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Long Term Care Insurance
Old 08-28-2010, 09:28 AM   #1
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Long Term Care Insurance

I was wondering about this long term health care insurance that people are saying you should have nowadays. I don't know anybody that has it or plan on getting it as it is very expensive. The children of the elderly always took care of them in my family either by going to their homes everyday or taking them in. Is it now that younger people don't want to be bothered with taking care of their parents or is this another scam to pray on peoples fears.
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Old 08-28-2010, 09:36 AM   #2
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Ripper, you aren't alone in questioning the need for LTC insurance. If you'd like to do some reading from the forum FAQ section: 15 threads discussing LTC
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Old 08-28-2010, 09:49 AM   #3
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Yep, plenty of stuff on LTC here. I don't think it's a matter of not wanting to be "bothered" but a recognition that in the era of the nuclear family there aren't always family members around to help. Now it's possible that this craptastic economy will result in more "extended family" living arrangements that make LTCI seem less necessary, but that remains to be seen.
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Old 08-28-2010, 01:38 PM   #4
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YMMV—everyone's circumstances differ. I took out a LTC policy on my own when I was still working out in the field and there was a definite possibility I might need it due to an on-the-job injury. Later, LTC became available to City Employees at a group rate as part of our benefits, so I switched my individual policy to that carrier. I hope I can continue at group rates after retirement. Unless it becomes impossibly costly I will continue my own LTC coverage. I don't have any children, and it seems unreasonable for me to assume that one of my nieces would move in with me to take care of me, and after living solo for so many years I don't know how well it would work out to have someone else living with me. I already know I don't want to be forced out of my own home at an advanced age, so I'm planning a house that can be made handicap-accessible in case it needs to be.
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Old 10-01-2010, 12:53 PM   #5
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I was researching LTC a couple of years ago, and came across at least two law firm Web sites that claimed LTC insurers were more than willing to accept your premiums--until it came time to collect. Then they would start looking through your original application with the finest-toothed comb to find any loophole to deny benefits. That kinda put me off on wanting to get LTC. Here is one example of such a law firm Web site that I found by googling today ("Recently insurance companies have realized the expense of long term care, and they've started looking for qualifications loopholes that allow for premature termination or denial of benefits entirely"). And here's another sobering site: "Why are so many Long Term Care Claims Denied?" And a third site: "Years ago, insurance companies oversold long-term care insurance policies at a price that wouldn't support the future payment of benefits. Now that policyholders are aging and need to claim their benefits, insurance companies are engaging in bad faith practices in order to minimize benefits payments."

I could go on and on. It all seems like a toss of the dice, doesn't it?
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Old 10-02-2010, 01:13 PM   #6
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I'm a long-time non-advocate of LTC for DW and me. I do not believe that it is cost effective and prefer to self insure 100% of this risk. I am aware that many others disagree with this point.
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Old 10-02-2010, 02:33 PM   #7
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The need for LTC is the type of risk that I think makes sense to insure against. Unfortunately, the market doesn't sell a policy that meets my needs. What I'd want:

- A stable company with a long history of paying claims reliably and not raising rates (accurate underwritning/accurate cost projections are signs of competence. Not many insurance companies have demonstrated competence WRT LTCI).

- Shared coverage: We only need coverage if one of us needs LTC and the other is still living without it, so a shared benefit policy is more efficient than buying two individual policies. Once one of us dies, if the other needs LTC then SS, sale of the house and other assets, our nest egg, and a pension check will cover the bill. In the unlikely event that we both need LTC at the same time, I'd be wiling to gamble that the period we'd both need help would be short.

- True insurance: We can self-insure for a big chunk of this risk, and would like to do so. I'd like a 24 month exclusionary (waiting) period, and then about 7 years of shared benefits at a modest $/day benefit rate (again reflecting the fact that we can self-insure somewhat. We don't need every nickel of care paid for by the insurance).

We haven't found a policy like that. If we could, I'd guess the premiums might be fairly reasonable, given the self-insurance we're willing to do.
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Old 10-02-2010, 03:23 PM   #8
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- A stable company with a long history of paying claims reliably and not raising rates (accurate underwritning/accurate cost projections are signs of competence. Not many insurance companies have demonstrated competence WRT LTCI).
So far the number appears to be "zero"... they're either stable enough to realize they need to raise their rates, or incompetent enough to compete on price and not have enough funds to pay out 30-40 years from now.
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Old 10-02-2010, 06:16 PM   #9
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I'd love to buy LTC ins, but only if ins companies weren't involved.
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Old 10-02-2010, 07:02 PM   #10
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I'd love to buy LTC ins, but only if insurance companies weren't involved.
You (we) might get the chance to do this. The CLASS Act was part of this year's health care reform change act. Details are still lacking, but it appears that it will pay $50 per day (indexed for inflation) for care and there will be no medical screening for those wanting to enroll. You have to pay premiums for 5 years before you can collect, and you have to be employed for 3 of those 5 years.

The premiums haven't been announced (as far as I know) but they are supposed to be set at a rate that will remain constant for life (so, younger folks will pay much lower rates). The rates are capped at $5 per month for students who are working and for those with incomes below the poverty line (note: There won't be an asset test, this is all about income. Hmmm . . .).

