Long Term Care Insurance

Parent Cafe
1

Anyone else have LTC (Long term care) insurance? I’d like to compare notes, and have a few questions for anyone in the insurance business… I couldn’t decide whether to post under the Parents Caring for Parents thread or the Retirement thread, so am starting a new one.

We bought LTC insurance over 10 years ago because premiums were of course cheaper when healthy, and in your 50’s, and we were advised that it is best to purchase young when it is still relatively affordable. Our company supposedly had never increased premiums once you purchased, although we knew that was not guaranteed, and it stayed relatively stable for the first few years. By contract and state law, they are also not allowed to increase due to health changes or age. We expected some increases over time, but wow, over the last 3 years (coincidentally when we turned 60), the yearly premium has shot up over 50 % - with no end in sight. Is that typical for those of you (or your parents) who also have LTC insurance/

The company of course uses the excuse that people are living longer (we knew that for the last 50 years, didn’t we?), and more people are therefore claiming their LTC.

OK, I’m not totally naive (I hope), and I know insurance companies are in the business of making money, and are often difficult to use when needed, but why would anyone purchase when younger to help stabilize costs, if there is no stable cost? And, aren’t the actuaries supposed to study longer living trends when they determine rates? Our state at least requires the company to prove necessity before any increase, so obviously they must have (again) studied trends to try to predict future costs and justify any increases. But no one will tell us for how long these increases are likely to happen.

We can of course drop the insurance. Or, when the rates change, we are allowed to change our contract, and lower the premiums (and payout), but no one will guarantee one change won’t affect any other portion of our supposed contract. The language is very vague as to exactly what does and does not change.

This has been a very frustrating experience. We need to make decisions based on absolutely no information (no history to compare, no projections, etc.).

So, what has been your experience?

2

To be honest, I don’t know exactly what our LTC insurance premiums are, or how much they have changed. You should be aware, however, that the entire LTC insurance industry is more or less in crisis. None of the participants has shown any real ability to underwrite the risks accurately. Yes, people are living longer, and living longer in long-term care. My mother-in-law scrimped and saved to afford a LTC policy that would pay up to $3,000/month, with a lifetime cap of $100,000 (roughly three years). At the time she bought it, three years was pretty close to the outside limit for how long people spent in long term care. She, however, spent seven years in a nursing home, with Alzheimers, at the end of her life.

Many of the biggest players in terms of premiums collected and new contracts written are in questionable financial shape. They tend to be stand-alone companies, or separate subsidiaries of other insurance companies with no guarantee of financial support from the parent. When we were shopping for insurance, we could tell the difference between the stand-alone insurers and those that were functioning within a financially conservative larger company. The latters’ rates were essentially double those of the former.

One dirty little secret about LTC insurance (and life insurance too, for that matter), is that it’s crucial to the financial health of the insurers that lots of people let their policies lapse before they would need to claim benefits. And of course the business doesn’t work if a substantial majority of the insureds don’t die without ever needing long-term care, or much of it. But if you think about what has happened with cardiac care, stroke care, cancer treatment over the last 20 years, you know that 20-year-old statistics about how quickly people die are fairly useless.

The financial press about LTC insurance is pretty much all doom and gloom. We chose to gamble a bit on relatively cheap rates, and to hope our insurer stayed in business and didn’t raise its rates too fast. But we knew we were gambling, and we expected the rates to rise significantly over time.

3

My mother has it, and, yes, her premiums have increased every year - and not because of costs of living increases. Every year she ponders whether or not to keep the policy. In the end her rationale is “but I’ve had it this long and I’m vested.” She has lowered coverage now and then, and at this point, I doubt she has enough coverage to really make the policy worthwhile.

I do have life insurance as I figure that it’s a sure bet that I’m going to die. My premiums are automatically deducted from my checking account, so hopefully coverage won’t lapse. It’s through USAA, which is a fairly stable financial institution, so I’m not worried.

4

I’ll make my response a relatively brief one, as much information and advice about LTC insurance can be found elsewhere online.

One basic truth about any ANY type of insurance is this: On AVERAGE, the individual purchasing insurance will lose money on the transaction. You are buying a PRODUCT, and you are doing so in order to transfer a stated amount of personal financial risk away from you and onto the insurance company. Insurance should never be viewed as an investment, because it is not.

