Do you need long-term-care insurance?

By William C. Roeger Jr. & Doug Kreitzberg

PaTLA recognizes that you and your clients have questions regarding long-term-care insurance. This information is offered as an educational source to keep you as an attorney informed personally and so that you can add more value to your client service.

Q What is long-term-care insurance?
A Long-term-care insurance is an increasingly popular safeguard against the escalating costs of skilled nursing care. Types of care provided in a well designed LTC policy include: home health care, alternate care facilities, adult day care, and respite care.

Q Why consider long-term-care insurance?
A With the average daily cost of a semi-private room in a nursing home at $180, it’s easy to see that an extended stay quickly could wipe out any personal assets many people have accumulated. Medicare doesn’t pay for custodial care, which is what most seniors need. And Medicaid won’t pay a cent until virtually all your finances have been exhausted. Long-term-care insurance allows you to protect your assets for yourself and your family, instead of using them to pay for costly long-term nursing care. And with the passage of The Health Insurance Portability Act, long-term-care insurance premiums are a tax-deductible medical expense.

Q What do long-term-care insurance policies cover?
A If you should ever have a chronic illness or a disability that renders you unable to care for yourself for an extended period of time, you will most likely need long-term care in a nursing home, assisted living facility, or your own home. This care could include medical care as well as help with daily activities (such as bathing or dressing). Long-term-care policies cover skilled, intermediate, and custodial care in licensed nursing homes as well as home health services provided by state-licensed and/or Medicare-certified home health agencies. A few policies even allow for care to be provided by a family member.

Q How does the new law effect long-term care?
A As a result of the passage of the long-debated Kennedy-Kassebum Bill, premiums paid for long-term-care insurance will receive tax-favored status. For federal tax purposes, LTC Insurance will be treated like accident and health insurance. The passage of this legislation can be interpreted as a strong message from Congress that the federal government would like to diminish its role in the funding of long-term care. Federal entitlement programs are feeling the strain of increased utilization of health care services. In the future individuals will probably have to take more responsibility for personally funding long-term care. This bill grants significant incentives for the purchase of long-term-care insurance.

Q What different types of long-term care are available?
A Home care, community care, respite care, assisted living facilities, domiciliary care facilities, Alzheimer’s facilities, and nursing home care.

Q What should you look for when purchasing long-term-care insurance?
A An integrated plan which will pay the same daily or monthly amount for home care, assisted care and nursing home care. Also, select an established and stable insurer that offers stable premiums and guaranteed renewal plans.

Q What is a good age to subscribe for long-term-care insurance?
A Generally, the best candidates for long-term-care insurance are individuals between the ages of 50-65 who are planning for retirement and have at least $150,000 in assets to protect, not including their home. Those under this age may be interested in purchasing long-term-care protection for their parents or for themselves when the price is low. Since long-term-care insurance is medically underwritten, all candidates should be in reasonably good health.

Q How much long-term care should you purchase? What options are available?
A The average cost for a semi-private room today is about $180 per day. Most individuals will self insure for approximately $30 to $60 per day. The long-term-care insurance is then available to cover the remaining $120 to $150 per day costs. Options are as follows:

Daily benefit amount - This is the maximum benefit you will receive for any one day. Before choosing a benefit amount, you should find out the going rate for nursing home or home health care in your area. Typically, individuals choose an amount in the range of $100-$150 per day.

Benefit period – Five-year plans are popular because 90 percent of all people who need care will need it for five years or less. If you want to minimize your risk, a lifetime benefit period may be appropriate.

Elimination period - The elimination period is like a deductible and should be selected based on the amount you are willing to pay out-of-pocket before benefits begin. The most common choices are 20 days or 100 days.

Comprehensive plans - These plans can provide coverage for nursing home care, assisted living facilities, home care and community-based care. You can lower your premium by selecting a more limited plan such as nursing homes and assisted care coverage only. Other ways to reduce premiums include lowering the daily benefit amount, choosing a shorter benefit period, or increasing the elimination period.

William C. Roeger Jr., a partner in the Perkasie law firm of Roeger, Walker, Cassel & Holko, is PaTLA’s Comptroller.

Doug Kreitzberg is president of Colburn Insurance Service.

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