More info.

The law says taxpayer money won't be used to pay benefits. We'll see. The program is controversial because the premiums are counted as "lowering the deficit" while the down-the-road expenditures weren't accurately included in the costs of the legislation. Folks in the LTC industry opine that the adverse selection issue is either going to lead to very high premiums or a taxpayer bailout of the program down the road.

$50 benefit per day ain't much, but if they set the premiums very low (or if you can get into one of the categories for govt-subsidized premiums) it might be worthwhile. Especially if one is sick or otherwise likely to need LTC.
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Old 10-02-2010, 07:28 PM   #11
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Interesting, but for 50 bucks a day we'll be sleeping on a cot next to a MacDonalds.
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Old 10-02-2010, 07:55 PM   #12
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Yes, $50 per day won't cover the whole thing, but if it pays for in-home care it might buy a brief daily visit.

Otherwise, it's $1500/month that doesn't have to come out of savings.

Folks who are definitely on the decline would be smart to sign up to get the clock running. I'm sure there will be a whole cottage industry of "jobs" for such people so they can log the requisite 3 years of employment to qualify.

For all others, I think it would be a speculative play. Government programs have a history of growing rather than shrinking. It's dangerous to bet against government bloat. Once all the LTC facilities start their lobbying, who knows where this might go and what the payments might cover. If the price of a ticket on this gravy train is reasonable, it might make sense to jump aboard and see where it leads.
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Old 10-02-2010, 09:46 PM   #13
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$50/day is nothing and I was under the impression that the benefit is not indexed and is a fixed amount. The average annual cost of a nursing home is projected to be around $225k/year by 2030.

On a side note, John Hancock has put out a notice that some of their older policies will have premium increases as much as 40% for those with compound inflation riders. These increases will likely take effect early next year. 5% compound inflation riders will probably be a thing of the past in the next 5-10 years (my opinion).
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Old 10-02-2010, 10:32 PM   #14
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$50/day is nothing and I was under the impression that the benefit is not indexed and is a fixed amount. The average annual cost of a nursing home is projected to be around $225k/year by 2030.
The Kaiser Family Foundation has a good info sheet on the program. Lots of details remain to be worked out. Apparently the $50/day benefit is a minimum, it will likely be adjusted upward based on degree of impairment.

For the CBO scoring of the recent health legislation, an average benefit of $75/day for life was assumed, and monthly average premiums of $123/month (see link above).

According to the info at this link (State of Connecticut), the benefits are to be inflation-adjusted and the premiums are expected to be between $140 and $240 per month (older folks pay more). Everyone above the poverty line effectively subsidizes those below the poverty line, who would pay just $5 per month.

$225K/yr in 2030 sounds scary, but it's just about 6% inflation/yr. Is there some expectation that LTC costs (per day) are going to increase faster than general inflation? I'm sure it's possible, but I wonder why--I'd guess the major cost is for relatively low-skill hourly labor, and based on the way our economy is headed, I'd say we'll have plenty of that.

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On a side note, John Hancock has put out a notice that some of their older policies will have premium increases as much as 40% for those with compound inflation riders. These increases will likely take effect early next year. 5% compound inflation riders will probably be a thing of the past in the next 5-10 years (my opinion).
It must be very hard to sell these products anymore, at least for salespeople who fully disclose the true history of how insurers continually increase rates.
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Old 10-02-2010, 10:38 PM   #15
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The Kaiser Family Foundation has a good info sheet on the program. Lots of details remain to be worked out. Apparently the $50/day benefit is a minimum, it will likely be adjusted upward based on degree of impairment.

For the CBO scoring of the recent health legislation, an average benefit of $75/day for life was assumed, and monthly average premiums of $123/month (see link above).

According to the info at this link (State of Connecticut), the benefits are to be inflation-adjusted and the premiums are expected to be between $140 and $240 per month (older folks pay more). Everyone above the poverty line effectively subsidizes those below the poverty line, who would pay just $5 per month.

$225K/yr in 2030 sounds scary, but it's just about 6% inflation/yr. Is there some expectation that LTC costs (per day) are going to increase faster than general inflation? I'm sure it's possible, but I wonder why--I'd guess the major cost is for relatively low-skill hourly labor, and based on the way our economy is headed, I'd say we'll have plenty of that.


It must be very hard to sell these products anymore, at least for salespeople who fully disclose the true history of how insurers continually increase rates.
I'll have to read up on it a bit more as LTC is not our main focus, but they will probably just make it up as they go along just like the health reform laws. LTC applications require a statement showing the rate increases of all past policy forms, so they are not hidden from an applicant's view.

Every time there is a major rate increase, it gets more difficult to sell the products. You can buy a policy from a major mutual insurer that has never increased their rates, but there is no guarantee they won't increase in the future and they are usually about 50-100% more expensive than companies like JH/Genworth, so there's pretty much a rate increase built in there anyway. Since there is no guarantee against future increases, the survivorship benefit option just becomes that much more important as rates keep going up.

