Long-term care costs not covered in most policies

by Jan K. Allen

SBJ Contributing Writer

More people are living longer and standard health insurance coverage often fails to meet such needs as assistance with daily living unrelated to catastrophic illness.

As a result of an again population, long-term care, and how to pay for it, has become a major issue.

According to Kathy Powell, agent with Ollis & Company, few people have not experienced either personally or through friends or family the need for home care or nursing home care, and the problem of how to meet spiralling care costs.

Powell said there are four ways to cover health care expenses. A person can be self-insured, be a recipient of Medicare or Medicaid, or have private insurance. The two government programs cover only charges directly related to the treatment of an illness and hospitalization. Health plans have typically had the same narrowly defined structure.

"Fifteen years ago, people didn't even know about assisted living. Now there are facilities everywhere," Powell said.

It has only been in recent years that insurance providers have come up with insurance protection that will cover the costs of the care provider, whether it be a nursing facility or in the insured person's own home.

With most policies, the care provider does not even have to be a medical person, Powell said.

Coverage varies, and basically there are two categories, the tax-qualified plan, in which the patient requires substantial assistance with ordinary tasks like feeding or dressing themselves, and the nonqualified plan, which allows an unskilled care provider to help the insured with basic chores like cooking, shopping, housekeeping, answering the phone, paying bills and doing the laundry.

Congress is on the verge of legislation to make the second option tax-deductible as well, according to Powell.

Part of the impetus for these long-term care insurance plans comes from the obvious gap in coverage caused by Medicare paying less and less and people being forced to leave the hospital before they are able to care for themselves, according to Debbie Green, agent and certified financial planner with Wealth Management Inc.

The plans can be inexpensive, especially if the insured is under 60 years of age when he purchases the coverage, plus the underwriting is more liberal than for regular health plans, Green said.

There are a few life insurance companies that will let the policyholder convert a portion of his or her life insurance to long-term care, but for the most part people are on their own to provide for this contingency, which can be an asset-draining proposition for the person without coverage.

"People often spend down to Medicaid when they have long-term illnesses," Green said.

Coverage can be for a specified amount and time, or for an unlimited time with little increase in premium.

There are options available that allow for inflation, and options to pay a set amount monthly to the insured or directly to the care provider.

The average cost of nursing home care can run about $90 per day, which is approximately $33,000 per year. In-home care can be even more expensive, according to Green.

The interest in long-term coverage is coming on slowly, Green said. As the need for care of an ailing or elderly family member hits more families, the financial losses and hardship will drive more people to look at this type of protection in the future.

Businesses now have the opportunity to add long-term care coverage to their insurance benefit packages.

Group plans offer the individual a cheaper premium rate, plus more lenient underwriting. They also have the benefit of payroll deduction of the premiums, Powell said.

Policies can be paid monthly, semi-annually, annually or, if the insured has the money, he or she can pay a lump sum in one payment.

Some policies have a paid-up feature which allows the insured to pay for the benefits in full over a set number of years.

Initial awareness of the issue of long-term care has come through articles in major national publications, but increased interest usually comes when a person has had to deal with the problem directly via an aging parent or relative, said Alan Lockhart, executive vice president of Marketing Financial Services.

Hit with the expense of a family member's long-term care, individuals begin to think about their own future protection, he said.

Premiums are cheap for people under 50, and they can fund a 20-year paid-up policy.

With an inflation rider they can have the assurance their assets are protected in retirement should the need for long-term care arise, Lockhart said.

"The sooner they get it, the more they save," he added.

Some people are opting to fund the policy with an annuity they had planned to use for retirement income, but found they do not need it for that purpose, Lockhart said.

Others are setting aside money for premiums as part of their estate planning to protect their assets and retirement income.

[[In-content Ad]]