Conduct a simple Internet search on long-term-care insurance and the results are baffling. Add the words buy or quote, and it gets even more complex. For an insurance product that already has mystery surrounding it, the sheer amount of information yielded by an Internet search makes it tempting to scrap the whole process.

But hang tight. If you’ve already determined that you have assets and income to protect from a catastrophic event, then finding accurate information is crucial to your family’s protection.

First, I recommend that you find an insurance agent who specializes in long-term-care insurance. There aren’t many of them.

Pick one who is an independent agent, someone who represents several of the top LTC insurance companies and doesn’t sell insurance from just one company. Actually, you need a LTC insurance agent who helps you design a policy that’s right for you. There are simply too many variables involved with designing the right long-term-care insurance policy that is right for your family and financial needs and your future needs and goals.

For example, recently a consumer had contacted one of our agent partners about buying LTC insurance. He and his wife had applied for a policy with a leading insurance company and he wanted to see if he could save some money. During the phone call he told the agent that they were planning on retiring in the Caribbean and planned on using their LTC policy there.

The agent explained that although the policy they had applied for was a very good policy from a top company, that policy would pay benefits for only 365 days if they were outside the United States. The agent recommended they buy a policy, for about the same premium, that could give them more than 10 years of coverage outside the United States.

Simply requesting a quote from one of the numerous Internet ads listed will not necessarily yield you contact with a specialist. The best way to find a specialist is through a referral from a friend. If you know people who have already purchased long-term-care insurance, and they liked their experience with their agent, this is probably your best source. Or, you can search the Internet for “long-term-care insurance specialist,” along with your city or region, and you might find a good agent.

After you have found a good LTC insurance specialist, your first question might be about cost and affordability. In order for the LTC insurance specialist to provide accurate quotes, you need to share some health information. It is vitally important that you share an accurate picture of your health with your LTC insurance specialist. By providing a list of current prescription medications and any related health conditions, your LTC insurance specialist will be able to choose which insurance company is most likely to approve your application with a good premium. Keep in mind that insurance underwriters will be obtaining a copy of your medical records, so withholding information from the insurance agent is not helpful.

Lately, insurance companies are moving towards enhanced Underwriting. Essentially, long-term-care insurance companies have begun to underwrite applications much like they do life insurance applications. That means a medical professional will visit your house to obtain your height, weight and blood pressure and collect blood and urine specimens.

Some recent articles state the opinion that this type of underwriting is a bad move for the long-term-care insurance industry. However, this move should bring an assurance to consumers that the underwriters are carefully managing their assets and limiting their risks. After all, insurance companies are for-profit, private companies. Having insurance is a necessity and can bring peace of mind. It’s a good thing if you never need it. Just like with auto insurance, we all have it and we all hope we never need it.

To learn more, send questions or comments to questions@LTCFacts.org.

In my last column, I addressed recent articles published on a several well-known news websites have been riddled with half-truths and misleading information.  In an effort to educate the public, here are a few more corrections to the half-truths that have cropped up recently:

LTC policyholders have confronted surprise rate hikes on the order of 45% to 85%.

Some long-term care policies have guaranteed level premiums for life.  But most long-term care policies are “guaranteed renewable” which means that the insurer has a limited right to request a premium increase from each state’s insurance commissioner.  In most states the premium increase can only be approved if the insurer has incurred significantly higher claims than the insurance commissioner had originally approved for that policy.  In most states, premium increases must go towards paying claims only—not profits.  And the premium increases must be shared by all the owners of that type of policy.

Most long-term care policyholders who have had premium increases have had only 1 or 2 premium increases over a 10 to 20 year span. And most premium increases have been closer to 20%, not “45% to 85%”. I’m sure most of us wish our medical insurance had only two increases over the past 10 to 20 years.  In 2004, most states adopted “Rate Stabilization Regulations” for long-term care insurance. Most long-term care policyholders who have purchased their policies after those regulations went into effect have not had any premium increases.

