Federal Long Term Care Insurance Premium Increases

I don't know Rich, I don't see the difference between LTC ins and any other type of ins.. Ya never know when your going to need any of it. I paid disability at about 4K a year for 25 years and never knew if I would need it, thank God I didn't. I gave it up 3 years ago at retirement and I guess you could say I lost all that money.

You say LTC ins may not be needed for 20 or 30 years or maybe never. Same with disability ins., home owners ins., car ins or any of the others. If we knew when or if we would need it we would know when or if we should get it.

It's just a big gamble and the Ins. companies mostly win.
 
73, lots of similarities to other insurance products for sure.

OTOH, an auto policy pays for damages incurred during the 1 year policy period, then you get to buy another year's worth or from another carrier, or maybe not at all if you give up driving, etc. Comparison shop, alter your coverage and deductible and all that.

With LTC insurance, realistically, you are entering a multi-decade agreement with all the vagaries that entails. Years into it you can drop out, but you leave a lot on the table: not just past premiums and future coverage, but the actuarial edge you were promised in return for buying young. And if you want back in, you may be underwritten.

Not a warm fuzzy feeling either way.
 
Rich_in_Tampa said:
73, lots of similarities to other insurance products for sure.

OTOH, an auto policy pays for damages incurred during the 1 year policy period, then you get to buy another year's worth or from another carrier, or maybe not at all if you give up driving, etc. Comparison shop, alter your coverage and deductible and all that.

With LTC insurance, realistically, you are entering a multi-decade agreement with all the vagaries that entails. Years into it you can drop out, but you leave a lot on the table: not just past premiums and future coverage, but the actuarial edge you were promised in return for buying young. And if you want back in, you may be underwritten.

Not a warm fuzzy feeling either way.
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IMO, the one of the biggest differences is few of us would face financial ruin if we lost a car, or even a home, and didn't have insurance to cover replacement and/or repair. The cost of LTC can be much more devestating.
 
Rich, I would guess a good comparison would be disability or life ins., no? These premiums would increase with age as well. In most cases you'd be more likely to use them later in life.
 
Purron said:
IMO, the one of the biggest differences is few of us would face financial ruin if we lost a car, or even a home, and didn't have insurance to cover replacement and/or repair. The cost of LTC can be much more devestating.
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Purron, I understand the concern. Here's an alternative perspective.

IIRC, nursing home cost is about $75,000 per year on average with the typical stay being in the 3 year range, so $225,000 is at stake (let's talk nominal dollars for now since inflation raises benefits if you have the COLA option but premiums will be higher over the decades). LTCI typically does not cover the whole cost, but more like $100 per day -- or half the actual cost above.

So, if you are 55-60-ish you pay the opportunity cost of 25 yrs of premium at $2500 a year at 6% -- about $135,000 (not counting increases in premium over time).

On the other side -- if you need a nursing home -- you gain three years of NH expenses, paid by LTC at about one half or $109,500 (using $100/day).

You are paying $135,000 in premiums/opportunity cost for a typical net benefit of $109,000. And that assumes that every insured will need a nursing home; in reality, something like 50% will never need one, and the premiums are stll paid.

I am not trying to talk anyone in or out of LTCI. I just know that for me it's not a slam dunk. Self-insuring may be more attractive if you can reach a net worth to make it prudent and that is probably well within the reach of many on this board. If self-insuring is not realistic for some, maybe they should get LTC insurance rather than risk financial ruin.

Hope that explains my understanding of this tough decision.
 
