Making the jump. Buying LTCI

[imoldernu]

Something to remember...
The person who takes out the policy is not commonly doing so for his/her own benefit, but for that of others. We did so, so that whoever survived would not be left penniless.
.........................................................
As to the cost of nursing home care. I believe that in coming years, there will be a great change in the eldercare industry, with a turning away from large nursing homes, to smaller care facilities, including private homes, with graded care levels.

The nursing home within our community (homes/apartments/ assisted living/rehab center/nursing home/ Alzheimer unit... has many patients who would do well with moderate care... food, meds, safety oversight etc. with actual patient care requiring an aide or a nurse, at a minimum. In most cases they are there because they have no where else to go.
Government regulations are extremely requiring and consequently expensive. DW worked in nursing home for many years, and spent more than a third of the time filling out paperwork to satisfy inspectors. Litigiousness is is no small part of the cost.

Mentioned in an earlier post, was the part about cost to satisfy the relatives and visitors... Very true.

Home healthcare is on the rise, with local businesses growing in leaps and bounds. In our small town there are now 7 such businesses. Some of the older LTC policies (such as ours) originally had severe limits on this... (later corrected), but others, unfortunately did not have this alternative option, forcing patients out of their homes. The insurance companies counted on them wanting to live out their lives at home, which would reduce the company expenses.

 

[obgyn65]

Since I am the OP, I can confirm this is not my case. I have no children and no wife - but I like the peace of mind of buying an LTCi.

Something to remember...
The person who takes out the policy is not commonly doing so for his/her own benefit, but for that of others. We did so, so that whoever survived would not be left penniless.

 

[youbet]

Since I am the OP, I can confirm this is not my case. I have no children and no wife - but I like the peace of mind of buying an LTCi.

It's interesting how viewpoints vary on this. Having the ability to self-pay with little risk of impoverishing the survivor is what gives DW and I peace of mind. When we were shopping for LTCI, we felt uneasy since the industry is in such turmoil and it's difficult to feel comfortable that even after you pay in for years the insurance company will be there for you.

Despite that, we were still willing to purchase a low cost "catastrophic" type policy that would begin paying after 3 years just in case one or both of us requires a long, long stay. After an extensive search, we determined the product does not exist.

So, for us, the risk of needing many years of LTC without LTCI is now added to the risk of our FIRE portfolio failing due to investment performance. The odds of either happening are small but real and we accept the scenario as the most comfortable for us. I certainly understand and respect your decision though.

 

[Mulligan]

It's interesting how viewpoints vary on this. Having the ability to self-pay with little risk of impoverishing the survivor is what gives DW and I peace of mind. When we were shopping for LTCI, we felt uneasy since the industry is in such turmoil and it's difficult to feel comfortable that even after you pay in for years the insurance company will be there for you.

Despite that, we were still willing to purchase a low cost "catastrophic" type policy that would begin paying after 3 years just in case one or both of us requires a long, long stay. After an extensive search, we determined the product does not exist.

So, the risk of needing many years of LTC is now added to the risk of our FIRE portfolio failing due to investment performance for our retirement years.

I had read that also. I find that rather odd that no company would offer such product since, the odds are in favor of the insurance company not ever having to pay out. Doesn't it seem very strange that a health insurance company would offer a 10k high deductible plan, but a company would not offer in essence a high deductible LTC plan?

 

[youbet]

I had read that also. I find that rather odd that no company would offer such product since, the odds are in favor of the insurance company not ever having to pay out. Doesn't it seem very strange that a health insurance company would offer a 10k high deductible plan, but a company would not offer in essence a high deductible LTC plan?

One of the several agents we were dealing with explained that predicting accurately what percentage of people will need more than 3 years of LTC is more difficult than predicting whether they will need any LTC at all. That would make it hard for the insurance companies to price the policies. He also said he's had very, very few requests for such a product. People seem to be interested in short waiting periods.

But, I agree with you. We were expecting to find policies available at low cost since the chances we'd ever qualify for benefits would be very low. Despite going through multiple agents and making several phone calls, we found nothing. We don't need insurance to cover a few years of LTC. But it would be nice to share the small risk of needing many years of LTC through a low cost, 3 year exclusion period, policy.

Please post if you find anything.

 

[Nords]

I had read that also. I find that rather odd that no company would offer such product since, the odds are in favor of the insurance company not ever having to pay out. Doesn't it seem very strange that a health insurance company would offer a 10k high deductible plan, but a company would not offer in essence a high deductible LTC plan?

I wonder if their research indicates that people who survive a three-year exclusion period will live for over a decade. That might make the premiums even more expensive than the 100-day-exclusion policies.