Imagine buying a Lexus for $5,000 down plus $500 a month under a contract that allows the dealer to raise the monthly payment if he wants to. Six months in, it goes to $800, and you have a free choice between paying up or handing in the car and losing your down payment. That would be a ridiculous contract to sign. LTC buyers sign contracts like that.

This Lexus example could only be an accurate analogy it included all of the following requirements for the monthly payment increase:

1. The state’s “Automobile Commissioner” regulated how much profit the Lexus dealer could make on each car,

2. The state’s “Automobile Commissioner” had to approve any increase in the monthly payment,

3. The increased monthly payment approved by the Commissioner had to be shared by all Lexus owners who had purchased cars from that dealer,

4. The state’s “Automobile Commissioner” would only approve increased monthly payments after the Lexus dealer incurred higher losses and had much lower profits than the “Automobile Commissioner” had originally approved for the Lexus dealer,

5. The “Automobile Commissioner” required the Lexus Dealer to give you the option to keep your payment at $500 but switch to a different Lexus one grade lower, and, lastly,

6. The monthly payment increase was required in order to keep all the Lexus owners in their cars, driving safely, and the Lexus dealer in business and able to maintain all the cars and guarantee all the warranties.

Obviously, this is a silly analogy, but these points prove the tight regulations surrounding long-term care insurance.

To collect on an LTC policy, your family may have to put up a fight.

The U.S. Senate Committee on Aging commissioned the federal Dept. of Health and Human Services to conduct an audit of the top long-term care insurers’ claims practices. The federal audit reviewed both approved and denied claims from seven of the leading long-term care insurers.  These seven insurance companies are currently paying over 70% of long-term care insurance claims.  They audited EVERY denied claim for some of the insurers in the study.

Here are a few important points made in the report:

“…There is a greater probability of approving rather than denying a questionable claim.”

“…Regarding denial decisions, we found that in all cases, there was no evidence to suggest that the individual met the tax-qualified criteria for benefit eligibility in their policy.”

“…This would suggest that companies are consistently applying their clinical contract language to their claims decisions.”

In other words, the claims are being paid! The reason some claims are not paid is because the policyholder does not meet the federal guidelines for “benefit eligibility” in the policy. You can download the actual study at LTCFacts.org and seach for Federal Audit in the search box.

To learn more, send your questions or comments to questions@LTCFacts.org.

Some of the leading long-term care insurance companies have recently announced that they will soon offer policies that have different rates for men and women.

Gender-based pricing for insurance is not new. Most insurance policies have premiums that are based upon gender, as well as other factors. Life insurance, auto insurance and disability insurance all have different prices for men and women because the risk factors are different for each gender.

Men pay higher premiums than women for most forms of insurance. One type of insurance for which women have paid higher premiums than men is medical insurance. However, as part of the Affordable Care Act, effective Jan. 1, 2014, all medical insurance policies are required to charge men and women the same rates.

Some reports on the Internet have stated that gender-based pricing for long-term care insurance is a violation of the Affordable Care Act (aka Obamacare). However, the Affordable Care Act does not have any regulations regarding long-term care insurance; it regulates only medical insurance.

As of the publishing of this column, all long-term care insurance policies available for sale still use unisex rates, meaning that men and women pay the same rates. However, this will change in most states sometime in 2013.

If you’re a woman and you’ve been thinking about purchasing long-term care insurance, you may want to buy a policy that has the unisex rates rather than wait for the policies that will have gender-based rates. Some have estimated that the gender-based rates may be as much as 20 percent to 40 percent higher for women than the current unisex rates.

Once you purchase a policy with the unisex rates you will always have the unisex rates; your policy cannot be switched to gender-based rates.

The justification for charging women higher rates than men for long-term care insurance is that women account for roughly two-thirds of long-term-care insurance claims. However, more women own long-term care insurance than men, so the data may not be quite so lopsided.

