Long Term Care Insurance

[Teacher Terry]

No matter how nice a nursing home is it’s still a miserable existence. Our plan should that be necessary is to just quit taking my pills for BP and my heart. It will only take days for my BP to be out of control as even missing one day has bad results. Our kids are aware of our plan.

 

[pb4uski]

.... One phone call from Xi Jinping at an opportune time in geopolitics and poof one of the largest LTC insurance companies in the US nursing home claims are going unpaid.

It doesn't really work that way in the real world of insurance in the US. It might for a short while but then complaints would be made, insurance regulators would investigate and order the company to make the payments... if the company refused then the regulators would walk in the door and take the keys and start paying the claims.

The bigger risk, which I'm sure is being carefully monitored, is of Genworth moving cash to its new papa in China via loans or dividends, but that risk is low as I suspect that Genworth doesn't have money/capital to spare.

 

[Spock]

It doesn't really work that way in the real world of insurance in the US. It might for a short while but then complaints would be made, insurance regulators would investigate and order the company to make the payments... if the company refused then the regulators would walk in the door and take the keys and start paying the claims.

The bigger risk, which I'm sure is being carefully monitored, is of Genworth moving cash to its new papa in China via loans or dividends, but that risk is low as I suspect that Genworth doesn't have money/capital to spare.

I agree with everything you said except for "short while".
I expect that things will have to get really bad for regulators to get involved and even worse before before another "taboo corporate bailout" where regulators (tax payers) start paying the claims.

At the rate regulators move (think earth crust plate tectonics) there will be a lot of grandma's needing to find new care facilities before it gets regulators attn.

Since Genworth has such a large chunk of the market, I would not be surprised if the regulators default to Medicaid payments as the solution since its already in place.

 

[ncbill]

It doesn't really work that way in the real world of insurance in the US. It might for a short while but then complaints would be made, insurance regulators would investigate and order the company to make the payments... if the company refused then the regulators would walk in the door and take the keys and start paying the claims.

The bigger risk, which I'm sure is being carefully monitored, is of Genworth moving cash to its new papa in China via loans or dividends, but that risk is low as I suspect that Genworth doesn't have money/capital to spare.

State guaranty funds usually have a limit...IIRC here it's $300,000 for life insurance...do states have similar guaranty funds for LTCi?

 

[pb4uski]

I agree with everything you said except for "short while".
I expect that things will have to get really bad for regulators to get involved and even worse before before another "taboo corporate bailout" where regulators (tax payers) start paying the claims.

At the rate regulators move (think earth crust plate tectonics) there will be a lot of grandma's needing to find new care facilities before it gets regulators attn.

Since Genworth has such a large chunk of the market, I would not be surprised if the regulators default to Medicaid payments as the solution since its already in place.

It would likely only take a handful of claims of non-payment to establish a pattern sufficient to launch an investigation... and if there were a pattern of non-payment as you suggest then regulators could act pretty quickly and there would be ample political pressure on them to do so... so I don't buy into your second paragraph.

Regulators don't pay claims... they comandeer the company and then order that claims be paid from company funds... then if those run out (blow through reserves and surplus) the guaranty funds would step in. After that, claims would just not get paid... taxpayers wouldn't be on the hook.

 

[pb4uski]

State guaranty funds usually have a limit...IIRC here it's $300,000 for life insurance...do states have similar guaranty funds for LTCi?

This document suggests that LTCI falls under the same guaranty funds.

https://www.antheminc.com/cs/groups/wellpoint/documents/wlp_assets/d19n/mzq1/~edisp/pw_g345394.pdf

Also found:

STATE GUARANTY ASSOCIATIONS PROTECT CONSUMERS

Each state operates an insurance Guaranty Association (this is the equivalent of the insurance industry's FDIC). Actually each state has two Associations -- one for life and health insurance and a second for 'property and casualty (car, home) insurance. Should an insurance company fail, policyholders are protected up to certain limits. Every insurance company that sells policies in the State is assessed a fee to cover any costs. They must pay the fee.

If you own a long-term care insurance policy, the State Guaranty Association for the state where you reside protects your benefits up to set limits that can be as much as $500,000. This is added protection that should give you some added peace of mind.

 

[youbet]

I like the CCRC concept but they are no panacea. DW's father had a disastrous experience at a highly regarded CCRC.

If this was a corporate owned CCRC, would you mind sharing the corp?

Also, was he there on a type A, B or C contract?

DW and I have been visiting some CCRC's and are always interested in whatever info we can get.

 

[Red Badger]

No matter how nice a nursing home is it’s still a miserable existence. Our plan should that be necessary is to just quit taking my pills for BP and my heart. It will only take days for my BP to be out of control as even missing one day has bad results. Our kids are aware of our plan.

I hoard all of my opioids. Have hundreds from various injuries and surgeries. Keeping my options open.

 

[Teacher Terry]

Red badger, that’s also a great idea. I also have a bunch leftover from surgeries because I never take them for long.