Even so... 6-12 months seems like a reasonable exclusion period in exchange for lower premiums.

 

[M Paquette]

Perception is everything.

It looks like some folks are concerned that their self-paid or LTCI funded stays in these facilities might not be getting them any better care than the Medicaid patient in the next bed receives. Long term care facilities should be more sensitive to issues with perceived equity.

I suggest that the perceived equity issue could be addressed simply, at almost no net cost to the facility and with no actual difference in care for patients. This could be done by managing the perceptions of patients and visitors. Medicaid patients would be housed in rooms furnished with basic institutional items, lit with fluorescent light fixtures specially designed to flicker, and painted institutional green with special wall treatments designed to resemble peeling paint. Self-paid or LTCI patients would be housed in rooms with nicer appearing furnishings, and light fixtures and paint treatments designed to give a more modern, "clean" appearance.

Visitors would then see a marked difference between the rooms of Medicaid patients and others, with the implication of better care for non-Medicaid patients, and a sense of superiority for those paying to avoid Medicaid care.

 

[youbet]

Having spent a little time doing preliminary research for anticipated care needs for DW's 88 year old mom (who will need Medicaid for LTC from the get-go) I can tell you that here in Illinois, there is no confusion between the quality and availability of private pay vs Medicaid LTC. Since all other states are in much better financial shape than Illinois, perhaps it's state specific. But here, when you can't private pay or show them your quality LTCI policy, the better institutions simply put you on a long, long waiting list for their few mandated Medicaid beds. Ugh. One of the suggestions given to us was to keep putting MIL on waiting lists on a rotating basis so that when/if her need for LTC arises, she'll be near the top of one of them.

The payment situation here in Illinois is so bad that even medical bills for retired state employees using state provided med ins don't get paid until they're many months overdue. I suppose not getting paid in a timely manner is considered a negative by NH's when considering Medicaid patients.

 

[Sun456]

So, for us, the risk of needing many years of LTC without LTCI is now added to the risk of our FIRE portfolio failing due to investment performance. The odds of either happening are small but real and we accept the scenario as the most comfortable for us. I certainly understand and respect your decision though.

This was similar to my worry. I have a modest LTC policy that I bought many years ago through work. I also had no pension. I solved both problems by buying annuities. One of my annuities doubles the payments for needing assistance at home (a Prudential plan that is no longer available). This one plus another one (Aviva) doubles the payment for nursing home care. I also chose two other higher paying annuities so that I maximized the income received while healthy. The end result is I now have a pension that I cannot outlive. It is not COLAd but it does increase if I need care at home and it increases again if I need nursing home care. In addition my LTC will kick in at that point also. With the annuities I probably don't need it but I have a very good price so it would make no sense to drop it. When shopping the annuities I did not view them as an investment product, rather as an insurance product. They have some very interesting options that I had no idea about until I started to plow through the materials.

 

[youbet]

This was similar to my worry. I have a modest LTC policy that I bought many years ago through work. I also had no pension. I solved both problems by buying annuities. One of my annuities doubles the payments for needing assistance at home (a Prudential plan that is no longer available). This one plus another one (Aviva) doubles the payment for nursing home care. I also chose two other higher paying annuities so that I maximized the income received while healthy. The end result is I now have a pension that I cannot outlive. It is not COLAd but it does increase if I need care at home and it increases again if I need nursing home care. In addition my LTC will kick in at that point also. With the annuities I probably don't need it but I have a very good price so it would make no sense to drop it. When shopping the annuities I did not view them as an investment product, rather as an insurance product. They have some very interesting options that I had no idea about until I started to plow through the materials.

Where our scenarios differ is that I can't get cheap LTCI (quotes are in the $6k+/yr range) and I'm not worried about paying for 2 - 3 years of LTC. I'm worried about the rare circumstance where DW or I need many years of care. That would put the survivor in a position of likely needing to cut the budget at home. We also have some pension income.

I'll look for some info on the type of annuities you mentioned. I'm curious as to how much the annuity payment suffers as a result of having the built in LTCI. That is, what is the hidden cost of the LTCI built into the annuity? I'm sure they aren't giving it away but, who knows, perhaps it's a great deal.

On the annuity/LTCI policies you have, does the increased annuity payment during LTC go on indefinitely or is it time limited? That is, if you went into LTC for 15 years, would it pay all that time or is it perhaps limited to the first 3 - 5 years?

The risk I want to insure against is that of needing a lengthly LTC stay. A policy that only covers 3 - 5 years wouldn't do it.

