When one spouse qualifies for LTCi and the other doesn’t

Couples often face a dilemma when only one spouse qualifies for long-term-care insurance coverage, leaving them on the financial hook to pay for the expenses that are associated with the LTC costs of the spouse who has not qualified for the product. Tom Riekse, managing director at LTCi Partners, recently shared some of the steps that agents and advisors can take to help the spouse who failed to get LTCi coverage.

The need for LTCi

Several surveys have pointed out the fact that many clients need LTCi protection. Each day, more than 11,000 Americans turn 65, and a majority (56%) of them will need some level of long-term care services within their lifetime, according to the Department of Health and Human Services. Yet, LIMRA estimates that only 3% to 4% of Americans who are age 50 and over have a private long term care insurance policy.

The costs of providing LTC services are high and continue to rise with each passing year. For example, the annual median cost of a home health aide exceeds $77,000, and the median yearly cost for a semiprivate or a private room in a nursing home is between $111,000 and $127,000, depending on the location, according to LIMRA.

Reasons for denial

What are some of the reasons why a spouse is sometimes denied LTCi coverage even though the other spouse qualifies? LTCi takes a variety of forms, including standalone, short-term care plans, life/LTC linked plans or annuity linked products, Riekse said.

All these products are medically underwritten. When consumers apply for long-term-care insurance, health questions will be asked, medical records may be ordered and prescription drug databases may be accessed, Riekse said.

“It’s not surprising that the medical conditions that can result in a decline are the types of things that may lead to expensive long-term care in the future,” he added. “So for someone who is in the typical buying age range of 50-65, insurance carriers are looking at the following as real concerns: Cognitive or memory issues, diabetes complications, a recent stroke or heart event, neurological disorders, mobility limitations, and multiple co-morbid conditions.”

These factors may lead to someone being declined coverage, Riekse said. It’s always a smart idea to pre-screen with a brokerage general agency that works in the long-term care space so they can look at multiple carriers and avoid declines, he added.

“If they do happen,” he said, “it’s important for the spouse who was approved coverage to avoid acting rashly and withdraw their application. It’s much better for a couple to have at least one person with coverage than no coverage at all.”

Helping to provide coverage for the denied  spouse                                                                            

And what are some of the steps that agents can take to gain coverage for the denied spouse? Riekse said that just because a spouse is declined for their preferred solution doesn’t mean that no solution is available.

There are some options for coverage that might be worth considering, Riekse said. These include:

1. Short-term care insurance. Riekse said that STCi coverage, as its name implies, has a limited benefit period - typically a year or less. These plans can provide benefits that are similar to tax-qualified LTCi, including the provision of home care and skilled nursing coverage. “Because the overall liability to the insurer is limited, they may be able to be more aggressive in offering plans. Someone may even consider purchasing from more than one carrier to increase benefits,” he said.
2. Annuity/LTC plans.Annuity/LTC plans can often double or triple the initial deposit if long-term care is needed, Riekse said. Because of their structure of using the deposit for LTC (typically tax-free) first, it is a form of self-insuring and carriers can be more risk tolerant. In addition, he added, some carriers will accept people who have been declined, and the medical questions that they ask may help determine the amount of additional extension of benefits available.

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Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at amseka@INNfeedback.com.