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(Yet another) LTC question
Old 06-17-2015, 02:08 PM   #1
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(Yet another) LTC question

Hi all,
Been considering an LTC policy. I've read through most of the previous threads on this topic, but most of them seem to be pretty old, so thought I'd see what some of the "current thinking" is. I live in a state with LTC "Paternership" program with certain insurance companies, to encourage folks to purchase it. In addition to the "dollar-for-dollar" spend-down protection, yearly premiums are deductible from state income tax.

I'm 58, and have qualified for an LTC Partnership policy with the following benefits:

$5800/mo. benefit with 5% annual compounding
Unlimited coverage
90-day elimination period

They are offering a "10-year payment option", where I pay annual premiums of about $9700 for 10 years, and then the policy is paid in full. If I were to require LTC services before 10 years, the policy goes into effect immediately, and I don't pay any further premiums. It is possible that the rates could be raised prior to 10 years ... but only if they raise their rates across the board (i.e., they can't single out existing customers to raise premiums).

I can afford the premiums without significantly altering my ability to FIRE (just have to get past my "OMY" syndrome ;-) ) so I'm seriously considering doing this.

Would be interested in hearing arguments both for or against, or any other factors I should consider in order to decide.

Thanks!
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Old 06-17-2015, 02:25 PM   #2
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You can be sure they will raise the rates for all their customers within the next 10 years.
Will your $9700 payment per year be fixed or rise (like doubled within 5 years) ?
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Old 06-17-2015, 03:32 PM   #3
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I did this, and the raises all seemed to take about 3-5 years from the date the increase was proposed to pass the state commissioner's office. Mine rose from 5200 to 6800 per year, but I finished paying about 3 years ago. I think this is the way to go if you can afford it. There are plenty of math reasons to pay annually, but having that expense behind you with NO chance of future increases is plenty of peace of mind.
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Old 06-17-2015, 04:21 PM   #4
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I did this, and the raises all seemed to take about 3-5 years from the date the increase was proposed to pass the state commissioner's office. Mine rose from 5200 to 6800 per year, but I finished paying about 3 years ago. I think this is the way to go if you can afford it. There are plenty of math reasons to pay annually, but having that expense behind you with NO chance of future increases is plenty of peace of mind.
So I guess OP needs to find out are there increases already before the State Commissioner's office, or can he reasonably expect no increase for 3-5 years.

Which will leave him with only 2-3 increases of about 30% per your example.
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Old 06-17-2015, 04:58 PM   #5
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We purchased a paid up in 10 policy 20 years ago. Beyond looking at the benefit terms see if you can pre-pay on the policy (pay it off in 3 years, for example).
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Old 06-17-2015, 06:57 PM   #6
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OP, I am presuming "unlimited coverage" means once you start collecting it the payments go on indefinably?
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Old 06-17-2015, 07:56 PM   #7
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One of the most comprehensive analyses of Long Term Care Insurance comes from AARP.

Understanding Long-Term Care Insurance - AARP

The article is very long, but covers every imaginable situation in detail. A long term and expensive commitment deserves the half hour of reading involved.
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Old 06-17-2015, 08:11 PM   #8
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Great article. Thanks for posting. My unfavorable view of LTC insurance (in my case) has not changed after reading, however.
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Old 06-17-2015, 09:25 PM   #9
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merlin, the 10-pay option would mean that any premium increases they try to stick you with would have limited amounts of time to make any material difference to your total cost. I am astounded that you have found an insurer willing to write coverage for a lifetime (forever) coverage duration. Last I heard a couple years ago those policies were pretty much unobtainable.


If you do a deal like this, you will want an insurer with a very solid balance sheet. I would look for a minimum AA-/Aa3 claims paying rating, preferably from a mutual. Do you mind telling us who the insurer is?


