Insurance Update
January 2016
Issue No. 64
In this issue

Long-term care insurance checklist

 

 

About Us 
Insurance logo 
 A not-for-profit ministry of
Church of the Brethren Benefit Trust Inc.

Church of the Brethren Insurance Services provides the following products: dental, vision, basic life and accidental death & dismemberment, supplemental life and AD&D, dependent life and AD&D, retiree life, long-term disability, short-term disability, and Medicare supplement for eligible Church of the Brethren employees.
 
Dental, vision, retiree life, and Medicare supplement coverage may also be available for eligible retired Church of the Brethren employees.
 
For eligibility information, call Connie Sandman at 800-746-1505, ext. 366, or contact your human resources representative.
 
Medical and ancillary plans (named above) may be available to Brethren-affiliated employer groups.
 
Long-Term Care Insurance is available for all members of the Church of the Brethren, their family and friends, and employees of Church of the Brethren-affiliated agencies, organizations, colleges, and retirement communities. 

Contact Us 
1505 Dundee Ave., Elgin, IL 60120
800-746-1505
www.bbtinsurance.org 
  




The New Year brings new energy reinforced by resolutions to do better, to do more, to be a better person. On the other hand, this optimism is countered by the realities of deep winter -- snow, bitter cold, icy streets, treacherous sidewalks, and dark, short days -- in the words of the carol, "the bleak midwinter." Even in milder climates, January is a fallow time. The joys of the holidays are a fading memory, and the winter doldrums are setting in. So which is it for you -- possibility and hope or darkness and dormancy, or an intermingling of both realities?
 
In this issue we are considering something that most people would probably not put on the side of energy and light, so maybe it's fitting that we are discussing it in January. Most people would rather not think about planning for long-term illness, disability, or cognitive impairment. Yet doing so lightens the spirit and gives hope for the future, because it reassures you that you will receive care when you need it, and that you and your family will be protected from exhausting your resources if you should experience a terrible illness or injury.
 
We are talking about Long-Term Care insurance. Increasingly, you hear that people are integrating this into their thinking about the future, especially the retirement years. So we have tried to give you what you need to know if you are beginning to consider LTCI.
 
Long-Term Care Insurance is a complex and changing insurance product. We hope that the material in this issue will help you in your understanding and consideration of this important matter.

 
Everything you ever wanted to know about Long-Term Care Insurance and didn't know how to ask

 
In recent years more and more people are considering something called long-term care insurance. This may be because the huge baby-boomer generation is retiring and thinking about the effects of aging. Or maybe people all across the age spectrum are considering and planning for the future. No matter what age you are, buying long-term care insurance (LTCI) can be a confusing and complex matter. We will try to break it down for you in manageable chunks of information to think about.
 
What is long-term care insurance?
There are two key ideas you need to understand -- personal care and extended time. This insurance provides for your daily personal care over an extended period of time when you have a chronic illness or disability. This care ranges from assistance with simple daily activities to the skilled medical care provided by nurses, therapists, or other professionals. Extended time means 90 days or longer and possibly much longer. The expression long-term is important not only for this reason but because health insurance, Medicare, and supplemental insurance are designed to pay for specific medical treatment only over a short period of time, while long-term care insurance picks up where these leave off.
 
What does it pay for?
Long-term care insurance pays for personal and custodial care. Medical care is included but is not the primary form of care. Long-term care is delivered in a variety of settings such as your home, a community organization, a retirement center, or a nursing home. This insurance will pay for your care if your illness leaves you permanently incapacitated (a stroke, for example), if you have an accident that leaves you disabled, or if you are elderly and reach that time when you can no longer care for yourself.
 
Why buy long-term care insurance?
Obviously it is protection for you, insuring that you will receive the care you need when you are incapacitated. But it is also protection for your family, ensuring that they will not have to exhaust their resources, time, and energy caring for you.
 
What is long-term care?
Long-term care is a range of services and supports you may require in order to meet your personal care needs. Most long-term care is not medical care, but assistance with the basic personal tasks of everyday life, sometimes called Activities of Daily Living, such as bathing, dressing, using the toilet, transferring (to or from bed or chair), caring for incontinence, and eating. Other common long-term care services offer assistance with what are sometimes called Instrumental Activities of Daily Living. These include housework, managing money, taking medication, preparing and cleaning up after meals, shopping for groceries or clothes, using the telephone or other communication devices, caring for pets, and responding to emergency alerts such as fire alarms.
 
