Napa's Health Insurance Guys: Should he buy long-term care?

Dear Kyle, Tom and Alan:

Every year about this time I meet with my CPA and have the same discussion about Long Term Care.

I'm 52, employed, and I am in good health. I've priced this type of insurance and it is amazingly expensive!

My CPA says the odds are at least 50/50 that I'll need it if I live past 65, so what's up?

P.S. I plan on living past 65!

Mike

Kyle: The state may be poised to help you with your decision, Mike. The California Task Force for Long-Term Care has been meeting for over a year and has presented five different options to the legislature for consideration. The plan is to tax payroll or income for all citizens in order to offer long-term care (LTC) benefits in the future. An actuarial company has been hired to present a cost analysis before the end of this year.

Al: There are at least a dozen other states considering tax-financed LTC for residents to alleviate the high demand for Medicaid.

Tom: OK. The reason that quite a few other states are considering this type of LTC is that Washington state has one in place that could be a model for many.

The Washington Cares Fund (or Act) requires that all W-2 employees contribute $.58 per $100 of earnings beginning this July. Benefits will be available July, 2026. The amount that the beneficiary can access is only $36,500, so it definitely encouraged individuals to get their own private coverage.

Those who had an LTC policy in place could opt out of the state requirement and, of course, this was a boon for insurance companies selling LTC coverage.

Al: The part that jumped out at me was that in order to trigger coverage, a person had to be unable to perform three of the Activities of Daily Living (ADLs). Typically, private LTC policies only require two.

According to the website of "LTC Tree" the large companies, John Hancock, Mutual of Omaha, Genworth, etc., define ADLs as: eating; bathing; dressing; toileting; transferring; maintaining continence. If an individual's doctor confirms the person cannot perform two of the six, he/she can go "on claim." Dementia and/or Alzheimer's are also triggers to begin benefits.

There are some that combine toileting and continence into one and have a list of five ADLs instead of six.

Kyle: Some members of the California Task Force wanted the employers to pay at least half of the tax on behalf of employees. Since corporations already pay almost 9% income tax in California, there could be some strong resistance. On the other hand, group LTC policies can have more lenient underwriting requirements than individual plans.

Al: We cannot emphasize strongly enough that you have to be in good health to qualify for an individual policy of LTC. I tell prospective customers to get ready for a paramed exam including blood and urine, and a lengthy wait for approval.

We'll get back to our readers as we learn more.