I had the impression that the optimal age for buying LTC insurance was 59, when I thought I became uninsurable at age 57, I thought it was too late. Maybe I should look into it anyway? I was surprised to find this information in Consumer Reports:

Consider buying at around age 65. Although salespeople will try to get you to buy a policy as young as age 40, the coverage may be useless 40 years hence when you need it. New systems for care may emerge that will not be covered by a policy purchased today. For example, 15 years ago, long-term-care insurance did not pay for care in assisted-living facilities.
Between the ages of 55 and 60, buy long-term-care insurance only if you have a chronic condition like diabetes that could prove incapacitating over time. Otherwise, begin at about age 60 to assess whether you need long-term-care coverage, and, if so, buy at age 65. If you buy later than age 70, the policy will likely be too expensive or you may not pass the medical tests needed to qualify.
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ConsumerReports.org - Long-term-care insurance 11/03: Long-term health care, elderly care, disability insurance plan.
 
Rich, thank you for your thoughtful analysis and comments. Here's the part I have a hard time dealing with..."the typical stay being in the 3 yr range". As I mentioned, my MIL has required LTC for over 15 years now.

There's so much more to the LTCI decision than the financial analysis. Our personal experiences and fears come into play. While this does not help reach a logical decision, it is a factor.

If DH and I hadn't spent so many years immersed in the reality of nursing home care, we would likely have a very different perspective. Even so, we do plan to analyse this carefully before shelling out an extra 25% for premiums. Your input will help us do this.
 
Rich_in_Tampa said:
Purron, I understand the concern. Here's an alternative perspective.

IIRC, nursing home cost is about $75,000 per year on average with the typical stay being in the 3 year range, so $225,000 is at stake (let's talk nominal dollars for now since inflation raises benefits if you have the COLA option but premiums will be higher over the decades). LTCI typically does not cover the whole cost, but more like $100 per day -- or half the actual cost above.

So, if you are 55-60-ish you pay the opportunity cost of 25 yrs of premium at $2500 a year at 6% -- about $135,000 (not counting increases in premium over time).

On the other side -- if you need a nursing home -- you gain three years of NH expenses, paid by LTC at about one half or $109,500 (using $100/day).

You are paying $135,000 in premiums/opportunity cost for a typical net benefit of $109,000. And that assumes that every insured will need a nursing home; in reality, something like 50% will never need one, and the premiums are stll paid.

I am not trying to talk anyone in or out of LTCI. I just know that for me it's not a slam dunk. Self-insuring may be more attractive if you can reach a net worth to make it prudent and that is probably well within the reach of many on this board. If self-insuring is not realistic for some, maybe they should get LTC insurance rather than risk financial ruin.

Hope that explains my understanding of this tough decision.
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Rich, DW and I are trying to run our finances in RE so we're self-insured for LTC. I think your numbers are too small and I'd be uncomfortable with a situation where expenditures in excess of $225k would deplete our LTC fund.

I've been using $90k/yr and want to be able to cover 8 yrs. The 8 yrs can be one of us for 8 yrs, each for 4 yrs, one for 7 and the other for 1, etc.

Using the average stay (about three yrs as you say) as a predictor simply says anytime you and DW total more than the three yr average, you're in financial trouble.......

Another complication in figuring out what number to use for self-insuring purposes is understanding what happens after the first spouse dies. For example, say I die first and DW shortly thereafter needs LTC. How does losing 50% of my pension (as it drops to survivor benefit levels for her) impact the portfolio's ability to keep her in LTC?

I've worn a couple of pencils down to nubins working on this...... and still don't feel very confident. But, like you, we're self-insuring at this time but continue to look at the situation periodically.
 
youbet said:
...
I've been using $90k/yr and want to be able to cover 8 yrs. The 8 yrs can be one of us for 8 yrs, each for 4 yrs, one for 7 and the other for 1, etc.
...
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From what I studied it seems to me that you are planning for longer than average LTC (leaning toward worse case). That is... that both of you have longer than average NH stays.

Planning for LTC is similar to other risk based planning... very complicated and you will accept some level of risk. My wife's grandmother lingered for 10 years in a NH after a stroke left her completely unable to do anything. You or your spouse could be the statistical outlier but there is a low probability that it will occur.

