Long Tern Care!!! If you haven’t heard of it get ready, it is the hottest topic in the insurance industry. As Baby Boomers move toward their senior years this subject is getting more attention. The reason? Well, there isn’t one clear answer. However, concerns include Baby Boomers who have, or currently are, caring for elderly parents and don’t want that responsibility to fall to their children. Another reason is the increasing costs of quality care, and an average life expectancy that grows each year.

All of these factors, and more, have people looking toward Long Term Care and exploring their options for their December years.

The following article published in the January 1, 2008 Detroit Free Press gives an overview of the Long Term Care arena and some concerns that are associated with this insurance coverage. For more questions on Long Term Care please contact me through this website–Marty O’Neill, Insurance Agent
January 1, 2008

BY RUBY L. BAILEY
FREE PRESS STAFF WRITER

Teresa Alexander can usually spot a good deal. She’s snagged cars at cost, computers on clearance and her suburban home at an auction for an estimated 40% less than what it was worth. But after months of research resulting in stacks of information from four insurance companies, Alexander still can’t figure out whether long-term care insurance is a good deal for her. The pile of envelopes covered with six months of dust attests to her inability to decide.

“Every time I reach for that pile, I get a headache,” said Alexander, 51, who’s using her maiden name and won’t reveal the city she lives in for fear of receiving more calls and letters from insurance agents. “There’s too many ways to go wrong and end up either paying for something I won’t use or drop it and not have my care covered when I need the help.”

A growing number of consumers like Alexander of southeast Oakland County are considering long-term care insurance. Experts anticipate Michigan’s large population of people 60 and older will add to the nation’s 8 million policyholders as they seek ways to pay for long-term care. Seniors, who now make up 12% of the state’s population, will comprise 15% by 2020 and 19% by 2030, according to estimates from the U.S. Census Bureau.

In Michigan, roughly 137,000 residents had long-term care insurance policies in 2005, up from 127,000 in 2004, according to the state’s office of long-term care. Long-term care insurance pays for what health care plans typically don’t — stays in nursing homes and assisted-living facilities or in-home assistance.
Experts estimate that nearly half of those 65 and older will spend some time in a nursing home or need long-term care. And not everyone will meet Medicaid’s stringent income requirements to qualify for nursing home benefits. Medicaid, run jointly by the state and federal governments, will pay for nursing home care after most of a person’s assets have been depleted.

Bankrolling long-term care out of pocket can be costly. A stay in a private nursing home averages $5,340 a month in Michigan, while assisted-living facilities cost $2,430 a month, according to the state Medicare/Medicaid Assistance Program. A home health aide costs an average of $21 per hour.
Depending on the policy features chosen, long-term care insurance could cover any of those forms of care, saving thousands of dollars.

Dropping policies
But here’s the catch that has tripped up Alexander and others: The policies can be expensive, and a person may never use the benefits after paying for them for years. The average policy costs $1,800 to $2,500 a year, and many increase every three to five years. Policies with inflation riders are available but add at least 30% to the cost, insurance agents and experts said. Features vary — including what type of care is covered, when coverage starts and the daily payout amount for care. In 2001, the Government Accountability Office found 60% or more of long-term care policyholders allow their policies to lapse within 10 years of purchase.

“You essentially paid in thousands of dollars, and you essentially got nothing out of it,” said Gail Jensen, a Wayne State University economist and gerontologist whose 2004 study of 1,375 seniors with long-term care insurance found that 204 let their policies lapse after two years. “It’s not just a one-shot deal. You’re committing for the rest of your life. Once you drop the policy, you lose the coverage.”

Jensen said her study showed people dropped the policies because they could not keep up with the payments. And there’s a chance that the insurer may not pay when the benefits are needed. The U.S. House Energy and Commerce Committee is investigating accusations that insurers Conseco and Penn Treaty erroneously denied legitimate claims while collecting billions in premiums. Industry-wide, insurers took in $9.5 billion in premiums in 2006, up from $8.25 billion in 2004, according to the American Association for Long-Term Care Insurance, the industry’s trade organization. In 2006, the industry paid $3.3 billion in claims, according to the association.

And because more people are purchasing the policies at younger ages, the long-term financial commitment is growing. In 2007, the average age of a policy buyer was 58, down from 67 in 2000, according to the association. Some experts recommend purchasing the policy at a younger age, when rates are likely to be lower and consumers are less likely to be turned down because of illness. One in five applicants is denied because of health issues, insurance agents and consumer experts said. But it also means more years of premiums and the increases that could make the policy financially burdensome.

Investing as a strategy
Bob Hull is waiting to find out whether his premiums will increase next year. His insurance plan, which he bought five years ago, allows for premium adjustments every five years.

“I’m anxiously awaiting that decision,” said Hull, who lives in Farmington Hills and didn’t want to give his age. Hull pays more than $1,500 yearly for his policy. “Depending on what they raise it to, I’ll have a little heartburn.”

