Information from Kaiser Health News on the complicated topic of long-term care insurance.
The question of whether to get long-term care (LTC) insurance bedevils consumers and their advisers. Unlike medical insurance, it is intended primarily to cover people who need assistance with so-called activities of daily living—for example, the care of a dementia patient or someone recovering from a broken hip. It can be expensive: Premiums range from $1,000 to $5,000 a year, depending on the age, sex and health of the purchaser as well as the extent of the coverage. And policy details can be confusing.
Kaiser Health News experts offer four things to consider as you make the decision:
- Determine if you qualify financially. Don’t buy if the out-of-pocket cost for the coverage would be more than you can afford. Consumer Reports advises people that if their net worth, excluding their home, is below $300,000, long-term care insurance is not a good buy for them. The National Association of Insurance Commissioners also recommends that consumers spend no more than 5% of their income on a long-term care policy. If you need long-term care but have few financial resources, Medicaid should quickly kick in to pay, although that will probably limit your choices for care. On the other hand, if you have a lot of resources (some financial advisers put that threshold at $2 million), you may be able to self-insure and pay the costs as they arise, thereby eliminating the need to buy a policy.
- Shop around. Unlike car insurance where you can switch carriers easily, it can be expensive to change long-term care policies because the premiums increase as you age and you lose the investments already made. Comparison shopping is critical. Some companies and associations (such as alumni groups and AARP) offer group policies with relatively liberal eligibility, making it easier to obtain coverage if the policyholder has any health issues. However, these policies may have more limited benefits than individually purchased plans.
If you are young or in excellent health, a group plan may also be more expensive; you may end up paying more to subsidize your less healthy peers. And if you are certain you want LTC insurance, the younger you are, the better. Your annual premiums will be smaller, and you have less chance of being denied for health reasons.
- Know what’s covered. Policies differ greatly, so know what you are buying. What services are covered? How long is the disability period before benefits kick in and what happens if you move from one facility to another? How much does the policy pay per day for nursing home care, home-health care and assisted living? How long will benefits last? Is there an inflation adjustment that anticipates rising medical costs as you age? How long are benefits extended (one, three or five years, or indefinitely)? Who determines benefit eligibility—your doctor, or the insurance company’s doctor—and on what basis? Are pre-existing conditions excluded? Does the policy cover mental or nervous disorders, alcoholism, drug abuse or self-inflicted injuries?
The National Association of Insurance Commissioners advises consumers to look for policies that include at least one year of nursing home or home health care coverage, including intermediate and custodial care; coverage for Alzheimer’s disease; inflation protection; a guarantee that the policy cannot be terminated because you get older or your health deteriorates; no requirement that the beneficiary has to first be hospitalized to receive benefits; and a 30-day cancellation period after purchase.
- Check out the insurance company. Review a carrier’s record with your state insurance commissioner’s office. Find out how long it has been in business, its complaint record, and history of raising rates. Stick with a company that has an A financial rating.
Also, the National Association of Insurance Commissioners (http://www.naic.org/index_ltc_section.htm) and the American Association for Long-Term Care Insurance (http://www.aaltci.org/long-term-care-insurance) have consumer guides on their websites. The Department of Health and Human Services provides extensive information on its National Clearinghouse for Long Term Care website (www.longtermcare.gov).
This article was reprinted from Kaiser Health News (www.kaiserhealthnews.org) with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente. Read Calculating a Long-Term Care Policy (www.kaiserhealthnews.org/Stories/2012/January/24/calculating-a-long-term-care-policy.aspx) to learn more about whether long-term care insurance is a good idea for you.