LONG-TERM CARE SOLUTIONS
WHAT IS LONG-TERM CARE?
Long-Term Care (LTC) generally refers to the care needed for those requiring assistance with basic daily activities or due to cognitive impairment for both shorter and longer periods of time.
This care does not cure you and typically results from chronic illnesses, cognitive impairments, automobile/sporting accidents, head injuries, disabilities and aging. It is non-medical care, also referred to as custodial care, and can be received in many settings. While it is most commonly received at home, it can also be received in assisted-living facilities, nursing homes or adult day care centers.
Long-term care can be needed by anyone, at any time. The most common causes of the need to receive LTC are cognitive impairments, such as dementia or Alzheimer’s, progressive neurological conditions, like Parkinson’s or MS, strokes, cancer and accidents.
WA State Long-Term Care Trust Act
Washington State passed a law mandating public long-term care (LTC) benefits for Washington residents. Beginning January 1, 2022, Washington residents will fund the program via a payroll tax set at $0.58 per $100 of payroll. This tax is permanent and applies to all residents, even if your employer is located outside of the state. While this program may be appropriate for many Washington State residents, such as those with average income and/or health conditions that prohibit obtaining private coverage, it may not be advantageous for you based on your individual situation.
Under this current law, you have one opportunity to opt out of this tax by having a long-term care insurance (LTCi) policy in place by November 1, 2021.
The current Long-term Care market is at capacity and there are no longer any carriers in the market for new business. At this time, their focus shifted to processing existing applications to meet the November 1, 2021 deadline.
Statuses of any applications you’ve submitted will be given by our team as we have them available and we will inform you about the opt-out process as soon as we hear from the Trust Act.
WHY IS LONG-TERM CARE PLANNING IMPORTANT?
According to Georgetown University’s 2007 study on long-term care (LTC), 41% of LTC is provided to those under 65.* The US Department of Health and Human Services cites that 70% of those who reach 65 years will need some type of LTC in their lives.** Despite these overwhelming statistics that show LTC will touch the young and old, many don’t plan for their likely need of future care. This is a risky and selfish assumption.
of LTC is Provided to Individuals Under 65*
Individuals Who Will Need Long-term Care After 65**
Protect Your Hard-Earned Retirement Assets
Get Peace of Mind Knowing You're Cared For
Make Your Own Choices
Provide Security for Family and Loved Ones
Caregiver Total Lost Wages, Pension & Social Security Benefits*
Female Caregiver Lifetime Lost Wages, Retirement Savings & Social Security*
Further complicating LTC planning are many myths that muddle the decision-making process.
MYTH: Medicare does not pay for extended LTC and many assume that they can self-insure, despite the growing and prohibitive costs of such care. Ask me about other myths and misconceptions.
There is a growing interest in LTC by the workforce, as the caregiving crisis grows and lands on the doorsteps of working caregivers and, by default, their employers. The toll placed on caregivers is varied and cannot be ignored. It impacts health, physically and mentally, is a significant driver of stress, leads to family disputes and has a significant impact on careers, with the fallout impacting 401ks, other benefits and lost wages. Employers feel these effects as well in lost productivity, retention and replacement costs, and impacts on healthcare costs, and a disengagement with their employees due to this disconnect.
*MetLife’s study on working caregivers
How much does an LTC event cost?
LTC services vary depending on where you live and where you receive care, as well as the level of care required. Genworth’s Cost of Care Survey for 2018 breaks down these costs in all 50 states and annually, they average as follows;
Home Health Care: $53,493 – (Based on 44 hours per week by 52 weeks)
Adult Day Health Care: $23,660 – (Based on 5 days per week by 52 weeks
Assisted Living Facility: $60,000 – (Based on 12 months, private, one bedroom)
Nursing Home Care: Semi-Private: $126,473 | Private: $140,613 – (Based on 365 days of care)
I’ve heard that LTC Insurance is expensive. Is that True?
LTC Insurance is affordable and often press coverage of LTC is not accurate. Like other insurance, LTC insurance is more affordable the younger and healthier you are. It depends on your health as well and costs vary from carrier to carrier. Therefore, using an LTC Specialist is important as we are familiar with all the carriers and know the differences between each product.