Women tend to become caregivers themselves for the men in their lives, thus reducing the number of claims made by men. With women typically living longer than men, there may be no one left to provide extended care for them.

According to an industry website, Genworth’s new long-term care insurance product, Privileged Choice Flex 2, will be launched in April in about 35 states with single women paying about 20 percent to 40 percent more than single men. Industry experts predict that all companies offering long-term care insurance will soon follow the gender-based pricing model.

To learn more, send your questions or comments to questions@LTCFacts.org.

If you live in California and have been thinking of purchasing a long-term care insurance product,now is the time to act.  Speak to a long-term care insurance specialist today!

My last column explained the government’s role in providing long-term care.

As a general guideline, if your household income is less than $50,000 per year and your net worth, not including your residence, is less than $50,000, then relying on Medicaid for your long-term care needs probably makes sense.

It is not always this clear cut. Suppose a couple wants to own long-term care insur­ance but can’t afford a policy for each of them.

Which spouse should get a policy?

Statistically speaking, women are more likely to need care than men, so it might make sense to buy only a policy on the woman. In reality, it’s the spouse who has the most income in his or her name who should own long-term care insur­ance.

For example, John has a pension of $36,000 per year. He also receives $24,000 of Social Security benefits each year. Mary, his wife, has a pension of $20,000 and she receives $15,000 of Social Security benefits each year.

Without long-term care insurance, if John were to need long-term care and apply for Medicaid to pay for his care, all of his income would have to go to the facility caring for him (minus a small allowance and minus the cost of his health insurance.) In other words, if he were to rely on Medicaid, Mary would no longer be able to use any of his income for her own living expenses. She would be able to keep only her annual income of $35,000.

Conversely, if Mary were to need long-term care and apply for Medicaid to pay for her care, all of her income would have to go to the facility caring for her (minus a small allowance and minus the cost of her health insurance.) In other words, if she were to rely on Medicaid, John would no longer be able to use any of her income for his living expenses. But, John would be able to keep all of his income totaling $70,000 per year.

Without having a policy on John, they risk losing about $70,000 per year in income. Without having a policy on Mary they risk losing about $35,000 per year in income. Therefore, if they can insure only one person, I think it’s wiser to insure John rather than Mary. Even without owning significant assets, it would certainly be wise to protect the primary source of income.

But what if there is mod­est income yet fairly signifi­cant assets that need protec­tion? In order for the gov­ernment pay for someone’s long-term care expenses, the person would have to spend down his or her assets to the poverty level — about $3,000 in most states.

Since 2005, and the pas­sage of the Deficit Reduc­tion Act, most states are allowing their residents to keep more of their assets if they own a government­approved Long-Term Care Partnership policy.

Long-Term Care Partnership policies are similar to tradi­tional long-term care insur­ance policies, except they must include special con­sumer protection features, especially inflation protec­tion. Each dollar that your long-term care partnership policy pays to you in bene­fits entitles you to keep a dollar of your assets, if you ever need to apply for Med­icaid services after using your policy’s benefits.

In the old days, you’d have to spend your assets down to the state-required minimums. Now, the state will allow you to keep the minimum amounts plus an amount equal to whatever your long-term care partner­ship policy paid in benefits.

Your assets are protected from Medicaid spend-down, and your assets can even be protected from estate recov­ery after you die.

Four states have success­fully run long-term care partnership programs since the 1990s — California, Connecticut, Indiana and New York. Since 2005, about 40 other states have established long-term care partnership programs.

To learn more, send your questions or comments to questions@LTCFacts.org.

Carolyn Olson is founder of LTCFacts.org, a website providing short articles about long-term care insurance to help people make decisions about buying long-term care insurance.

Long-Term Care Facts Column: article originally published by the Redlands Daily Facts February 7, 2013:

Last week I discussed the need for long-term care planning and the role that long-term care insurance can play.  Surprisingly, many people still believe that government programs will provide
for them and their loved ones.  But what exactly is the difference between Medicare and Medicaid, and which pays for long-term care?