In terms of self-insure... your risk (in general terms) is forgoing asset spending on one side of the coin and winding up on Medicaid on the other side of the coin. The other risk you are trying to mitigate is ensuring that the surviving spouse is not left financially ruined.

While one of you may need some sort of care in the home... the average NH stay seems to be less than 3 years. Of course it is an average.... you or your spouse could last longer.

I would recommend you check out the rules for Medicaid in your state and follow those rules to do your planning. Usually one spouse is in the NH and the other is not. In some states, spouses can split the assets. In other states, the state has tougher rules. Some states are very tough on income that can be kept by the spouse (the one not in the NH). Do not Assume anything! You really need to include this in your planning... and the rules change from time to time.

If you have a house that is worth something and the surviving spouse has other liquid assets to spend (to live on)... the house could be the potential LTC funding mechanism for the surviving spouse.

IMO - this planning is as much about protecting assets for the surviving spouse (maybe more for them) as it is for the person receiving care. Assuming you get into a half way decent NH... you will get the care whether you pay or Medicaid pays. Plus I am fairly sure Medicaid (in some states) will pay for in home care.

You might assume that because you have money to pay that you will wind up in a better NH. It might turn out that way and it might not. You can be neglected just as easily either way.

My recommendation (if you or your spouse need care and it is workable): If you have assets, then stay at home and hire Home Health and nurses to deplete your resources. The care will be better since one spouse can oversee the care and help. The challenge with this is finding competent care. It takes more management than you would think.

You can find the stats to help with planning and there are planning guides for self insure LTC.

http://www.therubins.com/homes/stathome.htm



While only twelve percent of nursing home residents are between 65-74, 45% are over 85 years of age. It is estimated that anyone over 65 years of age will have a 43% chance of spending some time in a nursing home. About 24% of these individuals will spend less than a year in residence at a nursing home.
------------------

Age Group Percentage of Nursing Home Population Age (1999)​
65-74yrs. --12%
75-84-yrs. -32%
85+ yrs. 46%​
Average Length of Stay (Point-in-Time Measure)​
2.4 years varying with gender, age, ethnicity and type of facility; also influenced by the increasing use of short-term stays following hospitalization
2.51years for females
2.29 years for males
1.86 years for Hispanics
2.62 years for persons over age 85
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Yes, there are so many variables and assumptions that a generalizable recommendation is virtually impossible. Another morbid consideration is that most elderly in a NH die there.

One approach (one which would be first on my list if I had to decide today) is to buy life insurance for each of us (or maybe first-to-die) in a moderate amount in the range of 3 years expenses. This would allow tapping your retirement portfolio to cover NH costs, knowing that upon death the life insurance benefit would make the surviving spouse whole again.
 
Rich_in_Tampa said:
...
One approach (one which would be first on my list if I had to decide today) is to buy life insurance for each of us (or maybe first-to-die) in a moderate amount in the range of 3 years expenses. This would allow tapping your retirement portfolio to cover NH costs, knowing that upon death the life insurance benefit would make the surviving spouse whole again.
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You mentioned that approach before in previous posts. It seems like a reasonable approach to mitigate the risk of the survivor being ruined. Perhaps it has less risk than LTC Insurance considering the potential for premium rate increases. You can get a rate guarantee with term insurance.

Some considerations:


  • You need to be insurable. This is one of those situations where you generally need to be proactive. Similar to LTC, and health insurance. Once you have certain health problems... Insurance companies will not underwrite you... or they will rate you and the costs will be high at best.
  • In most cases term ins at the longest period is for 30 years. Depending on your longevity, you may have some risk exposure. The alternative is Whole Life (which IMO is generally not a great deal).
  • If you buy a life policy for that purpose, you would need to factor in inflation. Which probably means at least doubling the face amount for what would be needed in today's dollars. If you assume the event will occur after 75 years of age.
  • Check out the Medicaid laws in your state. In some cases, a life policy may be considered an asset that is factored into Medicaid calculations. If you have adequate assets and Medicaid does not come into play... then this would not be a factor. Just to be on the safe side... or at least to understand your risk exposure, I would check it out.
 