What are the basics?
Here is a quick summary of the complexities of long-term care insurance -- 
  • Total coverage needs
  • Benefits amount
  • Benefit period
  • Elimination period
  • Inflation protection
  • Total benefit amount or "pool of benefits"
Where do I start?
You need to determine your total coverage needs and to do that you must first know your "cost of care."  This is a term you will run into in any discussion of LTCI. Simply put, it answers the question of how much long-term care will cost you on a daily, monthly, and yearly basis. Of course, this depends on the kind of long-term care you need, which could range from private nursing care to home health assistance. "Cost of care" also depends on where you live. "Cost of care" will help you decide how much long-term care insurance you will want to purchase. Below are six levels of care and the median cost per day, month, and year. (Median means the middle amount between the state with the highest costs and the state with the lowest. It does not mean the average.)                                                                                                 
 Median Costs 
 
Per
day
Per
month
Per
year
Private room in a nursing home
$250
$7,500
$91,250
Semi-private room in a nursing home
$220
$6,600
$80,300
Assisted-Living Facility
$120
$3,600
$43,200
Adult Day Health Care
$69
$828
$25,185
Home Health Aide Services ($20/hr., ex. 8 hrs.)
$160
$4,800
$58,400
Homemaker Services ($20/hr., ex. 10 hrs.)
$200
$6,000
$73,000

The cost of care in the state where you live may be higher or lower than the median. The figures below will give you an idea of the range.    
                                                                   
 
Highest/year
Lowest/year
Private room in a nursing home
$158,775 Connecticut
$62,050 Louisiana
Semi-private room in a nursing home
$146,000 Connecticut
$51,100 Texas
Assisted-Living Facility
$68,940 Delaware
$36,000 North Carolina
Adult Day Health Care
$31,829 Alaska
$13,240 North Carolina
Home Health Aide Services ($20/hr.)
$59,488 Alaska
$36,608 Louisiana
Homemaker services
$94,050 Wash., DC
$34,320 Louisiana
 
The figures in these two charts are taken from the Genworth 2015 Cost of Care Survey. This website will also allow you to look up the cost of care in your own state. It is important to remember that these are 2015 figures. As you plan, you have to assume they will increase every year.
 
Now that you know cost of care, what are your "total coverage needs"?
Planning for long-term care means thinking about what your needs might be if you have a debilitating illness, cognitive impairment, or a disabling injury. When you have decided the level of care you will want for yourself, then you find the cost of that level of care in your state. This is the benefits amount. The next thing you need to consider is how long you want to be sure you will have that care. This is the benefits period. You multiply the benefits amount by the benefits period and you arrive at your total coverage needs. (Click here for a discussion of coverage needs.)
 
How do I determine my benefits period?
It is an inexact science to try to predict how long you will need benefits. Perhaps the health history of other members of your family can give you clues. In the end you have to use your own best judgment.  The average length of stay in long-term care is about three years. But if there is a history of Alzheimer's in your family, for example, you might consider a longer benefits period.
 
What else do I need to consider?
Before you can decide how much LTCI you want to purchase, you need to determine the total benefits amount, which may be different from your total coverage needs. You will need to ask yourself how much of these total coverage needs you will be able to cover with your own assets, such as pensions, social security, investments, or savings. You will also want to ask yourself what part of your assets you want to preserve for your spouse, your heirs, or for charities and other organizations you support. When you know how much of your assets you are willing to use for your long-term care, you subtract this from you total coverage needs. This will determine your total benefits amount or pool of benefits.
 
What is the "pool of benefits"?
This is the total benefits the policy will provide. For instance, suppose your pool of benefits were $350,000. This means that your policy would cover your long-term care up to that amount. Let's say you live in Pennsylvania and you need skilled nursing care in a private room. The estimated annual cost in that state is $113,150. Thus, your policy would cover slightly more than three years, which is the average length of stay. But suppose you needed assisted living. Again, if you live in Pennsylvania, the estimated annual cost is 42,660. Your policy would cover 8.2 years of care. It is not uncommon for a person to spend some time in assisted living until skilled nursing care is needed. Let's say you needed to live in assisted living for five years and then move to a private room in skilled nursing care. You would still have enough left in your pool of benefits to cover about 14 months of nursing care. This example is actually atypical because 80 percent of people begin their long-term care at home, which means the pool of benefits can be stretched out.
 
What is the elimination period?
This is the period of time before the benefits of your LTCI policy kick in. In order to decide the length of this period, you need to know the terms of your health insurance. If you are retired, you need to know how long Medicare and supplemental insurance policy will cover your care. The typical elimination period is 90 days with the assumption that you will be able to cover any costs of care during those 90 days with your health insurance or your Medicare and supplemental insurance and your own assets. The elimination period can be shorter, but the shorter it is, the more the policy's premiums increase.
 
What is inflation protection?
It may be 20 or 30 years after you start your policy before you need your benefits. If the pool of benefits still has the same dollar value, it will not purchase as much care as it would have bought when you took out the policy. The only way to avoid that reality is to purchase inflation protection. For instance, if you are 60 years old and you buy a policy with $380,000 of coverage, that amount of money will buy far less care when you are 85. But if you buy a policy with 5 percent compounded inflation protection, the pool of benefits will grow to $1.5 million dollars by the time you are 85. You can buy different levels of inflation projection, and the higher the percentage, the more costly it is. At one time 5 percent was common. In today's economy 3 percent is sometimes suggested. This is something to discuss with your agent.
 