So, the insurance company’s actuaries estimate what the risk is that you will need to use the LTC and to what extent, charging you accordingly. They also estimate how many people will purchase the insurance but then stop paying premiums before they ever tap into the policy. Also, these premiums have to pay high sales commissions to the agent, pay the CEO’s high salary and their “golden parachutes,” company trips to the Caribbean for top sales producers, as well as pay salaries/benefits for the working staff, to build/maintain gleaming insurance office buildings, etc., etc. This helps us see that the costs to us are more, ON AVERAGE, than we the insured will ever receive.

The problem recently is that the insurance companies realized their actuaries under estimated the number of LTC policy holders who would actually file claims. Fewer people than expected would, for example, pay eight years of premiums and then drop the policy before ever making a claim. They also underpriced the LTC policies in order to compete with other LTC insurers and to build up their LTC business. Only a few insurers now sell LTC policies, making for less competition, and they have raised premium costs to cover their increased risks and expenses. Expect continued premium increases, though future increases might not jump as much as they have in the past couple years.

My wife and I wrestled a couple years ago with whether to buy a LTC policy. We decided not to, being (we hope) in a good enough financial position to “self-insure” for our LTC needs. On AVERAGE, being healthy individuals with no chronic or family-genetics issues in our 60s/50s, we will come out ahead by NOT buying a LTC policy. But keep in mind that an Alzheimer’s patient’s average stay in a nursing home is about 7 years.

Personally, I’m waiting to see if any insurance company is willing to issue a LTC policy that would cover my nursing-home stay after I have already self-funded, say, 2 years in a nursing home. But I’m not holding my breath waiting for that to happen.

So, do you feel lucky? You’d certainly help the insurance company today by dropping your policy and allowing them to keep the premiums you have paid thus far.

…
.

5

I believe that the low interest rate environment of the recent past also hurt the LTC carriers.

I have been surprised that the premiums on my mother’s policy have not increased at a higher rate. The daily benefit limit of the policy increases annually, but that was a feature purchased at additional cost.

@MinnesotaDadof3 – I like your idea of a policy with a two year elimination period. I agree that there is no reason to purchase LTC if you have the assets to self-insure. The LTC’s claim payment policies add a layer of hassle and aggravation to the process of obtaining appropriate care.

6

When H’s fed govt employer encouraged LTC policies, we looked into it. I read EVERYTHING I could about it for awhile and we even met with a MetLife agent.

We talked about what it took to qualify for benefits and he confirmed my understanding that the insured had to be unable to do 3 of the 6 activities of daily living (ADLs) to qualify for ANY benefits. These activities are spelled out in the policy: Transferring from bed to chair, toiletibg, feeding, and a few others. It does not matter how slowly or painfully the person performs said activities, just that the person physically is able to do so.

My beloved elderly aunt had faithfully paid LTC premiums for decades and ended up dying painfully from lung cancer. She could not get ANY benefits until the last month of her life, though being able to pay for assistance sooner in her final year would have made her life more comfortable.

Similarly, my folks benefit from having others help them with things like laundry, cooking, driving but can still perform all ADLs. We opted not to purchase LTC insurance and are saving so we can hire the help as we choose.

7

The people I have seen buy LTC have bought Lincoln Financial MoneyGuard, a hybrid LTC-Life insurance product. An Example would be, $100k single premium, policy either pays $122k in death benefit, so not a great ROI, but you don’t lose the premium paid or pays $244K in LTC monies, last time I read it, it was 4 years of benefits.

You only qualify for the LTC benefit if you need help for a certain number of ADLs and, for example, help with feeding means someone putting the spoon in your mouth, not shopping and cooking. Other ADLs are transfer (like between bad and wheelchair); toileting; bathing; dressing, continence.

We have seen older people need help for issues for 10-30 years and seen people die after needing help for days or months, in neither case would a limited pay LTC be great help, either it runs out in 2-4 years or you don’t need it for long at all, so, for example, with the LFG MoneyGuard, no reason to claim unless you get the 4 years of benefits and it would take 2 years of benefits to payout more than the death benefit.

8

There have been a number of articles in the financial press recently about LTC insurance, mostly arising from GE’s mandated move to increase reserves for the policies (written by others) that they have reinsured. It isn’t a pretty picture. The simple overview of the situation is that the premiums charged to people aren’t remotely close to enough to pay the claims that are arising.

https://www.bloomberg.com/news/articles/2018-02-02/why-long-term-care-insurance-is-bringing-ge-down-quicktake

I’m not real enthused about giving direct advice to others about such things, but I do think that the option of just letting the policy lapse could possibly be the best thing to do for some policy holders.