The price sounds pretty darned steep to me. Before you sign on the dotted line, it might be worth doing a simple calculation. Assume you invest the premiums yourself over 10 years and earn a return of X%. How many months of coverage could you pay for out of pocket with the lump sum you would have accumulated?
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Old 06-18-2015, 07:16 AM   #10
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We did the 10 pay LTC plan from Genworth - 8 payments down - 2 to go - no rate increases so far. Starting last year I thought for sure that there would be an increase.
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Old 06-18-2015, 09:15 AM   #11
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Thanks, everyone, for your feedback. I appreciate the thoughtful comments. The AARP article was helpful as a general overview of the different options available.

To answer some of the questions, the company that is underwriting this policy is Genworth - it's the only one of the "approved LTC partners" in my state that offers an "unlimited pay-out period" ... the others are cut off at, I believe, 4 years. I did read some accounts where Genworth has had a "bumpy ride of it" in the past, but currently, they seem to have weathered that storm. Most of their problems seem to have been in other divisions, some of which have since been "spun off" from the parent company.

There is talk that, after this year, Genworth will no longer offer the "unlimited pay-out time period" option (they've already ceased offering it in some states) ... so this seems like the time to do it if I decide to go that way. Unlike some of the other plans I looked at, this one does require a fairly extensive medical records review in order to get underwritten. They rule out some fairly common pre-existing conditions, such as diabetes, and perhaps even family history of diabetes, alzheimer's, etc.

I'll have to see if I think I could "match" the 5% compounding myself ... but it's difficult to think of finding any sort of investment that would "guarantee" 5% growth over the next 10 years or more. Plus, I have to consider what would happen if I need to start using it BEFORE even the 10 year period.

Thanks again!
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Old 06-18-2015, 09:43 AM   #12
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p.s. just found the article linked below about Genworth's LTC division, which definitely gives me pause .....

Genworth Struggling Under Weight of LTC
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Old 06-18-2015, 11:12 AM   #13
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There is one more extremely definitive website that covers Long Term Care from every conceivable angle including solvency and forward looking expenses.

https://www.longtermcarelink.net/eld..._insurance.htm

As everyone seems to understand, this type of insurance, which basically came on the scene in the 1980's was based on probabilities and projections that have changed over time.

We originally bought our LTC in 1993 with a $300/day no inflation adjustment. At the time Nursing home costs were in the $40K to $50K range. Our payments have not increased over that period... approximately a total of $2K/yr for two of us.

The Insurance was written by Travellers Insurance, and some 5 years later turned over to GE Capitol, then to Metlife, and then to Conseco. The Insurance is now administered by a not for profit Trust. State of Pennsylvania Senior Health Insurance of Pennsylvania... Long Term Care. SHIPLTC. The company does not offer insurance, but just administers existing policies, and is funded with $3B in assets.

Not for any suggestion of any current policies, but just to note that many different companies who had initially entered the market, found it to be problematical to continue.

In retrospect, I'm not sure it was a good move, but with $40K+ invested so far, we'll keep the insurance... Nearing age 80 the chances of getting some payback are likely pretty good. To do it all over again, I don't think so... money perhaps better spent in savings. Our initial reasoning was based on my cancer, and DW's stroke, before age 56, and the fact that we had had medical clearance.

The other case in point would be the net worth that the insurance would be protecting. We do not have enough in assets, that would cover nursing home expenses for five or six years. (nearly half a million dollars). Owning our home will allow the non involved spouse to keep the house, as Medicaid supports nursing home expenses.
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Old 06-18-2015, 01:26 PM   #14
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I was able to find our state's website for the "department of insurance", and they list the history of rate increase requests/approvals for insurance companies doing business in the state going back to 2010. Genworth currently has a pending request for a rate increase for my specific (proposed) policy of 67%! Of course, looking at the history of requests, and what the state winds up approving, the MOST the state has ever approved in a given year is 18% (and companies routinely seem to request hikes of 60-70% when they do request one). Must be some sort of game they play. This is the first rate increase Genworth has requested for this policy in the past 5 years, so if I assume they'll get 20% now, and perhaps one more of, say 20%, in a few years .... I would still get back the total of what I will have paid in premiums over 10 years in about 18 months of a stay in a Nursing Home. That doesn't take into account what I could have gained by investing that money myself ... but as I said, I can't think of any investment that would guarantee me 5% growth/year for the next 10 years ... or more, since hopefully I won't be making a claim that soon (or hopefully ever, but that's probably not realistic, either).

