Did I Read That Right? Rates for Long-Term Care Insurance Rose 9% This Year!
Published: Fri, 02/27/15
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Did I Read That Right? Rates for Long-Term Care Insurance Rose 9% This Year! If you cannot view the image below, please read the article on our blog.  Q. My wife and I like to plan ahead. Unfortunately, both of her parents and three of her aunts died of Alzheimer's, and we want to make sure we are prepared should one of us need long-term care in the future. We are aware of the astronomical costs of long-term care and are considering LTC insurance as a way to cover it. I have heard mixed opinions about LTC insurance. Recently, I saw one of your Facebook posts about a study in the New York Times stating LTC Insurance rose 9% this year, and rates are a lot higher for women. I must not be reading it right. In your opinion, should we still consider LTC Insurance as part of our planning, or is there a better way? A. Statistics show that more than 70% of people age 65 or older will need long-term care sometime in their future, so you are certainly wise to plan ahead. There’s definitely a benefit for some people in purchasing long-term care insurance. However, there are certain issues to consider before you buy, including the rising costs and how long-term care insurance interacts with Medicaid. LTC costs are rising faster than inflation, and yes, you read it right -- LTC insurance premiums rose this year an average of nearly 9%, according to a new industry report by the American Association for Long-Term Care Insurance (AALTCI). Each January, AALTCI compares top-selling policies offered by major insurers to determine average rates. This year’s analysis included rates from 10 insurers. On average, for a healthy 55-year-old man, LTC insurance costs $2,075 per year for $164,000 in initial benefits, up from $1,765 last year, the report found. The average cost for a healthy, single woman of the same age is $2,411, up from $2,307. Couples generally get a discount if they buy a joint policy. A married couple, both age 60, would now pay $3,930 combined, up from $3,840, for $328,000 of initial coverage. Keep in mind that these amounts are far below the costs of long-term care, which costs $10,000- $12,000 a month in the metro DC area. At that rate, your benefits would be used up in a little more than a year. The rates cited in the report are for new policies. Premiums for outstanding policies, particularly older ones, have been increasing as well, in part because people are living longer and insurers had underestimated the level of claims. Premiums typically will be lower if you buy when you are younger (in your 50s), rather than waiting until your 60s or 70s. Coverage not only becomes more expensive as you age but also becomes more difficult to qualify for at all, since health problems are more likely as you age. If you are considering long-term care insurance, you should look at the pros and cons, and weigh your options. The following are some important facts you should take into consideration before purchasing a long-term care policy:
Please see our blog post, "Long-Term Care Insurance- The Good, the Bad, and the Ugly" for more details. If you have done your research and decide long-term care insurance is right for you and your family, you should incorporate it as part of your long-term care plan, not as the only form of planning for long-term care. Keep in mind that there are dozens of long-term care asset protection strategies other than long-term care insurance. -Medicaid Planning can be started while you are still able to make legal and financial decisions, or can be initiated by an adult child acting as agent under a properly-drafted Power of Attorney, even if you are already in a nursing home or receiving other long-term care assistance. In fact, the majority of our Life Care Planning and Medicaid Asset Protection clients come to us when nursing home care is already in place or is imminent. -If you are still healthy and not yet on the “long-term care continuum,” then instead of Life Care Planning and Medicaid Asset Protection Planning you should consider our Living Trust Plus Asset Protection Trust, which is a simpler and less expensive method of asset protection for clients who will most likely not need any long-term care for at least five years. For most Americans, the Living Trust Plus™ is the preferable form of asset protection trust because, for purposes of Medicaid eligibility, this type of trust is the only type of self-settled asset protection trust that allows a settlor to retain an interest in the trust while also protecting the assets from being counted by state Medicaid agencies. As always, if you have not done Long-Term Care Planning, Estate Planning or Incapacity Planning (or had your Planning documents reviewed in the past several years), please call The Law Firm of Evan H. Farr, P.C. in Fairfax at 703-691-1888, in Fredericksburg at 540-479-1435, in Rockville at 301-519-8041, or in Washington, DC at 202-587-2797 to make an appointment for a no-cost consultation. --- Critter Corner: What is Partnership Qualified Long-Term Care Insurance?  Dear Saki and Alley, I heard about Virginia's Partnership Qualified Long-Term Care Insurance. Can you tell me more about it as part of a Medicaid Asset Protection Plan? Thanks! L.T. Cayre ----- Dear L.T., Virginia’s Long-Term Care Insurance Partnership Program allows consumers to obtain Long-Term Care (LTC) Insurance as part of a Medicaid Asset Protection Plan, and to protect assets that otherwise might have to be paid to a nursing home prior to obtaining eligibility for Medicaid benefits. One of the main purposes of the LTC Insurance Partnership Program is to offer government-endorsed “Medicaid Asset Protection” to consumers who buy long-term care insurance, enabling these consumers to protect an additional dollar amount of personal assets and still remain eligible to apply for Medicaid coverage of LTC services. How does it work?
When shopping for a long-term care insurance policy, it is crucial to consider carefully the entire financial situation of both spouses and to consider the alternative of not purchasing long-term care insurance, but using other forms of Medicaid asset protection. Failure to do so can result in purchasing too little coverage, which can actually be worse than purchasing no coverage at all. LTC insurance can be used as part of a Medicaid Asset Protection Plan when it is used to cover the potential need for long-term care during the five-year lookback period. Using this approach, you could purchase five years of long-term care insurance and, at the same time, transfer all of your assets into a Medicaid Asset Protection Trust. At the expiration of the five-year lookback period, you can simply stop paying the long-term care insurance premiums and allow the policy to lapse, knowing that Medicaid will be available to cover nursing home costs. Alternatively, the policy can be kept in force to cover 5 years of home health care, with the idea that Medicaid can then be used to cover additional time in the nursing home if necessary. Please read more on our Partnership Qualified Long-Term Care Insurance FAQs. If you need to do long-term care planning for yourself or your loved ones, please make an appointment at the Farr Law Firm for a no-cost consultation. Purrs, Saki and Alley |
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