9

My in laws have been paying LTC premiums for a number of years. The monthly premiums are pretty high, and their policy only covers $100 a day, I think. FIL is almost 90 & has Parkinson’s. They are at the point where they need to modify their home to allow him to get around - LTC doesn’t cover that. He needs help showering, but he can do everything else - so no LTC assistance, since he doesn’t have TWO things he can’t do. Once he does meet the criteria, if he has to go into assisted living or have in-home care, $100/day isn’t much. Frankly, I think they have been on the losing end on this deal. Time will tell, of course. H and I are funding an HSA instead of putting money into an LTC plan. I honestly think we’ll be better off that way.

10

We do have a nice extra benefit, that if/when the rates increase, we can walk away, and not lose any of the premiums we have already paid. We don’t get a refund, but it goes into a pot to be used if we ever do need LTC in the future. It obviously would not last long at all. It does not bother me if the money is never used. In fact, I honestly hope I never need to use the policy! That is what insurance is all about. We also wanted it to supplement our own contribution so that our children would never need to feel guilty about the level of care that could be afforded, assuming our children will likely be the ones making such decisions. So, we took the chance to purchase 10 years ago based on the history at that time, and the assumption that premiums would rise, just not so rapidly. Since that is no longer the case, obviously the assumptions and decisions going forward must change too.

11

You really have to read the policies closely. While the thought of not having to worry about the bills is great, when it comes down to it, it can be very different. From what I have learned over the past 10+ years of parent, inlaw and grandmother in a nursing home, is that a lot of homes will not bill your private insurance. They bill you, you have to get an itemized bill from the home and turn it over to your insurance. Like health insurance, they will go though and pick and choose what they will cover and how much they will cover. You still have the headache and hassle. Nursing homes love self pay. The reason is that the administrator of the home gets a percentage of the self pay. This is one reason why there are a limited number of medicare and medicaid beds (if the home even takes medicaid). Usually a nursing home sends what I term a general bill. Room, board, medications (could be a separate bill from the pharmacy they contract with) and other. Other is the big loop hole were all kinds of things are placed. That loop hole is where you find a lot of overcharges. A monthly fight that my mom had with gram was the fee for diapers and each diaper change. Well gram didn’t wear diapers but got up and went to the bathroom. That alone amounted to a couple of hundred a month. It seems that everyone was charged those fees no matter if they wore diapers or not. Every month mom had to call and fight to get the fees removed. With dad, my sister and I found drug over charges and fought those. One large tube of “butt cream” lasted at least a month, suddenly he was being charged for 4 or 5 a month. Nope, no way. He was being billed for other patients cream basically because he had drug insurance that covered it. Another item that is often overcharged for is gloves. While it is hard to know exactly how many pair they go through a day, a charge for a large number, say 10 boxes a month, is out of line when you consider that your roommate is mostly being charged for the same number.

Years back when my husband was offered nursing home insurance though work that also allowed his parents and inlaws to get the insurance we turned it down. His dad spent less than a year in a small town nursing home on medicaid. My mom died at home with hospice and dad spent a year in a home as self pay with us auditing the bills. Most likely my parents would have paid out more for the insurance than they would have gotten back.

12

We had no problem at all with my mother-in-law’s Unum policy. They were great – required minimal documentation at the outset, determined that she had been eligible months before we made a claim, and sent a back-benefit check, and did very little by way of periodic re-qualification. (Granted: my mother-in-law was profoundly limited and had no prospect of improvement.) They sent the maximum monthly to the nursing home until the coverage ran out, and the nursing home took it off the portions of our bill that qualified as insured care. Unfortunately, Unum is one of the insurers that discontinued selling new LTC policies.

13

My MIL has the plan offered to federal gov’t employees/retirees. She only needs help with TWO ADL’s, not three and the policy is paying the full cost of her care every month. Every morning and evening she needs help getting dressed because she has balance issues. And she needs help bathing a few times per week. Getting the claim approved was very ea

14

My MIL has the plan offered to federal gov’t employees/retirees. She only needs help with TWO ADL’s, not three and the policy is paying the full cost of her care every month. Every morning and evening she needs help getting dressed because she has balance issues. And she needs help bathing a few times per week. Getting the claim approved was very ea

15

Getting the claim approved was very easy. Her first few months of care were at home. The home care agency filed the claim and it was approved in about three weeks. All we had to do was sign a couple of HIPAA forms.

