In reviewing my past articles I found it hard to believe that it has been three years since we last visited the subject of Long-Term Care insurance (LTCi).
One thing that has changed over the years is the general public’s awareness of insurance plans to cover the catastrophic expenses of long-term care expenses.
When I first started offering these plans over 20 years ago many folks had no idea you could purchase a plan to cover these costs; nowadays everyone I talk to is aware that this type of insurance is available.
I see many people each month who are preparing to turn age 65 and are reviewing their insurance situation as they join the ever-expanding ranks of the Medicare population.
Of those folks who already have purchased an LTCi policy, most have purchased individual plans as opposed to the group plans offered through many large employers. This fact has been a surprise to me.
Fifteen years ago the trend in the industry was that employer group plans would be the avenue via which most people would purchase policies. They would purchase plans when at a younger age, with lower premiums, and enjoy the benefits of that wise decision many decades in the future.
To a great extent this has not materialized due to a number of factors, which we shall explore below.
It is one thing to offer employees in their 40s and 50s a policy, but when they are frequently faced with the expense of college tuition at the same time, the family budget does not stretch that far.
As health care costs in general have risen, many large employers are passing along an increasing portion of those premiums to the employees; this likewise has the effect of stretching the budget.
When this is combined with businesses in general cutting back both benefits and shedding employees, it is easy to see why fewer folks are purchasing LTCi through employer plans.
Recent studies have shown that the past 10 years have been brutal for many families in preparing for retirement. When folks have been laid off they frequently have to tap into their retirement accounts just to stay afloat and LTCi is an expense that can be postponed into the future or ignored completely.
Finally LTCi is still a product that needs to be explained one on one, as it is not suitable for a cookie-cutter, one-size-fits-all approach. These are a few of the reasons that I see most people with LTCi have purchased an individual plan when the benefits have been explained to them.
Everyone I talk to is aware that the expenses of long-term care can be high and most folks think in the $5,000-$6,000 per month range. This is true for care in your own home or assisted living facilities where care could be even lower than these amounts. But for care in a Skilled Nursing Facility (SNF) the monthly room and board is frequently around the $9,000 per month range.
Yes, those are Sequim costs in Avamere or Sequim Health and Rehab, not inflated prices from large metropolitan areas.
There are a number of methods to protect yourself to some degree from these expenses, including a traditional LTCi policy, and then various other options that utilize either life insurance, annuities or even a combination of them both.
Medicare continues to pay less than 2 percent of the nationwide costs of long-term care, with the vast majority of the expenses being paid by the individual patient and their families or Medicaid, which is available once persons have impoverished themselves.
I find when a person is going onto Medicare and is reviewing all the options that is a very opportune time to consider LTCi. When I see people who have been paying in excess of $500 per month per for their health insurance premiums and we sit down and explore all their options on Medicare, they usually can include an LTCi policy as well as great Medicare coverage for significantly less than they were paying for major medical alone previously.
If people choose not to protect themselves from the costs of long-term care, they have in fact made a decision to self-insure. When people are self-insured they pay no premiums but likewise have no coverage and if something happens to where they require care, they would be responsible for all costs of that care.
Most people carry many types of insurance from home, auto, umbrella, health, life, but other than life insurance which everyone will use at some point, the expenses of long-term care are the largest hole in their financial plan.
The state of Washington publishes a highly informative booklet called, “The Shoppers Guide to Purchasing Long-term Care insurance.” Copies may be found online at the Office of the Insurance Commissioner’s website, www.insurance.wa.gov, or locally at the SHIBA office, 411 W. Washington St., or at my office at the other end of Washington at Castell Insurance, 426 E. Washington St.
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