 

[Chuckanut]

My LTC plan is simple:

1. Take SS at 70 and get that nice 32% increase.
2. Buy five more years of service on my capped COLA'd pension - another $400 a month.
3. Spend 10-20% less that what FireCalc says I can spend, and keep the difference in cash, shorter term notes, etc. for care use.
4. See the doctor at least once a year even if I am feeling great.
5. Be very very careful not to fall.

 

[donheff]

If this was a corporate owned CCRC, would you mind sharing the corp?

Also, was he there on a type A, B or C contract?

DW and I have been visiting some CCRC's and are always interested in whatever info we can get.

I will PM you.

 

[meierlde]

Of course assisted living is far to be preferred to a nursing home, starting with food choice, and having a (in my case) a 1 bedroom apartment instead of just one room a full size fridge and a microwave. Assisted living is IMHO sort of a very upscale college dorm, (at least as dorms were around 1970), Of course a nursing home gets better if you are not confined to a bed as I was for 6 months. One big difference is that folks at meals in assisted living talk to each other whereas in the nursing home I went to the main dining room for a few days and no one talked, so I decided I could watch tv in the room instead. (All be it that having a smart phone and later a pc helped me keep my sanity in the nursing home)

Another topic is that new budget bill changed the income limit for medical deductions from 10% back to 7.5% for 2019 and 2020.

 

[ziggy29]

Our LTCI is that we spend about 2/3 of what FIRECalc says that we can spend and about $100k is in HSAs.

I looked at LTCI over the years and the value proposition never seemed to make sense.

I guess I'm not the only one who tries to max out an HSA (or close to it) to use it as an LTC backstop in the future.

 

[pb4uski]

I am a bit concerned about having such a large HSA balance though. Just the income should more than cover out Medicare Part B and Part D costs, vision, hearing and dental. I really wish that it could be used for Medigap.

In any event, if we don't need LTC there is likely to be a sizeable balance that would be taxable to beneficiaries.

 

[kyzymurgist]

Our checklist list for LTCI included:
- Guaranteed no increase in premium.
- Unlimited funds in case of early Alzheimer's requiring long term care.
- High deductible and lower premiums.

Traditional LTCI plans currently don't meet any of these requirements. We were 62 and 59 when shopping for plans last year. We could self insure but with a chance of burning through everything in a worst case scenario.

We found that hybrid Life Insurance plans with LTCI rider were the best option in our case. Lump sum $100k grows to $186k tax free to heirs after we both pass with no claims.

Any claims are made first against the life insurance funds so this acts like a high deductible. After this, the LTCI rider takes over.

$66k (over 10 years) rider provides 5% inflation protection and no duration or payment limit.

The monthly maximum payout is enough to cover assisted living care in our area but short of nursing home cost. However we have sufficient funds to cover the difference and still provide plenty for the healthy spouse.

The underwriting is much more lenient for these hybrid plans so this may be a good option if you have any health issues that could derail conventional coverage. Also the lump sum can be in the form of an IRA with distributions over 20 years.

Mike

 

[capjak]

A few corrections:

There is an insurance company that still has (or did in 2018) a fixed rate traditional insurance product (it's expensive). I purchased a hybrid whole life policy instead with unlimited time LTC rider at 3% inflation per year (it was also expensive). It covers 2 people for unlimited confinement (i.e. it pays until you leave the home or pass) at a current assisted level pricing and 3% inflation.

My father set aside or rather had liquid invested assets of $700,000 (does not include home) when my mom had a stroke and spent the next 6+ years in assisted living and about 6 months in nursing home. Her health was constantly monitored and meds strictly adhered and therefore was in better health than when she was at home (except complications from stroke of course). His expenses are about $35,000 per year so he should be fine.

So I would suggest that if you have $700,000 to set aside you will most likely be fine as majority of stays are not 6 years. Of course if you purchase the LTC insurance you may not need the $700,000 set aside at all.

 

[Ebendana]

Premiums not always going up...

LTC insurance is one way to plan for a future expense, so that other funds can be freed up....I am fortunate enough that I was able to buy into a policy with John Hancock about 15 years ago via my employer, premiums never go up, only if I want additional coverage. Cost is $99 per month for both myself and my husband, we each have a face value policy of $325K...granted, we have been paying into it for15 years...if we cancel before age 70 get return of premium. I don't have a ton of money in the bank, but having this possible future expense somewhat taken care of lets me sleep better at night...

 

[Jenny867]

Got it in my 30s

I started paying premiums in my 30s because what if I get in a car accident now as a young person? I don’t want to have to rely on family and make their life a mess.

 

[meleana]

We did not buy it. I am so sick of insurance companies. They exist only to not pay out claims. Whatever happens, happens.

 

[zippy2020]

We bought our (separate) LTCi policies 20 yrs ago. Premiums have increased dramatically, which we were prepared for because I had worked for decades for life and health insurance companies. I understood how the actuaries were pricing it and IMHO they were incorrect.

I told my spouse we should be prepared for future price increases. Fortunately our income increased over the years and retaining the policies remained a low-figure budget item.