 

[Sun456]

I'll look for some info on the type of annuities you mentioned. I'm curious as to how much the annuity payment suffers as a result of having the built in LTCI. That is, what is the hidden cost of the LTCI built into the annuity? I'm sure they aren't giving it away but, who knows, perhaps it's a great deal.

On the annuity/LTCI policies you have, does the increased annuity payment during LTC go on indefinitely or is it time limited? That is, if you went into LTC for 15 years, would it pay all that time or is it perhaps limited to the first 3 - 5 years?

The risk I want to insure against is that of needing a lengthly LTC stay. A policy that only covers 3 - 5 years wouldn't do it.

I just pulled out my Aviva contract and do not see any language that limits the amount of time you get the income doubler. There is a waiting period that says you must be confined 180 of the last 250 days before it kicks in. My Prudential one (no longer available) has a 120 day waiting period and no limitation on the Lifetime Income Accelerator. The contract says they can have one and it will be in the schedule of benefits. My schedule says "Not Applicable" next to that tag so I should be good. But this plan is no longer available.

To answer your other question. Here is an example of what I found when I was looking. For $100K here is what my comparison matrix says:

Axa Accumulator CP series $15,172. Same payout for single vs. joint life. I did not choose this because it was low and no nursing home care doubler. It was also a variable annuity which are a bit more complicated to slog through so I sort of put it aside.

Aviva Income Preferred Bonus with Income Edge Plus (this same plan came in several different names depending on who was selling it). $19,389 for single, $17,450 for dual. We chose dual for this one because of the income doubler for nursing home confinement.

Prudential X Series w Highest Daily Lifetime Income. This is my only variable annuity. The payout for single is $15,661. It has a doubler for home care, assisted living and nursing home care. This was not available for a joint life, only single. Even though the guarantee is low it locks into the highest daily amount of the investments in the stock market and continues to increase 5% per year above that. Whether it will ever catch up or outstrip the indexed annuities I don't know. Only time will tell. It has since been discontinued as all the contracts kept locking in at higher and higher levels due to QEs.

Guardian Target 300. Discontinued. Had a 300% guarantee after 15 yrs. Might have been a good option but like I said it went away so couldn't buy.

Equitrust MartetTwelve Bonus Index w/income for Life. $21,765 for single $19,588 for dual. Highest payout but no income doubler for nursing home care. I bought this one.

Midland National MNL Capstone 14 with Retire X-Cell Rider. $20,310 for single and $16,248 for dual. I bought this one.

North American Charter Series 14 yr option with Income Pay option 2. $19,295 for single $15,233 for dual. Passed on this one due to the parent company being the same company as Midland. I tried to choose companies that were as independent from each other as possible.

I have 4 more more columns hidden in my spreadsheet that I looked at but determined didn't suit our situation or the payouts were too low so I won't list them here. All the ones in the spreadsheet were seriously evaluated. It took alot of time and I created the spreadsheet to keep track of the various features.

My rates were for someone 45, planning to take income at 65. Everyone said that there are much better rates for older folks (who didn't need as much time to roll up) but since were not older we had to chose from those available that suited our scenario.

So what does this all look like for us? Here is what we have:
At 65 I will have a guaranteed income of $109,871
This increases to $133,363 if assistance is needed at home.
This increases to $156,630 if I am in a nursing home.
I cannot outlive this income. I chose some plans with the doubler and some without to get more whether I'm healthy or not. I also spread the money among 4 plans to diversify the income sources.

(Note to anyone following my posts, since I last posted on this I put a little bit more in so the numbers are different than before.)

I also have a limited LTC policy that I bought before getting into the annuities. No sense in cancelling it as it is a very good rate. My spouse has an 'all the bells and whistles' policy which seems to make sense for us. Don't know if others would get it along with the annuities or not.

We initially started looking at this over a year ago. The plans were better when we first started shopping but due to the complexity and the reputations of annuities I felt I needed to research them thoroughly. Everything we initially looked at went away while I was in research mode and I don't have the heart to model those plans as I think I would cry to see how I had disadvantaged myself by waiting. The insurance companies are getting more conservative, probably due to the QEs. I had to decide whether to buy what was available or wait and I decided to get the best I could find at that point in time (last spring).

 

[Sun456]

I'm putting this in a separate post as there is alot of detail above and it could get lost. Let's look at the Equitrust vs Aviva example. Equitrust is the highest payer for me. Aviva has the nursing home care doubler. For dual life the difference is $2138. So if you were looking at these two, $2138 in lost income per year is what you are paying for an extra $17,450 in income for two people if one needs a nursing home. For me the extra insurance wasn't enough to get me to put all my money in Aviva. Aviva got a spot in my plan because there weren't enough plans that were better and independent from each other for me to get the diversity I wanted. In fact Aviva was such a poor payer that I put more in the higher paying annuities. But not alot more as I viewed diversity of income sources as a higher priority than maximizing the income.