16

My parents’ policies not only covered skilled nursing, but the daily rate was something like 40% higher. This was true even when Medicare was paying for the stay! Self-funding, other insurance, other income sources – it didn’t matter. The contract was that they would pay X if certain care was required, period.

N.B. – Their policies were purchased in the early 90s, and the claims were in 2010-14, so none of the above may be true now. The industry is changing rapidly.

17

There are policies where you self-fund the first 2 years and then the policy kicks in.

18

I’ve been studying this issue pretty intensely for the last 2 weeks. I’ve pretty much determined that at this time, traditional long term care insurance is not the way to go. I am looking at several “asset based plans.” Some give a death benefit and some do not. The ones with a death benefit are Universal Life policies that can be tapped into for long term care. Others are standard low yield savings plans that if needed, gives you additional money for long term care.

I’m swimming through the weeds on this one and trying to find clarity and what policy is the best for me and DH. Both our parents ended up in long term care. Mine have Alzheimer’s and no telling how long they will be there. But, “do not hospitalize or transfer to the ER” orders are in place.

I would love any recommendations.

19

@GTalum (you’ve been so supportive on the parent caring for parent thread, thank you. Yours & others’ experiences shared there & mine with my mother have contributed to how I’m thinking about LTC)

I suggest weighing the value of LTC insurance by envisioning the need for care at the end of life and working backward. This is what I mean, using my family’s history as an example.

Longevity runs in my family so there’s a very high probability that I’ll live well into my 90s. And, by that age one most likely will need some type of help, be it even on the simplest level of housekeeping. (btw/ one of my mother’s brothers is 103.)

My mother is definitely near the end of her life. She’s 100 years old. Since she was diagnosed with mixed dementia about 18 months ago (she also had mild short-term memory symptoms for a few years before this diagnosis), I learned that her LTC policy would not have covered any of the care that she has needed over the past 18 months. The type of care that she has needed is assistance at home.

She’s now on hospice care, which is covered by medicare. She’s essentially bed-ridden & cachectic. However, she can manage toileting, can feed herself, can dress herself. She can’t really do ADL independently, but it’s unclear to me whether a LTC claims adjuster would agree. Before her PCP ordered hospice care she had a part-time aide at home, who continues to be with her.

Based on my experience with my mother, I’m leaning toward having assets that can cover costs for care at home. The issue I’m wrestling with now is nursing home or rehab coverage after hospitalization and whether medicare covers that.**

I’ll add-- In my mother’s case, physically, she’s in surprisingly good shape. Her vital signs are excellent, which I attribute to many years of faithfully managing hypertension & type II diabetes. Both of which were diagnosed after she retired. Knowing my mother’s medical history, should I need to be treated long-term for any cardiovascular or endocrine conditions and I live into my 90s, I want to remember to discuss with my doctor at that point in the future the pros and cons of continuing any medications. There’s a point at which the purpose of treatment, i.e. living into old age, becomes moot.

**@GTalum with the issue of assets. By the time either my husband or I need LTC, assuming retirement assets have shrunk considerably, the biggest asset will be our home, which we could sell or rent for income in order to cover assisted living in some type of facility.

20

Thank you @ManhattanBoro, that is useful. With my family history of Alzheimer’s I figure that is what I will need coverage for and I will assure that any long-term care policy I might get, will cover cognitive impairment. I have heard enough stories about reimbursement for LTC claims that I would certainly read the fine print as to what is covered.

As to assets, I honestly don’t know, even with the sale of our house (not a particularly expensive house) that mine will last for the amount of care required for cognitive issues. So there is comfort in looking at an investment of possibly 250K (transferring safe assets) will give me at least 3 years of long-term care. I have already discontinued by parent’s cardiovascular meds (on no others), but there is no sign of any physical decline. Their long term care can last years, and not much can be done to change the scenario. I think most of us have magical thinking to feel if we don’t want to be kept alive through medicine, we will somehow not be alive.

My parents always told me to shoot them if they got like this. I can’t give them that. For those of you who think if you have dementia, you’ll do x (go off in the woods, stop eating…) remember, if you’re cognitively able to make this decision, you want to be alive enjoying life. One you are cognitively impaired, you lack capacity to make such decisions.