Medicare is the federal program that provides hospital and medical insurance to people aged 65 or older and to certain ill or disabled persons.  Benefits for nursing home and home health services are limited to only those days that are medically necessary.

Medicaid is a joint federal/state program that pays for health care services for those with low incomes or very high medical bills relative to income and assets.  Therein lies the key words: relative to income and assets.

Medicaid offers some coverage for long-term care, but individuals must spend-down their income and assets.  The rules vary by state, but one typically can’t keep more than a few thousand dollars in “countable assets”.  And, in many cases, most of the income of the Medicaid recipient has to go towards his/her care.

Qualifying for Medicaid can be difficult for married couples.  Depending on the circumstances, the healthy spouse might have to forfeit the income of the spouse needing care.  The real kicker is the estate recovery portion of Medicaid.  According to the National Clearinghouse for Long Term Care Insurance, “If you receive Medicaid coverage for long-term care services, federal law requires states to recover the amount Medicaid spent on your behalf from your estate after you die.”  Although surviving spouses are protected until after their death, how devastating this would be for children to lose their loved ones, then be required to reimburse the state for the care provided after their death?

So what about the Patient Protection and Affordable Care Act?  Otherwise known as Obamacare, it contained a section addressing long-term care, which was supported by the late Senator Ted Kennedy (D-Mass).  This section of Obamacare was known as the CLASS Act (Community Living Assistance Services and Support), which was supposed to provide voluntary long-term care insurance to workers over the age of 18.  If needed, this provision would have allowed participants to receive on average $50 per day to help them pay for long-term care services they received at home or in a facility, without spending down their assets in order to qualify for Medicaid.

The Administration decided not to implement the program because they concluded it was not financially sustainable.  The premiums would have been far too expensive and most healthy workers would have opted-out of the program, thus making it unsustainable.  As a result, Congress never funded this portion of Obamacare, and in fact repealed it completely with the recent passage of the New Year’s Day budget agreement that avoided the “Fiscal Cliff”.

The only government program available to pay for long term care is Medicaid.  As a general guideline, if your household income is less than $50,000 per year and your net worth (not including your personal home) is less than $50,000, then relying on Medicaid for your long-term care needs probably make sense.  But, if there are significant assets and/or income streams to protect, then it might be time to talk do some serious planning for long-term care.  Although annual premiums for long-term care insurance can be $1,500 and up (depending upon your age, health, and choice of benefits), the benefits in the long run can be substantial.

If you’re married and you can only afford a long-term care policy for one spouse, or your income stream is higher than $50,000 per year yet your assets are far less than $50,000, then you need to know which spouse should get a long-term care policy.  I’ll cover that next time at Long-Term Care Insurance Facts.

We help you make informed decisions about long-term care.

LTCFacts.org is committed to educating consumers about long-term care insurance by providing an easy-to-use website filled with simple definitions about long-term care insurance terms and concepts.  By providing simple definitions for complex long-term care insurance terms, consumers become empowered to make intelligent buying decisions that impact their financial and family lives.

Contributing authors of LTCFacts.org have been involved with the long-term care insurance industry for over 17 years with knowledge of underwriting guides from top insurance companies in over 40 states.  This website is not sponsored by any insurance company, nor does it promote any particular insurance company or policy.  It is our goal to have sample policies for all of America’s top insurers available for you to research at your leisure in the comfort of your home.

Every consumer has different financial needs and health history, which is why educating consumers is especially important.  Once consumers understand the intimate relationship between their personal health history and financial situation, then they are ready to begin shopping and comparing long-term care policies offered by the various companies.

How to use LTCFacts.org?