How do you or your family decide that you need long-term care? What are the triggers?
Typically, a person needs long-term care when he or she cannot do at least two of the six activities of daily living. Remember they are bathing, dressing, using the toilet, transferring (to or from bed or chair), caring for incontinence, and eating.
   
Can you buy LTCI that will cover the cost of your care for the rest of your life?
That kind of policy was once possible, but it is now very rare and very costly. Only one major insurance company offers it. A different approach would be to consider enlarging your "pool of benefits."
 
Does LTCI cover you only when you are in your retirement years?
No, if you have a LTCI policy, it covers any long-term care at any age. For instance, if you bought your policy at age 50 and had a disabling workplace accident at age 52, your policy would cover your long-term care. A surprising 40 percent of LTCI claims are for people under 65.
 


When your long-term care has begun, can you or your family members choose what level of care to provide in order to stretch your pool of benefits?
Yes, of course. For instance, round-the-clock home health care will cost as much as a private room in a nursing home, but a few hours a day of home health care might be combined with care from family members, so that the cost of care becomes less and the pool of benefits lasts longer.
 
If you have a spouse, is there an advantage in buying LTCI together?
Yes, because both of you are protected. If only one of you has LTCI and the uninsured one is incapacitated, his or her care can exhaust all your resources, leaving nothing for the other spouse. Some policies offer a "shared benefit" option. With this kind of policy, the benefits for each spouse are put together into one pool, which both spouses can use. Some prefer this, assuming the likelihood that only one spouse will need long-term care. And since they cannot know which one, the whole pool would be available to either or both.
 
At what age should you buy long-term care insurance?
The younger you are the lower the annual premiums, but then the longer you will be paying them. Many financial advisers recommend buying LTCI when you are in your fifties and no later than your late fifties or early sixties. This is the time in your life when you are likely to have the extra cash to pay the premiums. Further, you are paying more attention to retirement matters and may have a better picture of your retirement budget, yet you are still working at full salary.
 
What do I need to know about the LTCI industry?
The LTCI industry has been changing. The cost of this insurance has been rising. According to the Wall Street Journal, about 8 million people have some form of long-term-care coverage ... Last year, an estimated 131,000 long-term-care policies were sold, down 24 percent from 2013. Sales peaked at about 750,000 per year in the early 2000s. Only about a dozen companies remain in the market, compared with about 100 just over a decade ago. These companies are beginning to create new products. So the options before you as you think about LTCI are growing. Inform yourself, think carefully, and most importantly find a good agent whom you can trust.
   
What should I ask my agent?
There is a small number of major companies. Ask your agent to help you compare information and costs from at least three of these companies. Ask how often and by how much the companies have increased their premiums. Never let anyone pressure or scare you into making a quick decision. Never pay any insurance premium in cash, and always make your check payable to the company and not an individual.

Nearly all states require insurance companies to give you 30 days to review your signed policy. During this time, you can return a policy for a full refund if you change your mind. Still have questions or concerns? Contact the agency listed for your state at the State Health Insurance Assistance Program (SHIP) at shiptacenter.org. Deciding whether long-term care insurance is right for you can take a significant amount of time and research, but making the effort will be time well spent.
 
Where can I find an agent?
Brethren Insurance Services, a ministry of Brethren Benefit Trust, offers long-term care insurance for all members and employees of the Church of the Brethren and their family and friends; and also for employees of Church of the Brethren-affiliated agencies, organizations, colleges, and retirement communities and their families and friends. Contact Randall Yoder. See below.
 LTCIContact Randy Yoder in the New Year about LTCI
We hope the foregoing article has answered many questions about Long-Term Care Insurance. If it raised many more questions, you may be at the point where you need to talk to an agent. To ask your questions and receive a free, no-obligation proposal, please contact:

Randall Yoder
Brethren Insurance Services
847-849-0205
Click here for more information

For questions about other products offered by Brethren Insurance Services, call 800-746-1505, Ext. 366

Remember, despite your best efforts, there is always the chance you could suffer a debilitating illness or a disabling accident. And, of course, if you live long enough, the time will come when you will need some extra care. Long-Term Care Insurance makes sure that you will get the care you need. It assures that your medical bills will not eat up your savings. Finally, and this is one of the best things about LTCI, it protects your children and other relatives from having to use their resources to care for you.

Brethren Insurance Services offers Long-Term Care Insurance for all members and employees of the Church of the Brethren and their family and friends; and also for employees of Church of the Brethren-affiliated agencies, organizations, colleges, and retirement communities and their families and friends.