Long Term Care Insurance

[rtroxel]

Hi,

I'm 75, and happily retired. About 14 years ago, I purchased a long-term care insurance policy, partly because I was told that the quarterly premium would never increase. Well, a few years ago, I received a notice from the insurer that they will be increasing the premiums on a regular annual basis. One of the reasons given was that "people are living longer."

Yesterday I received a letter from the company stating that I now had 3 choicesay the increased premium, or pay lesser premium amounts, with the understanding that smaller payments would mean fewer medical services.

The third option is an "Optional Limited Benefit Endorsement", which means I would pay no further premiums, and the insurance company would hold onto the amount I have already paid, which could be used for LTC payments until it is depleted.

At this point, I'm vacillating between to continuing to pay the premium, at the lowest quarterly rate, or not paying anything further. (I do have additional resources I can draw upon, should long-term care become a necessity in the future.)

Is anyone here in the same situation? If so, how are you handling it?

Thanks,

Roy in New Mexico

 

[Teacher Terry]

I would quit paying. You have other resources should they be needed and most people don’t need LTC.

 

[njhowie]

You should probably pay the increase.

LTC insurance companies have been exiting the business because they've lost so much money due to bad actuarial analysis. They were too optimistic in their assumptions, and costs have far outpaced their expectations.

At this time, anyone who wants to purchase a new LTC policy has limited options and for those that remain, the prices are very high.

 

[REWahoo]

rtroxel, here is a thread discussing my history of LTC premium increases dating back to 2010 and what we decided to do (and why) when faced with similar choices: http://www.early-retirement.org/forums/f28/ltc-insurance-premium-surprise-49854.html

 

[COcheesehead]

Based on my what I saw with my Dad and now with my FIL, having LTC is a great benefit. I would rather have some rather than none.

 

[njhowie]

... and most people don’t need LTC.

That's not what the statistics indicate.

75 Must-Know Statistics About Long-Term Care: 2018 Edition:
https://www.morningstar.com/article...-statistics-about-long-term-care-2018-edition

 

[timo2]

DW and I both have LTC with separate companies. DW's company is no longer writing new policies. We both have been presented with similar choices as you at various times. Not having additional resources that would cover the potentially large LTC costs, we each chose the option that kept our current payments about where they are.

As was pointed out in some of the previous threads on this subject, LTC insurance covers any reason for needing nursing home care (like car accidents), not just old age. So even if you drop the insurance now, you have had some good protection in place in case of an accident of some sort

 

[gerntz]

We have these & payments have increased a lot in recent years. But when I divide the premium by the cost of a LTC room today, it pays off in a week. So even our 30 years payments, most at a much lower rates, pay back in 6 months or so.

 

[CRLLS]

Hi,

I'm 75, and happily retired. About 14 years ago, I purchased a long-term care insurance policy, partly because I was told that the quarterly premium would never increase. Well, a few years ago, I received a notice from the insurer that they will be increasing the premiums on a regular annual basis. One of the reasons given was that "people are living longer."

Yesterday I received a letter from the company stating that I now had 3 choicesay the increased premium, or pay lesser premium amounts, with the understanding that smaller payments would mean fewer medical services.

The third option is an "Optional Limited Benefit Endorsement", which means I would pay no further premiums, and the insurance company would hold onto the amount I have already paid, which could be used for LTC payments until it is depleted.

At this point, I'm vacillating between to continuing to pay the premium, at the lowest quarterly rate, or not paying anything further. (I do have additional resources I can draw upon, should long-term care become a necessity in the future.)

Is anyone here in the same situation? If so, how are you handling it?

Thanks,

Roy in New Mexico

You were "told" the premiums would not increase. That is one option, albeit with reduced benefits. You didn't say the issuer "told" you that benefits would stay the fixed. Read your policy carefully to see what it says. If it says there is a fixed premium and guaranteed benefit in perpetuity and cannot be cancelled by the issuer, then you have something to argue with. If not, then you have little choice. Either select one of their options or just drop the policy.

 

[njhowie]

You were "told" the premiums would not increase. That is one option, albeit with reduced benefits. You didn't say the issuer "told" you that benefits would stay the fixed. Read your policy carefully to see what it says. If it says there is a fixed premium and guaranteed benefit in perpetuity and cannot be cancelled by the issuer, then you have something to argue with. If not, then you have little choice. Either select one of their options or just drop the policy.