LTCFacts.org is designed for consumers seeking to learn more about long-term care insurance.  On the right-side of the page you will see “LTCI DICTIONARY” with a drop-down list of long-term care insurance terms.  Some terms will have definitions only, and some will have other useful articles about that term.  You may search our site on the right-side of the page as well, or ask your own question by choosing the button at the top of the page.

What is Long-Term Care?

Long-term care includes a variety of services that may be both medically and/or non-medically necessary for people with a chronic illness or disability.  Health and personal needs are met through long-term care.  Generally speaking, long-term care provides people assistance with activities of daily living, such as bathing, dressing, eating, toileting or transferring.  People of all ages may need long-term care.

Choosing long-term care is an important decision.  Planning for long-term care requires you to think about possible future long-term care needs and costs.  It is important to plan for long-term care before you need it, and before a crisis occurs.  By thinking and planning your choices now, you will have more control over your individual situation, possibly remaining independent longer.  Even when you plan ahead, making long-term care decisions can be very difficult.

You may never need long-term care.  Even if you make careful plans and arrangements, you may never need it.  According to the US Department of Health and Human Services, “This year, about nine million men and women over the age of 65 will need long-term care. By 2020, 12 million older Americans will need long-term care. Most will be cared for at home; family and friends are the sole caregivers for 70 percent of the elderly. A study by t

he U.S. Department of Health and Human Services says that people who reach age 65 will likely have a 40 percent chance of entering a nursing home. About 10 percent of the people who enter a nursing home will stay there five years or more.”

“Well, my dad has a long-term care policy and it’s paying for his assisted living facility right now.  I want a policy that will do the same for me.”

Or, “My mom has 24-hour home health aides right now.  If it wasn’t for her long-term care policy, we’d have to put her in a nursing home.”

Millions of long-term care policies were bought in the 90′s.  Many of those policyowners are now making claims.  In fact, in just 2012, the leading long-term care insurers combined to pay over $6.6 BILLION in long-term care insurance claims to over 264,000 individual policyholders.  (Source:  AALTCi)

I shared that statistic with someone recently and he asked, “But how many claims do they deny?”

Recently, the federal government conducted an audit of long-term care insurance claims practices and released their findings in a 20-page report.  The audit was conducted over a 22-month period in 2008 and 2009.

The federal audit reviewed both approved and denied claims from seven of the leading long-term care insurers.  These seven insurance companies are currently paying over 70% of long-term care insurance claims.  They audited EVERY denied claim for some of the insurers in the study.

Here are a few important points made in the report:

“…there is a low incidence of disagreement between the clinical audit team and the insurance company adjudicators, particularly when it comes to denied claims.”

“…There is a greater probability of approving rather than denying a questionable claim.”

“…Regarding denial decisions, we found that in all cases, there was no evidence to suggest that the individual met the tax-qualified criteria for benefit eligibility in their policy.”

“…This would suggest that companies are consistently applying their clinical contract language to their claims decisions.”

In other words, the claims are being paid! The reason some claims are not paid is because the policyholder does not meet the federal guidelines for “benefit eligibility” in the policy.

Click the image below to read the full report.

This is a very important topic.  

I welcome your comments and discussion below!

What is long-term care insurance and why do you need it?

A simple Google Internet search yields a definition for insurance as, “a practice by which a company provides a guarantee of compensation for a specific loss.” Therefore, long-term care insurance is a practice by which a company provides a guarantee of compensation should you ever need long-term care or assistance with bathing, dressing, eating, toileting or transferring. Long-term care includes a variety of services that may be both medically and/or non-medically necessary for people with a chronic illness or disability.

Planning for long-term care requires you to consider possible future long-term care needs and costs. It is important to plan for long-term care before you need it, and before a crisis occurs. By planning your choices now, you will have more control over your individual situation, possibly remaining independent longer. Making long-term care decisions can be very difficult, even when you plan ahead.

