benefit limit of 300% and a two year benefit factor would have an additional $200,000 available for long term care expenses after the initial $100,000 policy value was depleted.
The policy owner would spend down the $100,000 annuity value over a two year period and then receive the additional $200,000 over a four year period or longer. In this example the contract pays $50,000 a year for a minimum of six years, but care will last longer if less than the $50,000 benefit is needed each year. Again, if long term care is never needed the annuity value would be paid out lump sum to any named beneficiary.
These scenarios are only basic examples of how hybrid policies work. The coverage will be different from person to person depending on age, health, gender, premiums and benefits requested. In order to get an accurate proposal, an illustration would be required. We can help you compare illustrations from several carriers.
These innovative products can meet consumer demands and provide more guarantees by combining traditional long term care insurance with the advantages of life insurance or annuity policies. Thus, consumers who utilize hybrid policies can avoid self-insuring against catastrophic long term care related expenses while still providing living benefits to themselves and a legacy to their heirs
Long Term Care Insurance Providers
We offer traditional long term care coverage from Allianz Life, Genworth, John Hancock, Lincoln Financial Group, Mass Mutual, Mutual Of Omaha, Prudential, and others.
We work with American Equity, Genworth, Old Mutual, One America, Money Guard, and Mutual of Omaha to provide hybrid long term care policies.
Category: Articles, Long Term Care, Retirement Planning, Wealth Transfer