My wife and I have had the FedLTC since the program started; we're going to stick with this program despite the run-up in premiums for our age and automatic inflation adjustment group -- BTW, the run-up is significantly less steeper for older people.

The new rates are frozen for another 7 years; with the inflation adjustment (where my daily benefit amount has increased a lot since we bought into the plan), this doesn't strike me as such a real bad deal. I think "underpricing" might be more of the culprit based on underestimating the number of insured people who would migrate away from the policies. I guess, if enough people get upset about these increases and drop coverage, this might ironically keep premiums level in the future!

Here's my thinking about this insurance coverage: (1) I know Medicaid fairly well as my Mom is currently under that program and has been in a nursing home for the last two years; I don't want to rely on Medicaid to finance any long term health care; you have to be penniless and asset broke to use Medicaid and your choices are quite limited; (2) I want to preserve some assets and my small estate for my children and figured that LTC insurance would put me ahead of the game by $350K-500K if I need it; (3) I can pay my current premiums of $2160 (for both of us and the extra $500 plus we'll incur after this increase) from my HSA to soften the blow; (4) my payments give me a deduction on my State tax return; (5) I like the basic features of the program and the home care aspect of paying a relative to care for us; (6) I don't look at this as simply long-term care insurance occasioned by old age medical problems -- a good friend of ours recently suffered a stroke from hip replacement surgery and long-term health care insurance could have helped him out, immensely and (7) with the Federal LTC, I'm not really concerned with payment risk from the insurer.
 
I guess I feel the same way about LTCI as I do about some senior entitlement programs: the economics look unsustainable and so I just don't trust it to be there under reasonable terms in a couple of decades, even if I do buy now. Plus there's also the potential that government may take a greater role in providing it in the future, and if that's the case I could feel like a schmuck for paying premiums for a long time which may not ultimately be necessary. (Don't want to discuss the politics here; just noting that there is some political risk in buying now.)
 
Purron said:
If DH and I hadn't spent so many years immersed in the reality of nursing home care, we would likely have a very different perspective. Even so, we do plan to analyse this carefully before shelling out an extra 25% for premiums. Your input will help us do this.
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My spouse says she's shelling out for oxycontin at the first sign from either one of us that we can no longer spell backwards...

... it's really keeping me on my toes.
 
Rich_in_Tampa said:
Don't some life policies allow early withdrawals against the death benefit to meet medical needs?
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At least there used to be (have not looked in a long time) life policies that had a specific LTC benefit. I believe John Hancock sold this type of product. But naturally they charged handsomely for it.
 
ChrisC said:
My wife and I have had the FedLTC since the program started; we're going to stick with this program despite the run-up in premiums for our age and automatic inflation adjustment group -- BTW, the run-up is significantly less steeper for older people.

The new rates are frozen for another 7 years; with the inflation adjustment (where my daily benefit amount has increased a lot since we bought into the plan), this doesn't strike me as such a real bad deal. I think "underpricing" might be more of the culprit based on underestimating the number of insured people who would migrate away from the policies. I guess, if enough people get upset about these increases and drop coverage, this might ironically keep premiums level in the future!

Here's my thinking about this insurance coverage: (1) I know Medicaid fairly well as my Mom is currently under that program and has been in a nursing home for the last two years; I don't want to rely on Medicaid to finance any long term health care; you have to be penniless and asset broke to use Medicaid and your choices are quite limited; (2) I want to preserve some assets and my small estate for my children and figured that LTC insurance would put me ahead of the game by $350K-500K if I need it; (3) I can pay my current premiums of $2160 (for both of us and the extra $500 plus we'll incur after this increase) from my HSA to soften the blow; (4) my payments give me a deduction on my State tax return; (5) I like the basic features of the program and the home care aspect of paying a relative to care for us; (6) I don't look at this as simply long-term care insurance occasioned by old age medical problems -- a good friend of ours recently suffered a stroke from hip replacement surgery and long-term health care insurance could have helped him out, immensely and (7) with the Federal LTC, I'm not really concerned with payment risk from the insurer.
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ChrisC - DH and I have also been in the Fed LTC program since the get go. Your comments make me feel much better about sticking with it. Yeah, I don't like the premium increases, but there are many things to offset this downside. I also like the home care option and security of this program being through the Feds which reduces repayment risk from the insurer.
 