Although most people cannot imagine themselves ever needing help with these activities of daily living, most people can imagine their loved ones needing care. If your parents are older than 70, it probably seems possible that they might need help at some point, or you have actually seen them need care. Can you imagine your partner needing care? What are the consequences should a family member unexpectedly need daily assistance?

Now consider the other insurance products you already have in your life. Auto insurance covers losses to your personal income in the event of an auto accident or theft. Health insurance covers losses to your income in the event of illness or injury, saving you potentially hundreds of thousands of dollars over your lifetime. Life insurance helps provide for your loved ones in the event of your death, providing for a continued source of income.

As the provider for your family, you have taken steps to protect your family from catastrophic losses beyond your control.

Now, what happens if you have a major stroke or heart attack and can no longer bathe, dress or eat without assistance? What happens if your partner is involved in a catastrophic event and requires daily care? Who will provide the care and how will the care be paid for?

You may never need long-term care. Even if you make careful plans and arrangements, you may never need it. According to the U.S. Department of Health and Human Services, “This year, about nine million men and women over the age of 65 will need long-term care. By 2020, 12 million older Americans will need long-term care. Most will be cared for at home; family and friends are the sole caregivers for 70 percent of the elderly.”

Are you prepared?

Next time, I’ll address the erroneous belief that long-term care is freely covered under Medicare and Obamacare.

To learn more, send your questions or comments to questions@LTCFacts.org.

Caveat:  LTCFacts.org is not a tax advisor.  Each of these situations has additional requirements and you need to make sure that you discuss your unique situation with your tax preparer.

Here are the 10 ways:

1. Owners of Health Savings Accounts can use money in the HSA to pay for some, if not all, of their LTCi premium on a pre-tax basis.
2. Owners of a Medicare Medical Savings Accounts can use money in the MSA to pay for most, if not all, of their LTCi premium on a pre-tax basis.
3. Retired public safety workers (e.g. firefighters, law enforcement, paramedics, etc…) can make tax-free transfers from their government-sponsored retirement accounts to directly pay their LTCi premiums.  (The transfers need to be done by the account trustee).
4. The self-employed: Someone who has self-employment income (e.g. home-based business, consulting work, etc…) can usually deduct some, if not all, of their LTCi premium under the “Self Employed Health Insurance Deduction” on the front of form 1040.  The LTCi premium for the spouse of the self-employed person can also be included under this deduction.  The self-employment does not have to be a full-time gig.
5. Owners of closely held corporations (S-corps and C-corps)can pay for LTCi premiums and write it off as a business expense.  It does not have to be offered to all employees.  This is a great way to use business income to protect personal assets and income.  In some cases, a “refund of premium” rider can be added so that all the premiums are refunded to your heirs/estate.
6. Owners of non-qualified annuities can have interest earned in their annuity applied toward their long-term care insurance premium.  Interest withdrawn from an annuity is normally taxable.  This can now be done without paying tax on the interest this year.  (Everyone can take advantage of this method!)
7. Owners of cash value life insurance can have interest earned in the policy applied toward their long-term care insurance premium.  Interest withdrawn from a life insurance policy is normally taxable.  This can now be done without paying tax on the withdrawal this tax year.
8. Owners of old, no-longer-needed, cash value life insurance policies can do a tax-free transfer of the cash value directly to a single-pay long-term care insurance policy.   The gains in the life insurance policy go directly to the long-term care policy without having to pay tax on the gains in the life insurance policy.
9. State income tax credits and deductions: 29 states and the District of Columbia, now have state income tax credits or deductions for those who own long term care insurance.  Taxcredits are available to residents of Colorado, Louisiana, Maryland, Minnesota, Mississippi, New York, North Carolina, North Dakota, Oregon and Virginia.  These tax credits can be as high as 25% of the annual premium and can significantly reduce your state income tax (dollar-for-dollar).
10. Lastly, if you itemize your federal income tax return, you can include much, if not all, of your long-term care insurance premium towards your medical expense deduction on Schedule A.