The costs for a 40-year-old couple living in Virginia based on a policy with a daily benefit of $120 and a 3-year benefit with shared care rider, (one or both insureds may need care for a longer period than provided by the joint policy they purchased. With this rider, the joint insureds can have an extra layer of financial protection added to the policy they purchased. This rider provides a third pool of money for the joint insureds to pull from in the event one or both insureds exhaust the benefits defined in their policy. Each insured has their own Benefit Amount, and once either or both insureds exhaust their own Benefit Amount, a joint Shared Benefit Amount will become accessible,) breaks down as follows;
Annual premium: $2,146 | Monthly premium: $188
Daily benefit: $120 | Daily benefit at 80: $391
Pools of Money: $290,040 per person
Shared Care Pool: $307,702
Total Pool of Money: $887,782
When should I purchase LTC insurance?
Most people today purchase LTC insurance between the ages of 52 and 64. Purchasing LTC when younger reduces the costs of premium and in younger years people are typically healthier.
Does Medicare or health insurance pay for LTC?
No. Typically, Medicare will only cover 100 days of LTC under certain conditions. Health insurance pays for hospital and medical care. For example, if you needed surgery due to an accident, your health insurance would pay for the surgery, hospital stay and costs, and medications and meals while in the hospital. However, for an LTC event, the costs are either paid by self-insuring, Medicaid, or using LTC insurance. LTC insurance picks up where medical coverage leaves off.
Who should purchase Long-Term Care Insurance?
LTC insurance is not for everyone. Suitability is based on health history and financial means. LTC Specialists can best determine suitability and in general, you should consider LTC insurance if:
- You are between 40 and 72: younger means more affordability and choices. Few people over 70 will meet the health screening but if you do, a thorough pre-underwriting will determine your choices.
- Your health is good: LTC Insurance is carefully underwritten to screen appropriate risks and deliver a stable product. Some carriers will treat certain conditions differently, again reinforcing the benefit of using an LTCi specialist since we know the underwriting criteria for each carrier. Some conditions that will preclude you from getting coverage are progressive neurological conditions like Parkinson’s or multiple sclerosis, metastatic cancers, any form of cognitive impairment like dementia or Alzheimer’s, and AIDS. Other factors may allow coverage but with higher premiums such as a high BMI or controlled diabetes or high-blood pressure and cholesterol.
- You have assets to protect: You should have at least 100,000 in assets including retirement accounts to protect. Some people can self-insure, but even high-net worth individuals understand the value of LTC insurance. LTCi is about peace-of-mind and control. An LTCi policy provides access to first-class care when it is needed. It prevents you from being a burden on loved ones
Can I expect my premium to stay the same or should I budget for rate increases?
Today’s policies are stronger and more stable than ever based on the improvements made by LTC insurance companies since the issues that caused most carriers to seek rate increases in 2016. However, like other types of insurance including homeowners, auto, and health insurance, you should budget for modest rate increases over the life of the policy.
LTC insurance policies are guaranteed renewable which means that the carrier does have the right to request a rate increase on an existing block of policies through the state department of insurance. However, all increases must apply equally to all policy owners from the requested class of policies and the carrier must keep the policy in force if the premium payments are made. Changes in age or health have no bearing on the contract premiums once issued; the policy may only be cancelled if premiums are not paid.
In 2002, the industry enacted the NAIC Rate Stability Act which made LTCi rates more strictly uniform and protected. This was based on over 20 years of claims experience and data that allowed carriers to better predict length of claims as well as costs of claims. The Rate Stability Act required carriers to adhere to guidelines and strict standards to be granted a rate increase.
The Rate Stability Act did not cover pre-2002 policies, but by 2004 almost all policies were protected by these guidelines and today, the Society of Actuaries performed a comprehensive study in 2016 which found that the LTC Insurance Industry is stronger than ever and wrote; “Based on our analysis, we conclude that products priced in the current economic environment with a more mature experience base are less likely than earlier products to experience future rate instability.”
They found that the future probabilities of a rate increase to be 10%.
What if I never use my insurance?
No one wants to use LTC insurance in the same way they do not want to use their homeowners, auto, or life insurance. However, there are different LTC policies and riders that allow you to receive a death benefit or return of premium if you never use your policy. Return of Premiums are available not only on hybrid products, which combine life insurance and LTC insurance, but for an LTC insurance policy as well.
LTC insurance is a risk management tool. Not having an LTC plan is risky and the risks of not insuring this risk results in consequences for not only you, but for your family and loved ones as well.