There's really nothing to argue with regardless of what the original policy indicates. This issue has been beaten to death by the insurance companies providing the LTC policies. For those who continued to stand by their policies they have been allowed to modify the terms and change the premiums/benefits in the way which has been presented to OP. The insurance companies basically said "Either we are allowed to do this, or we go in to receivership and nobody gets anything".

 

[marko]

You don't say how much your premium is or what the increase would be but, "14 years in and 15 max to go", I'd pay the increase.

Mom has a LTC policy that hasn't gone up in 30 years (same price, same coverage)....at age 90, I wouldn't have her cancel under any circumstance.

 

[Lewis Clark]

I've gone through some of these hoops with my parents.

When dad needed to go into a nursing home, the fact that he had LTCI helped influence our preferred nursing home to accept him as a resident. They told us they would have been more likely to turn him away if he did not have LTCI. Nursing homes often get better reimbursements from residents with LTCI compared to medicare/medicaid folks, or those who promise to pay the full rate out of their own assets. Renenue$ alway$ matter.

So having LTCI (at any level) *may* help someone get into their preferred nursing home, should that become necessary.

After dad passed, mom started getting the notices of annual increases for her LTCI policy. Based on her experience with dad, she elected to keep her premiums constant and accept the reduced coverage.

Don't know if this was the norm, but it was our experience.

 

[Alan]

The situation here in the UK is very similar. There are care homes run by local councils and there are private care homes, and both types of care home take patients who pay their own fees. For folks who can’t afford to pay they are means tested and the government pays the fees. There is no such thing as Long Term Care Insurance and I’ve listened to money podcasts on the issue where they say that insurance companies simply don’t want to insure this liability because they don’t know how to price it and how profitable it would be anyway.

In the case of a married couple if one goes into care and can not afford to pay, then the value of the house is not counted as part of the means testing but if a single person then the value of the house is taken into consideration.

 

[Pellice]

Yes, it all depends on the "pooled amount" you have already available. If it is substantial, you can maintain it by paying current premiums; if not, you can pay some more years and then stop it. It sounds as though, with your other resources, plus SS, you could simply maintain it at the current level.

I just reached the end of my 5 year "guaranteed" premium cost for my LTC policy, and I was holding my breath, bracing for a big increase. But I can report that at least in my case, my premium only increased by the expected amount. I have a somewhat unusual "step-rated" policy where premiums and benefits increase by 5%/year, but premiums could increase more after the 1st 5 years. That didn't happen, though it could in the future. At age 83 the amount I pay in "step-rated" increases begins to total more than what I would have paid had I purchased a "level premium" policy. At that point, or some other point, I will consider holding premiums and benefits steady.

I've read a couple of articles where it is stated that insurance companies are getting a better handle on these policies and unexpected increases are on the decline - but now the policies are very expensive. Still, the standard LTC policy offers more bang for the buck if you use it. My (former) FA was pushing a whole-life policy, but I don't care about leaving money to heirs or having some portion of money available, but I'd rather have the "more bang for the buck" and risk losing the premiums if I never use it.

 

[mf15]

While the increases are getting bad, I continue to pay, with some reduced benefits. We have a clause in both our Genworth policies, that if one spouse passes, the other pays no premium.
oldmike

 

[Independent]

If you are already 14 years into the policy, you are probably in a situation where your expected future benefits are greater than your expected future premiums.

 

[rtroxel]

While the increases are getting bad, I continue to pay, with some reduced benefits. We have a clause in both our Genworth policies, that if one spouse passes, the other pays no premium.
oldmike

Yes, I'm with Genworth, too. I've paid 46K in premiums so far.

Roy

 

[easysurfer]

Yes, I'm with Genworth, too. I've paid 46K in premiums so far.

Roy

Sounds like you are suffering from that psychological hurdle of having paid a lot in premiums and maybe not even get anything (besides peace of mind) in return. If so, I feel your pain.

Did some calculating and I've paid a total of $24,407.92 in premiums over 12 years. The first 4 years was the premium I signed up initially for, then got an increase. Haven't had another increase since though no guarantee another one won't happen.

 

[timo2]

Sounds like you are suffering from that psychological hurdle of having paid a lot in premiums and maybe not even get anything (besides peace of mind) in return. If so, I feel your pain.

.

Peace of mind is an invaluable thing and worth every penny. Peace of mind might help a person live longer?

 

[blueskyk]

I’m a fan of LTCI - we’ve paid about $24K in premiums over 15 years which, at today’s prices is equivalent to about 3 months of nursing home care (you do the laundry). Our policy also has home health care, respite and adult day care provisions. I don’t mind the $150 (for both of us) a month premium - I like the option of having multiple knobs to turn when sh*t happens.