Rich_in_Tampa said:
Don't some life policies allow early withdrawals against the death benefit to meet medical needs?
Click to expand...


I think so. Life insurers are getting creative with the riders that can be attached to policies for a variety of life events (for Boomers). This would require some homework.

At our age, one of the most important factors is insurability. There is not much of a way (at least that I know) to mitigate that type of financial risk without taking some risk (paying something). As Brew stated in so many words... insurance is not cheap.

If you think the life insurance approach is the way to go, I would suggest you do it while you and your DW are healthy. You can always let the policies lapse if you change your mind or find a better approach later. You initial premium money will be gone but you will have had coverage during that time.

These are complex decisions for which there is no clear answer.

If you are an annuity kinda guy.... there are some hybrid products on the market that you might consider... but I do not know of a SPIA that offers that type of rider. It might be worth looking into.

With any of these products... I would only enter into a contract with a Top Rated insurer.... especially for an individual policy. If it is a group policy your choices will be limited.
 
freebird5825 said:
This comparison chart for former Fed LTC 1.0 vs new Fed LTC 2.0 may have been posted before...there sure are lots of changes.
More paperw*rk to go over...:mad:

http://www.ltcfeds.com/091109_plan_comparison.pdf
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Thanks. Good info and I hope to hear comments from others on this. Still have heartburn over this on page 3:

"Your premium will not change because you get older or your health changes or for any other reason related solely to you. Premiums are not guaranteed. We may only increase your premium if you are among a group of enrollees whose premium is determined to be inadequate. While the group policy is in effect, OPM must approve the change."

This was not crystal clear when I enrolled. Don't think I'm alone in this. I also have some questions about OPM's approval of the change.

Plus, does anyone else feel uncomfortable with the fact that MetLife and John Hancock had the first contract, John Hancock alone has the new contract, and they were "partners" from the get go?

Freebird, you noted this earlier in the tread:

"Don't know if this was already answered, but the original Fed LTC contract was awarded to both JH and MetLife, as some sort of joint venture. The revised current contract only has JH as the insurer."
 
I would not get too excited about JH being the only insurer going forward. The LTC business has been getting more concentrated as all but the mist committed companies drop out of what is still a niche market. JH is one of the largest US life insurers and it is owned by Manulife, a mammoth, well diversified, creditworthy (IMO) Canadian life insurer.
 
Purron said:
Premiums are not guaranteed. We may only increase your premium if you are among a group of enrollees whose premium is determined to be inadequate. While the group policy is in effect, OPM must approve the change."
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This is the main reason I'm not buying LTC for the foreseeable future.
 
brewer12345 said:
I would not get too excited about JH being the only insurer going forward. The LTC business has been getting more concentrated as all but the mist committed companies drop out of what is still a niche market. JH is one of the largest US life insurers and it is owned by Manulife, a mammoth, well diversified, creditworthy (IMO) Canadian life insurer.
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I think you're right Brewer. I'm sure you can understand the temptation to imagine a nefarious conspiracy when you have the federal government and mega insurance companies involved....
 
Purron said:
I think you're right Brewer. I'm sure you can understand the temptation to imagine a nefarious conspiracy when you have the federal government and mega insurance companies involved....
Click to expand...

Actually, I cannot, since I have been a close observer of insurance companies and (to a much lesser extent) the gummint for many a year. But tinfoil hats never go out of style...
 
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