The Pros And Cons Of LTCi

May 15--For Cynthia and Fred Christopher, the cost of long-term care insurance, which they have had since 2002, has been worth it for the peace of mind it brought.

"We feel very strongly that until we go into a continuing care retirement community we should have this insurance, should something happen, cognitively, physically," said Cynthia Christopher.

But now the Christophers, retirees in Erdenheim, are worried. Since 2014, their insurer, Genworth, has raised their combined premiums 44 percent, to $5,427 from $3,767.

"This is still manageable for our budgets, but the concern is -- two big increases within a two-year period -- is this what we are going to continue to see?" said Christopher, calling the possibility of ever-rising premiums unsustainable on a fixed retirement income.

The Christophers have good reason to be thinking about their potential need for long-term care.

About half of Americans turning 65 between 2015 and 2019 will need long-term services to help with basic daily activities -- getting out of bed, getting dressed, bathing, and eating -- before they die, according to Urban Institute researchers.

The cost of those living services, adjusted for inflation, will average $138,100, the U.S. Department of Health and Human Services said. About 15 percent of those individuals face at least $250,000 in costs for those services. For more than 70 percent -- including those projected to require no long-term care -- the cost is projected at less than $100,000, according to the Urban Institute.

As the U.S. population ages, the societal costs of long-term care are expected to increase.

Currently, most of those costs are paid by individuals and their families or by Medicaid, the national safety net for the poor and for people whose assets are depleted in retirement.

Only about eight million Americans are covered by long-term insurance policies, including traditional plans, employer-sponsored plans, and life insurance policies that include a long-term care benefit, according to the American Association for Long-Term Care Insurance.

There is no simple answer as to whether any particular individual should buy long-term care insurance.

Steven J. Krzywicki Jr., managing partner at Beacon Bridge Wealth Partners in Conshohocken, advises clients to consider their physical health and longevity prospects, their financial condition, and whether they have family members who can help them in old age.

"Those are three critical pieces," Krzywicki said.

Financially, people can be divided into three groups.

One is the group of people who don't have enough money -- more than roughly $75,000 to $100,000 in assets excluding real estate -- to make insurance worthwhile. It would be a financial strain for them to pay premiums, so it makes more sense for them to avail themselves of Medicaid.

Then there are those who can comfortably set money aside to pay for long-term care. That requires assets in the range of $2 million or $3 million, said Greg Merlino, who founder of Ameriway Financial Services, a Voorhees financial planning firm.

"We've seen instances where clients have been in a long-term care institution for in excess of 15 years because they have some kind of dementia," Merlino said.

The third group is "the broad stretch of individuals in between that really could benefit from at least investigating long-term care insurance," Merlino said.

A mistake that some people make is assuming that they can rely on Medicare, said Adam Beck, a professor of health insurance at the American College of Financial Services, in Bryn Mawr.

"For most retirees, Medicare is going to go a long way in covering their medical costs, but it does not exist to pay for long-term care," said Beck.

Aside from assuring a level of long-term care that might not otherwise be possible, two reasons for buying long-term care insurance are to protect an estate and to spare children some of the responsibility of caring for an elderly parent.

The cost of nursing homes is a big threat to estates, Beck said. The average annual cost for a private room in a Philadelphia-area nursing home was $127,750 last year, according to Genworth.

Taking a potential burden off children is a factor for some.

"We've got children and grandchildren. We just feel that it's important not to have our kids worried about us, where we're going to go or what's going to happen," Cynthia Christopher said.

Christopher, 68, knows the benefit first hand. Her parents bought the insurance, and her father, at 96, is still using it.

That was a selling point for Cynthia and her husband, Fred, who is 74. "We got an excellent plan," she said.

But soon after the Christophers bought their policy, the long-term care insurance industry entered a period of turmoil, with dozens of firms leaving the business.

As recently as a decade ago, Genworth, for example, told policyholders that it had never raised rates on policies issued starting in 1974.

Those days are long gone.

This year, Genworth requested increases ranging from 33 percent to 130 percent for 27,551 Pennsylvania policyholders. The state's Insurance Department approved increases of 30 percent for policies with unlimited benefits and increases of 20 percent for policies featuring limited benefits.

Thomas McInerney, a Genworth executive, said at a March hearing that the company's requests for large increases centered on certain policies issued from 1974 to 2002. Genworth lost $2 billion on those policies nationwide through 2014, he said.

Among the factors behind the increases are low interest rates, which make it harder for companies to earn income on reserves, and fewer policy lapses than anticipated when the policies were sold.

Center City resident Carl Denlinger, 85, has had a Genworth long-term care policy since 1998. The annual premium for him and his wife, 86, is $5,729. His rate is going up this year, but he does not yet know by how much, leaving him wondering whether he will be able to afford it.

"I'm waiting, as they say about the cat, with bated breath," Denlinger said.

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