Planning For Long Term Care

July 13--If you drive a car, the state says you must have automotive insurance. If you own a home, homeowners insurance isn't required unless by the bank, yet is a good idea at any rate. Same goes for renters.

Life insurance is a good idea to help cover final expenses or leave a nest egg for a surviving spouse, but some choose to live -- and die -- without it.

And, of course, there's that whole thing about being required by Uncle Sam to have health insurance.

But when it comes to long-term care insurance, which helps to cover the cost of nursing home, assisted living and home-care expenses when people are unable to care for themselves, the first thing to know is whether owning it actually would do you any good.

"You don't have to be old to be in a nursing home." Tom Alger, Iowa Insurance Division

"One of the things we always say is, It's not for everybody," said Tom Alger, a spokesman for the Iowa Insurance Division, which regulates insurance companies in the state.

Who and why

Some who don't need it have money enough to afford nursing home or other types of care. Others don't have assets enough to bother with trying to protect them from being spent down prior to gaining eligibility for Medicaid.

Long-term care insurance is targeted primarily at people who live between those two extremes.

"There's kind of a sweet spot in the middle," Alger said, adding that the main market for such policies are people living at the upper end of middle class, who lack sufficient assets to pay the monthly cost of long-term care but have assets to save for the next generation and enough cash to pay the premiums, which can be in the thousands of dollars a year.

In Iowa as of 2010, the year with the most recent data, there were 149,000 in-force long-term care insurance policies, Alger said. A new type of plan called a partnership plan, which works with Medicaid to protect some assets even after benefits are exhausted, has helped drive interest in long-term care coverage the past three years.

Once purchased, Alger said, long-term care coverage is the least-dropped type of insurance, with policies lapsing at lower rates than home, life or auto insurance.

"People keep them," Alger said. "Over time, the probability of their needing to use them increases."

Long-term care is not health insurance. It does not replace private insurance or Medicare and does not pay for hospitalization or other acute care.

Beyond a strict desire to protect assets, Alger said other factors influence the potential benefit of buying long-term care. Gender is one, with women making up the larger percentage of long-term care recipients due to their longer life spans, making them more likely to collect benefits. Family history of disabling illness is another. Risky hobbies or workplaces might even enter in to the decision-making.

In those latter two instances, long-term care insurance is not strictly the domain of those considering life after retirement.

"You don't have to be old to be in a nursing home," Alger said. "You could have an accident. A stroke. Alzheimer's that puts you at risk. There's circumstances where this could happen to you at 40. Or it could be end-of-life."

Coverage and access

With the length of nursing home stays averaging between three and four years, Alger said, long-term care insurance buyers could choose to purchase enough coverage to get them through such a span, or they could fund a shorter period before their benefit would run out and require the care recipient to pick up any remaining cost until assets were depleted and Medicaid kicked in.

Coverage, Alger said, is calculated on an estimated cost-per-day basis, but whether the care received costs less or more per day only affects the speed at which the full benefit amount -- for instance, $125 a day for three years would amount to $137,000 -- would be depleted.

Being conscious of how benefits are paid out is one of the many intricacies of choosing a long-term care policy, Alger said. So are issues like rate increase history, which may be an indicator of future premium cost increases.

Like other forms of insurance, Alger said, risk and scope of coverage determine cost and availability.

Similar to life insurance, age and health play a part in determining whether a person can obtain coverage and how costly the premiums will be. The average age of purchase, Alger said, is 57, though some wait till they reach 70.

Younger buyers pay lower premiums, but stand to pay for a longer amount of time.

Like automotive and health insurance, deductible amounts also affect premiums. A person willing to cover the first 90 days of costs will pay lower premiums than someone with a shorter exclusion period, Alger said. And like homeowners insurance, there are plenty of optional coverages, such as degree of inflation protection, coverage for in-home care or provision of coverage based on premiums paid even if the policy is allowed to lapse.

"The product offered is very individualized," Alger said.

Getting help

Buying long-term care insurance can be confusing, both in terms of considering what coverage to buy and comparing the offerings of companies that offer it. Volunteers with the Senior Health Insurance Information Program, or SHIIP, are able to answer questions and provide advice. Hospitals in Des Moines, Lee, Henry and Van Buren counties have on-site SHIIP programs, while Louisa County residents are referred to hospitals in West Burlington or Muscatine for assistance, which is available by telephone.

Assistance also is available directly from the Iowa Insurance Division, Alger said.

"These are people without an agenda," he said. In other words, they aren't selling anything. And while there is nothing wrong with talking to an insurance agent, he added, "you might want to talk to more than one."

There are 18 companies, each listed on the Iowa Insurance Division website, that sell long-term care policies in Iowa.

On its website, SHIIP offers a downloadable guide to obtaining long-term care coverage. It begins with a section aimed at helping people determine their need for a policy, then follows with a how-to section for people interested in buying a policy. Also included is information about alternative approaches to long-term care insurance and consumer protections.

In the end, Alger said, the reasons to get long-term coverage or not to are as varied as the people who consider getting it. Whether they wind up buying it or don't, he said everyone ought to at least look into it, and determine whether it makes sense for them.

"At least," Alger said, "you'd want to be able to say, 'I know about it and I rolled the dice.' "

Learn more

For additional information about long-term care insurance, Iowa residents should call (800) 351-4664 or visit www.shiip.state.ia.us. In Illinois, call (800) 548-9034 or visit insurance.illinois.gov/ship.

The Iowa Insurance Division can be contacted at (877) 955-1212.

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(c)2012 The Hawk Eye (Burlington, Iowa)

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