In my personal opinion, policies will be watered down to avoid the massive rate increases. Changing from compound inflation to CPI-adjusted inflation riders might eliminate the increase, for example. If you were to ask me, I would say that the 5% compound inflation rider will go the same way as the low-priced $300 deductible health insurance policy on the individual market.
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Old 10-02-2010, 10:55 PM   #16
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Interesting, but for 50 bucks a day we'll be sleeping on a cot next to a MacDonalds.
Yeah, but on which side of the counter?

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$225K/yr in 2030 sounds scary, but it's just about 6% inflation/yr. Is there some expectation that LTC costs (per day) are going to increase faster than general inflation? I'm sure it's possible, but I wonder why--I'd guess the major cost is for relatively low-skill hourly labor, and based on the way our economy is headed, I'd say we'll have plenty of that.
Ironically college expenses have also been going up at 6% per year. Perhaps that's where the low-skill hourly labor is coming from?

I wonder if the demand for this labor is finally going to result in more liberal worker visas. Beats the heck out of picking strawberries or cutting lettuce.
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Old 10-03-2010, 05:48 PM   #17
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Unless we die early, we'll all need LTC. How can you insure against a certain future event? LTC "insurance" is just pre-paid LTC. Then you've got to ask yourself, do you really want to pay for LTC in advance? You've got to think the insurance company is not a benevolent society -- it is going to make a profit from you. So what are you getting in return for the extra money you will be paying the insurance company, over and above the actual costs of the LTC? Well, nothing, really, except the satisfaction of helping to maintain your insurance agent in a life of opulence, perhaps.

It makes perfect sense to me to insure against unlikely but very expensive events. The debility of old age just does not fall into this category.
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Old 10-03-2010, 06:18 PM   #18
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Unless we die early, we'll all need LTC. How can you insure against a certain future event?
70% of people over age 65 will need LTC at some time. Of the people that need LTC, only about 20% (source*) will need it for longer than 2 years. That 1:8 overall chance is a lot different from a sure thing, it's the kind of improbable but highly significant event that calls for true insurance. If only a suitable product were available.


* Source is an AHIP projection for planning, but is not claimed to be actual reporting of historical data. I assume they are close.
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Old 10-03-2010, 06:29 PM   #19
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Unless we die early, we'll all need LTC. How can you insure against a certain future event? LTC "insurance" is just pre-paid LTC. Then you've got to ask yourself, do you really want to pay for LTC in advance? You've got to think the insurance company is not a benevolent society -- it is going to make a profit from you. So what are you getting in return for the extra money you will be paying the insurance company, over and above the actual costs of the LTC? Well, nothing, really, except the satisfaction of helping to maintain your insurance agent in a life of opulence, perhaps.

It makes perfect sense to me to insure against unlikely but very expensive events. The debility of old age just does not fall into this category.
Actually, about 60% will require such services (this is a PDA file to request a kit from Medicare, which may get downloaded to your computer rather than displayed depending on your settings) in their lifetime including some very short term (e.g. uncomplicated rehabilitation from a fracture) all the way to more lengthy nursing home stays. Of the latter, the average duration of such care is about 3 years. So while it's a common enough scenario, it is not a "certainty." Many never need it or need it for short term ailments.

DW and I have decided to defer LTC insurance probably forever. It has numerous problems. Many threads on this board discuss the details. Do what you have to do for your situation but everyone's situation is different - it's right for some and wrong for others,
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Old 10-03-2010, 06:52 PM   #20
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DW and I have decided to defer LTC insurance probably forever. It has numerous problems. Many threads on this board discuss the details. But everyone's situation is different and I am not sure your categorical dismissal for all is justified by the facts.
Spouse and I feel that existing options are equally unattractive. My grandfather spent nearly 14 years in a full-care facility (dementia) and was within a couple months of Medicaid when he died. Ironically his financial situation was complicated by the four or so years of dementia he'd been living with before he went into the care facility. But he was living alone for several years before it all went to pieces.

Now my father is displaying the same symptoms. My brother and I are aware of the situation, and we've discussed it with Dad a bit, but he's not yet at the point where John Hancock will kick in. He's been living alone for over two decades but at least he's less likely to require the rapid response and financial forensics required for his father. I hope. He's quite likely to be able to beat his father's full-care longevity if something doesn't happen to him at his apartment first. All my brother and I can do is wait for "the call".

On the other side of the situation is the idea of spending hundreds of thousands of dollars for insurance that may or may not be used, may have huge premium increases, and may or not be honored by the finances of the company that sold it. I buy car insurance because I want to drive, and I buy home insurance because I don't want to have to replace the property and live out of a rental while it's being rebuilt. However those premiums are pittances compared to the cost of LTC insurance. Luckily at this point spouse and I are forecasting that we'll have enough assets to keep us in the style to which we're accustomed. We'll certainly do better by setting aside what we'd pay in premiums and investing that on our own.

On my side is the fact that my father & grandfather were widowed and solo for years, so when their symptoms began happening they really didn't have anyone watching out for them (or didn't want anyone watching out for them) until it was almost too late. But meanwhile my spouse just keeps cleaning her Glock, smiling at me, and assuring me that she has it all covered...
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