If the premium doubles, as he fears it might, “I’ll drop it,” said Hull, who chose his plan after comparing five companies. His policy includes options for assisted living, in-home care and nursing home care. “To heck with it. I’ll fund it myself.” Self-funding is a route WSU’s Jensen says could work for some.

“I would take the money that I would be paying as a premium and I would invest it in a no-load mutual fund,” Jensen said. “I think the advantage of doing that is that you can accumulate a significant nest egg there. It can go a long way in helping to pay those long-term care expenses.”

Robert Hawyer, 67, said he considered long-term care insurance for himself and his wife, Marilyn, about 10 years ago. But he couldn’t afford the $2,500 yearly premiums.

“I knew it would start there and go up,” Hawyer of Trenton said. In 2002, his wife was diagnosed with Alzheimer’s disease. Long-term care insurance may have helped pay for someone to assist her at home, but Hawyer wonders whether the company would have refused to pay or whether he would have dropped the policy before his wife’s diagnosis. “With that insurance, there are so many ifs,” Hawyer said. “My advice: Put some money aside either way. No matter what, they always take cash.”

Being prepared
But insurance agent Tom Varner of Long-term Care Financial Partners in Metamora said many people may not be disciplined enough to sock away thousands now to pay for care later. “There’s so many misconceptions, and there’s denial and procrastination,” said Varner, who likens long-term care insurance with car, life and homeowners plans. “You’re insuring a huge risk down the road. It may or may not happen to you. That’s always the fly in the ointment.”

That was Joe Kent’s thinking when he bought a long-term care insurance policy three years ago at age 46.
“You have to consider, ‘Gee, I could be on this Earth for another 30-40 years and not be in a position to earn a living,’ ” said Kent, who lives in Addison Township. He pays more than $1,000 yearly for his policy. “Health insurance isn’t going to pay for long-term care. So what is? Your own assets. If you own stuff, you can kiss it good-bye.”

Alexander has wavered between a save-all-the-money-she-can plan and a double-pronged approach of setting aside savings and supplementing it with a bare-bones long-term care insurance policy to keep premiums low and, she hopes, affordable for the next several years.

“The alternatives just stink,” said Alexander, whose New Year’s resolution is to make a decision about a policy. “And either way, you’re betting your future.”

By Marty O’Neill, Insurance Agent

Wake up, America! A financial crisis could be looming for which you are not prepared. This is the loud and clear conclusion of a recent Roper study about long-term care which shows that most Americans have done little to prepare for what could be one of the largest expenses they’ll ever face – their long-term care. The American Society on Aging (ASA) released the study.

“This study is a real wake-up call for people to start thinking about long-term care,” said ASA’s Jim Emerman. “People need to take the first step of getting some guidance about their long-term care needs. Careful planning can help preserve your options and protect your assets if you ever need long-term care in a nursing home, an assisted living facility or even in your own home.”

But the Roper study of people 45 and older shows how few are actually taking that important first step. More than four in five (86 percent) of the people surveyed said it was important they have enough money to be able to choose a long-term care setting if they or a loved one needs it. But only 37 percent have actually started saving money to cover those costs.1

At the same time, while the overwhelming majority (89 percent) believes it’s important or very important to have some type of private or government coverage for long-term care, only 17 percent have bought insurance that specifically provides it.2

Long-term care is for people who need help taking care of themselves after an injury, illness, stroke or disease. While most people think of it simply as moving into a nursing home, it can also include having a healthcare aide come to your home or staying in an assisted living facility. Surprisingly, 40% of the people who need long-term care are actually quite young, working adults under the age of 65 who need help after an accident or an injury.3

Why aren’t people planning for this vital need? After all, we plan for retirement, for college and other important things. The survey, which was funded by State Farm4, found considerable confusion about long-term care. For example, almost half the people surveyed mistakenly believe their health insurance or disability insurance will pay for long-term care. Others are not aware that Medicaid will only cover long-term care if you’ve used up almost all your financial resources. And, in the most telling comments of all, half said since they won’t need long-term care until they’re older, so there’s no need to think about it now.5 It’s time to wake up and change that way of thinking.

Given the fact that 71.8% of people over the age of 65 will need some form of long-term care, families need to consider long-term care insurance as part of their financial plan. Long-term care insurance can help protect assets, preserve choices and provide independence.

Families should at least be discussing their individual needs with someone they trust.

1 The Roper survey findings will be posted on statefarm.com® at www.statefarm.com.
2 Study conducted by Roper ASW, August 2002. Released by State Farm Mutual Automobile Insurance Company and the American Society on Agency (ASA), April 2003.
3 GAO analysis of information from the Department of Health and Human Services and the Institute for Health Policy studies at the University of California, San Francisco. As cited in, “Long-term Care: Current Issues and Future Directions, General Accounting
Office Report to the Chairman, Special Committee on Aging, U.S. Senate.” (GAO/HEHS-95-109). April 13, 1995: pg. 7. The level of coverage provided by long-term care insurance depends on the type of policy you purchase. Some types of care received may not be covered by long-term care insurance.