Four years after we bought the LTCi policies, my spouse suffered a severe hemorrhagic stroke. He was 50 yrs old.

Fortunately he recovered very well. I took ER in 2006; he took ER in 2010.

Due to my MIL's dementia we researched and have kept abreast of seniorcare facility and Skilled Nursing Care costs in our area. We live in a high-cost labor area.

A studio apt in a CCRC is roughly $3500-4500/mo. SNC, which is also used for convalescent care, is around $8300/mo at non-profits and $11-16,000/mo at for-profits.

Just FYI you have NO guarantees with a CCRC that it will still be in business 20, 30, or 40 yrs from now. In fact, depending on how strong the consumer laws are in your state, you can in fact be dumped on the sidewalk and told, "Now it's your responsibility to figure out where you're going to live."

If you read the fine print on a CCRC contract it almost certainly will say you must enter arbitration to resolve any disputes.

Care is better and staff morale higher at non-profits, however for-profit corporations are rapidly buying up non-profits. Why hassle with new builds and fighting for permits, when you can just take a headache away from a local church with a business loan you can write off anyway?

We have watched four non-profit CCRC's sell to corporations in the last two years, just within our city.

We have LTCi to protect the assets for the other, if one spouse becomes severely disabled. We ran the #s, and there was no other way to mitigate the risk.

Both of us have bad family genetic histories, so we have a higher than average morbidity risk, although an average mortality risk. To evaluate LTCi, you need to understand the difference.

 

[RHONDAVE]

I purchased a policy through my wifes employer from Prudential in 2012. Inflation protection is a purchase option every 3 years. I have had on increase in protection.
Facility Daily Benefit $232
Assisted Living FCD $232
Home Care Daily Benefit $174
Elimination Period 90 day
Lifetime Maximum $254040
Annual Premium $1300


I stopped the last increase in 2018.
My mother passed in 2012, my father in 1999, both from Alzheimer's.


Any thoughts on my policy?

 

[Sunset]

LTC insurance is one way to plan for a future expense, so that other funds can be freed up....I am fortunate enough that I was able to buy into a policy with John Hancock about 15 years ago via my employer, premiums never go up, only if I want additional coverage. Cost is $99 per month for both myself and my husband, we each have a face value policy of $325K...granted, we have been paying into it for15 years...if we cancel before age 70 get return of premium. I don't have a ton of money in the bank, but having this possible future expense somewhat taken care of lets me sleep better at night...

I would buy that in a heartbeat.

 

[The Cosmic Avenger]

OK, dug out the details, in case anyone wants to compare. It was almost 13 years ago, not 20, that I got this deal. It's a Unum workplace plan, but from what I can tell the company isn't paying any premiums, and the policy document says:

CONTINUATION OF COVERAGE
You may elect to continue the same coverage you had under the group policy on a direct billing basis, if your group coverage ends.

After 12 years (increased coverages are for April 1 2019), I've paid about $4K in premiums, and my current coverage with 5% annual compounding is:

Effective April 1 [no, really!] 2007.
Coverage:

Type of coverage	2007	2019
Monthly Maximum - Nursing Facility	$4,000.00	$7,183.43
Monthly Maximum - Residential Care Facility	$2,800.00	$5,028.40
Daily Maximum - Home and Community-Based Care	$2,000	$3,591.71
Lifetime Maximum	$144,000.00	$258,603.31

 

[Gearhead Jim]

My problem with LTCI is that premiums are not locked in when you purchase the policy. If you buy it at (say) 50 or 55 and it becomes unaffordable when you hit 70, you're sort of SOL.

Here's one way, not available to everyone-
Our adult daughter, who is financially wise and very caring, said:
"If you ever get to the point where you can't afford your LTCI, tell me and I'll pay for it."

We bought policies from State Farm about 20 years ago when we were in our middle 50's. There were some big premium increases since then, but are still only slightly over $100/mo/each for $730,000 each of coverage. We avoided almost all of the premium increases by deleting the inflation clause a couple of years ago, not a perfect solution but very doable for us.

Recently our agent commented that even using our ages at purchase time, today's policies are much more expensive.

 

[simple girl]

Our LTCI is that we spend about 2/3 of what FIRECalc says that we can spend and about $100k is in HSAs.

I looked at LTCI over the years and the value proposition never seemed to make sense.

Hi pb4uski!

Could you elaborate on how this plan would cover your needs should one of you end up needing nursing home care?

I'm trying to model what we would need. I read this article on M* and it made me feel like self-insuring is beyond our capability.

...even a one-year stay in a nursing home--roughly $100,000 in today's dollars--would cost more than $725,000 (!) in 45 years.

We have an HSA with about $75K in it. We also spend about 2/3 of what FireCalc says we can spend. So our situation along those lines is very similar to yours. Would love to hear more details on how you have modeled this.

My grandmother ended up in a nursing facility for about 10 to 15 years (Alzheimer's). I know this is an unusual length of time, as the average length of stay I believe is around 3 years, but...it concerns me that I could ruin hubby's financial situation someday.