On the other hand, I also stumbled across some "user forums" where folks talk about their experiences in actually filing claims for LTC policies. A lot of them sound like real "nightmare stories". The insurance companies seem to try anything they can to deny claims, or at least delay paying them for as long as possible. Genworth seems to be one of the biggest offenders - but then of course, they are probably the biggest single insurer in this area, and I'm sure folks that have good experiences with claims don't ever write about those on those sorts of forums.

A lot of the problems seem to be from policies written more than 10-15 years ago, when the "standard language" in such policies was (purposely?) ambiguous. In more recent years, with the "state partnership" programs, the states have forced a lot of that language to get cleaned up, and actually "outlawed" some of the standard language that used to be included, so it may be better today. Still, reading some of those accounts is pretty scary/disheartening.

In theory, LTC sounds like a good idea, and 2 separate financial advisors who know the specifics of my situation have advised me to invest in it ... but with the current state of the industry, it's definitely not a "no-brainer" decision the way they make it sound.

p.s. I checked to find out whether I'd be able to pay off the "10-year pay plan" early if I wanted to, as a hedge against future rate increases ... and the answer is no.
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Old 06-18-2015, 01:36 PM   #15
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Originally Posted by merlin3942 View Post
A lot of the problems seem to be from policies written more than 10-15 years ago, when the "standard language" in such policies was (purposely?) ambiguous. In more recent years, with the "state partnership" programs, the states have forced a lot of that language to get cleaned up, and actually "outlawed" some of the standard language that used to be included, so it may be better today. Still, reading some of those accounts is pretty scary/disheartening.
Is there a clear set of conditions which, if met, the insurer must pay? Nords shared his experience with us a few years ago (I think it was this thread). His issue was not ambiguous language, it was getting the insurer to acknowledge their obligation to pay.
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Old 06-18-2015, 01:40 PM   #16
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Originally Posted by merlin3942 View Post
In theory, LTC sounds like a good idea, and 2 separate financial advisors who know the specifics of my situation have advised me to invest in it...
Invest? Do your advisors really view LTCI as an investment, not insurance to help offset risk?
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Old 06-18-2015, 02:26 PM   #17
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Invest? Do your advisors really view LTCI as an investment, not insurance to help offset risk?
No, I mis-spoke. It's definitely NOT being presented as an "investment", just insurance against risk of losing assets to LTC expenses.
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Old 06-18-2015, 03:52 PM   #18
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I would be wary of Genworth. Their troubles don't seem to be over and they have some gnarly business issues.

A.M. Best Removes From Under Review and Downgrades Ratings of Genworth Financial Inc. and Its Subsidiaries - MarketWatch

https://www.moodys.com/research/Mood...ges--PR_313874

S&P Cuts Genworth Financial (GNW) to 'BB+'
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Old 06-18-2015, 04:25 PM   #19
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Is there a clear set of conditions which, if met, the insurer must pay? Nords shared his experience with us a few years ago (I think it was this thread). His issue was not ambiguous language, it was getting the insurer to acknowledge their obligation to pay.
The policy has a specific list of "ADL"s (Activities of Daily Life), such as bathing, dressing, eating, transfer from bed to chair and back, staying "continent", etc, and if/when the insured cannot do one or more of those activities without help, the policy is supposed to kick in and start paying for the needed assistance, either at home, or in an "assisted living" center, or in a skilled nursing facility. I guess the issue is who gets to decide whether the insured truly cannot do one or more of those things independently?
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Old 06-18-2015, 04:27 PM   #20
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Thanks for these links ... Genworth definitely seems to be on shaky ground. Ironically, though, it seems to be in that position precisely because they are trying hard to stay in the LTC business, so their share holders don't like it ... but their existing policy holders probably appreciate the efforts they are making.
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