Options available to balance rising costs of coverage

Dear Michael: We read your past article about a companion long-term care policy that will help us stay in our home longer. You called it the anti-long-term care policy because it keeps you from having to use your long-term care insurance.

We are in our late 60s, and we just got a notice our long-term care – a five-year policy paying $5,000 per month – is going to be going up by 33 percent this year and again for the subsequent two years. That is a 100 percent increase in three years. Why do insurance companies keep raising their premiums and what can we do about it? – Cannot Afford To Keep It or Lose It

Dear Keep It or Lose It: Back in the 1990s and early 2000s, people bought long-term care insurance to protect their assets.

However, during the first decade of the new millennium, companies either started going out of business or selling their policies to other companies because they could not keep pace with the rising claims. Imagine, if you will, if almost 25 percent of your homes burnt down. How high do you think your insurance would be on your home? There are companies right now that are pulling out of states, such as California, because they are losing so much money. Big companies – like State Farm, Farmers, etc.

All the smaller companies that went out of business or sold their block of business left a huge gap in how insurance works. Insurance – like Social Security – needs to have new people, younger people buying into the system to decrease the claims percentage. When they sold out, all the healthy people left for a different company and the companies who stayed are now stuck with mostly unhealthy, older people or "claims waiting to happen."

Younger people are no longer buying traditional long-term care insurance because this generation has never been through the times when Medicaid did not pay all of your medical bills. Many people today say Medicaid will take care of me when I get older, but they may be wrong.

In the 1970s there was no Medicaid to pay for long-term care and families had to either take care of their elderly parents themselves or pay for their care out of pocket.

The problem with this thought process is sooner or later Medicaid is not going to have sufficient money to pay claims on long-term care. We may see vast changes in how Medicaid is administered in the next two decades and it is not going to be good – perhaps a full return to the 1970s.

In your situation, however, you might look at something like this: If your husband is on a separate contract than you, you might look at shortening his term period for care. Most men spend very little time in a long-term care facility with about 80 percent of them not making two years. Perhaps you can lower his long-term care coverage from five to two years if you cannot afford the premiums.

For both of you, you can consider the policy in my last article which is a combination death benefit and long-term care policy. If you need help with your husband at home, this policy will directly pay you a benefit so you can spend it how you like. Your current insurance only reimburses long-term care expenses.

You, yourself, might lower your coverage to three to four years if this policy picks up the first three to six years of care – at home. Or however you want, because you receive the benefit and spend it how you like. You ma'am, as a someday single person – will be able to stay in your own home much longer. This should considerably shorten your time in a facility.

Unlike traditional long-term care insurance, the death benefit is paid to your children upon your death – resulting in some return of premiums – and it is guaranteed never to rise in premium.

By working the two together – traditional and death benefit – you can come up with a manageable cost for long-term care without losing any benefits or time for care.