For someone older, with a pension, their model will look quite a bit different than mine because they can defer income and allow their payout to continue to grow. Then they could turn it on if LTC were needed. I haven't modeled this so don't know if it makes sense vs. other options but it might work out and you would get the income for the rest of your life.

 

[Mulligan]

I wonder if their research indicates that people who survive a three-year exclusion period will live for over a decade. That might make the premiums even more expensive than the 100-day-exclusion policies.

Even so... 6-12 months seems like a reasonable exclusion period in exchange for lower premiums.

You have to believe you are on to something there. Insurance companies aren't stupid. They know the average stay is less than 2 years. I bet there must be some statistic that if you last longer than 2 years, you probably have a high percentage of making it 7-10 years in the home alive. They probably don't want to expose themselves to a smaller premium that may entail and indefinite long term cost. Especially those sound body, mentally impaired seniors that wind up in nursing home care.

 

[ejman]

After much consideration and reading a few threads on this topic both here and at Bogleheads, I have decided to make the jump and buy long term care insurance. Looking at Genworth, Prudential, and John Hancock. Only time will tell if this move was wise...

We bought a LTC policy through CALPERS in our late 40's about 15 years ago. The premiums were very low then (about $800 a year for the two of us) with a 5% annual inflation bump up and no limit on duration of benefits.

Fast forward to 2012. The plan has been closed to new members for a few years now. As the membership is shrinking, the premiums have about tripled. I suppose as the years go by and the pool of insured members continues to shrink the premiums will increase to the point where we will no longer be able to afford it, probably in our eighties, just when in all probability we'll need the coverage...

 

[Dreamer]

+1

Fraud comes in all shapes, sizes, ages and medical conditions...

+1

What do people think about people who hide their income now to get food stamps or other low income programs. They are looked at with contempt by the general public. However, hiding income in order to have the taxpayers pay for your nursing care needs is the same thing, IMO. We are paying for our LTC policies and hoping that we will not need them.

 

[marko]

+1

What do people think about people who hide their income now to get food stamps or other low income programs. They are looked at with contempt by the general public. However, hiding income in order to have the taxpayers pay for your nursing care needs is the same thing, IMO. We are paying for our LTC policies and hoping that we will not need them.

...and just a few weeks ago, there was a thread on this site with dozens of posters chiming in on how to take advantage of Obamacare's $10K annual subsidy by keeping their reported income artificially below $60K.

"...I"m sorry, you're looking for 'gaming the system', that's two doors down, this is 'righteous indignation'...." (apologies to Monty Python)

 

[samclem]

...and just a few weeks ago, there was a thread on this site with dozens of posters chiming in on how to take advantage of Obamacare's $10K annual subsidy by keeping their reported income artificially below $60K.

"there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible" - Justice Learned Hand, 1947

Nor is there anything sinister with (legally) arranging one's affairs so as to maximize the entire panoply of subsidies and benefits that the government sees fit to bestow.

If we don't like people getting the subsidies, then change the rules for eligibility. Anyone who stays within the rules and gets the subsidies has won the little game.

 

[marko]

"there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible" - Justice Learned Hand, 1947

Nor is there anything sinister with (legally) arranging one's affairs so as to maximize the entire panoply of subsidies and benefits that the government sees fit to bestow.

If we don't like people getting the subsidies, then change the rules for eligibility. Anyone who stays within the rules and gets the subsidies has won the little game.

+1, Sam!

 

[Delawaredave5]

We bought a LTC policy through CALPERS in our late 40's about 15 years ago. The premiums were very low then (about $800 a year for the two of us) with a 5% annual inflation bump up and no limit on duration of benefits.

Fast forward to 2012. The plan has been closed to new members for a few years now. As the membership is shrinking, the premiums have about tripled. I suppose as the years go by and the pool of insured members continues to shrink the premiums will increase to the point where we will no longer be able to afford it, probably in our eighties, just when in all probability we'll need the coverage...

So your premium has tripled ? I don't understand LTC, but what is the benefit of "buying early" ?

Is your current premium substantially different than person of same age that bought last year ?

 

[ejman]

So your premium has tripled ? I don't understand LTC, but what is the benefit of "buying early" ?

Is your current premium substantially different than person of same age that bought last year ?

The policy has been closed to new members for a year or two so a direct comparison with CALPERS is not possible. Last year I did look for quotes from a couple of other companies and in fact they were about double what I pay so there may be some carryover advantage to having bought early.