And, I will not feel like I lost anything if we don’t use it - I’ll be thrilled!!!

 

[Rianne]

I'm struggling with a similar question, we're 62. Say one or both go into long term care, be it independent living with nursing home benefit or a situation where there are several options of care. Does the facility look at your entire financial situation, pension, SS, portfolio etc when accepted or denied?
According to firecalc. we can safely spend with pension/SS/portfolio $130K a year or approx. $65K per person for 30 years. Does this suffice for long term care? We do not have a policy and figure it's too expensive to consider at our age.

 

[blueskyk]

Based in my observation (parents in assisted living) - independent living in a fairly nice place is about $4K a month and includes meals, utilities and an apartment. I'm sure this varies depending on where you live. AFAIK it is not covered by LTCI so that isn't a factor for that type of living arrangement.

A nursing home is much more expensive and again prices vary depending on where you live. My parents were greatly helped (and I listened in when I took them) with a one time consultation with an Elder Care/Social Security attorney who helped them understand options regarding financing long term care. While this is not cheap (think $300 per hr or so), it can provide some serious peace of mind for the future.

 

[ncbill]

Shoot, assisted living here was only $4k/month even with the level of assistance needed for my recently deceased relative.

They had a private room, could feed themselves, but were too weak from the cancer to get out of bed/bathe/dress without significant assistance.

Hospice (paid for by Medicare Part A) provided their hospital bed, O2 concentrator (lifetime smoker = lungs were trashed) & all medications related to their terminal cancer diagnosis (primarily pain meds of course)

I'd much rather pay the premium for LTCi & stay at home or go to assisted living.

I've been to the custodial (not Medicare rehab) side of enough skilled nursing facilities to know I'd rather be dead than forced to live for the rest of my life warehoused in a semi-private room at any nursing facility.

 

[zippy2020]

If one doesn't know what the seniorcare facilities in a local area charge, all that's needed is to pick up the phone and call. NOT KNOWING leaves you guessing, and what's the good in that. Would you buy a car not knowing how much it will cost you? Of course you wouldn't (at least, I hope not, LOL).

We have had LTCi policies for 20 yrs. We have had four premium increases, two of them substantial - so big the state regulator ordered each phased in over a three year period.

We were expecting this because I had worked for different insurance companies and understood (in general terms) how actuaries price policies. I felt very strongly that their numbers were way too low and that premium increases were almost certainly going to happen somewhere along the line.

Sadly, time proved me correct. We were fortunate that our income increased enough to pay for those increases. We kept our original coverage, which is no longer sold by any carrier.

Yes, we could have saved money by reducing coverage, but our morbidity risk is high based on both genetics and lifestyle. Our premiums are now 4x what they were originally - close to $8K per year (e.g., total for both policies).

Sound like a lot? It isn't.

We've started to investigate senior facilities with an eye towards moving in the 2020-21 timeframe. Independent living senior facilities in our area for a 2bd 2ba unit range from $3700/mo to $8000/mo.

Some of those facilities include A/L at the same cost. Most do not, so A/L is a higher cost, whether provided in-house or through your own private hire.

What used to be called 'nursing homes' is now known as "Skilled Care Nursing". It is a more accurate term because it covers convalescent care, both short- and long-term. Let's say you're in IL, then fall and break your hip. Short-term convalescent units are the 'rehab' part of the SCN equation. You leave the hospital after surgery and go into SCN for your convalescence and rehab, until you're able to be discharged.

In our area, SCN units run between $8,000 to $15,000/per MONTH.

Our LTCi pays for home healthcare, so helps with A/L. The SCN benefit has a 5% compounded inflation rider, and is currently at $383/day per insured, or roughly $125+K/year. As a partnership policy, all benefits are income tax-free to the insured (we each have separate policies, not a shared one).

The benefit period is unlimited, which is why the carrier would dearly love us to drop the policies and "save money" by agreeing to a 5-yr cap on the benefit period.

We certainly will not be doing that, until we are a whole lot older than we are now .

 

[blueskyk]

Wow, that's a robust policy! Ours has a cap, $550K per person (we each have an individual policy) with Max of $150 per day per person and 4% inflation rider. By the time we got ours (16 years ago) they must have nixed the unlimited version.

Won't pay for everything but I'm glad we have it.

As always, YMMV.