 

[audreyh1]

We have auto and homeowners insurance, not because we can't afford to replace either, but because of what we might be liable for in an accident. Also because these are pre-requisites for umbrella insurance - more protection against wiping out assets. We have health insurance because a devestating or long illness could wipe out assets. Long term care we can budget/save for, so we don't carry that insurance.

 

[ChrisC]

We have auto and homeowners insurance, not because we can't afford to replace either, but because of what we might be liable for in an accident. Also because these are pre-requisites for umbrella insurance - more protection against wiping out assets. We have health insurance because a devestating or long illness could wipe out assets. Long term care we can budget/save for, so we don't carry that insurance.

I have all the insurance coverage you have and I also have LTCi. I can also budget and save for long term care, as well. I'm somewhat puzzled by your bolded statement because traditional health insurance might not cover a devastating or long illness that's chronic, disabling or leaves you incapacitated. LTCi would cover that risk up to certain limits.

In all cases, I'm insuring against risk that a loss will do me financial harm and that I'm weighing the probability of risk and the impact it might have on my family. But I am also trapped by strong emotional issues based on personal experiences. I also have around $500K of a term life insurance policy in the last year of a guaranteed premium rate -- the risk of me eventually dying is pretty strong but I'm not likely to renew the policy at higher premium rates for another ten years. My gut tells me not to go another round of term life insurance at this age of my life. I don't think these issues of insuring against risk are simple questions of adding up dollars and cents. I think we are all moved by our current life experiences more than the budget issues.

 

[Sun456]

I have all the insurance coverage you have and I also have LTCi. I can also budget and save for long term care, as well. I'm somewhat puzzled by your bolded statement because traditional health insurance might not cover a devastating or long illness that's chronic, disabling or leaves you incapacitated. LTCi would cover that risk up to certain limits.

Were pretty much in the same camp as you. LTC will cover care if an accident happens and the health insurance coverage runs out. Let's say someone falls off a ladder or is in an auto accident and is damaged enough that they lose activities of daily life but not damaged enough to die.

In the old days someone in LTC likely had a pretty low quality of life with just TV and books on tape. But now with access to the internet and new technology for the disabled, keeping mentally active and engaged could be pretty satisfying for someone who had restricted physical abilities.

If we had no assets we wouldn't need the insurance but were not willing to risk everything on caring for one person in LTC for an extended period. In addition we have very reasonable rates for good coverage because we bought early from a group plan.

 

[MichaelB]

We have auto and homeowners insurance, not because we can't afford to replace either, but because of what we might be liable for in an accident. Also because these are pre-requisites for umbrella insurance - more protection against wiping out assets. We have health insurance because a devestating or long illness could wipe out assets. Long term care we can budget/save for, so we don't carry that insurance.

We share this view and approach. I would just include one other reason we carry health insurance, which is the multi-tiered pricing scheme most providers have that results in preferred prices for insurance carriers vs punitive prices for self-pay.

 

[East Texas]

I have all the insurance coverage you have and I also have LTCi. I can also budget and save for long term care, as well. I'm somewhat puzzled by your bolded statement because traditional health insurance might not cover a devastating or long illness that's chronic, disabling or leaves you incapacitated. LTCi would cover that risk up to certain limits.

In all cases, I'm insuring against risk that a loss will do me financial harm and that I'm weighing the probability of risk and the impact it might have on my family. But I am also trapped by strong emotional issues based on personal experiences. I also have around $500K of a term life insurance policy in the last year of a guaranteed premium rate -- the risk of me eventually dying is pretty strong but I'm not likely to renew the policy at higher premium rates for another ten years. My gut tells me not to go another round of term life insurance at this age of my life. I don't think these issues of insuring against risk are simple questions of adding up dollars and cents. I think we are all moved by our current life experiences more than the budget issues.

+1 All insurance comes down to whether or not you want to assume the risk. I also have all the other types of insurance Audrey listed as well as Umbrella. The premiums I pay for those policies gives me peace of mind as well as peace of pocketbook. I would rather pay premiums and cost-shift the financial risk to my insurance company.

With my family history, I have an excellent chance of collecting under my LTC policy, for which I currently pay $1,500 a year. Just doing the math - a semi-private room in San Antonio currently costs about $50k a year. It's $58k in Austin. A private room in San Antonio is almost $70k and about $2k more in Austin. Because of my LTC policy I would be able to move into an upscale facility when the time comes for that change. Even if my premium doubles I'm ahead because the odds are I'll spend at least a couple of years collecting LTC. LTC is just another component of my insurance premium budget. Just on a side note - my auto and homeowner premiums have gone up every year while my LTC has stayed the same for the past ten years.