Timing & LTCi

A few years back, I ran into a colleague at the grocery. She had recently been licensed to sell Long Term Care insurance, and wanted to "talk shop."

Okay, I’m all ears.

Turns out, she had been trained (??) to advise her clients to put off filing a claim for as long as possible, on the theory that using their own funds would allow the insurance dollars to last longer.

I nodded and said "well, that’s interesting," and we went our separate ways.

It was not, in fact, "interesting,” it was stupid.

Whoa there, Henry them's sharp words. Care to 'splain’ yourself?

Sure.

Last Fall, my mother-in-law was in a pretty nasty car wreck, and ended up in a very nice  Assisted Living facility. She had long ago bought a Long Term Care insurance policy through an affiliate program that her husband's employer offered. Since she had multiple physical issues as a result of the accident, she qualified for benefits under the policy, and they began rolling in a few months later.

Unfortunately, she passed away recently, which is what prompted this post.

The most important aspect of the claims issue is that we don't know how long that person will live, and had we listened to my colleague's advice, we may well have left significant "money on the table." Here's why:

She needed help with activities of daily living, and part of the claims process is an evaluation by a company representative (usually a nurse or service that they contract with) to make that assessment. If we had waited, there would have been no way for that evaluation to have taken place, and the claims process would have been very messy (or just straight-out declined). There was absolutely no upside to waiting, but significant potential (more likely, probable) downside.

Alternatively, had she been cleared for claims up-front and we had simply waited before filing the claim (which is another way to have interpreted my colleague's idea), we would not have been reimbursed until later. Yes, we would likely have still received the funds (this was a reimbursement-type plan) but why would we have given up the interest (this was a fairly decent amount)? After all, money is fungible, and using the carrier's funds instead of Mom's meant her money was able to keep earning interest.

Take heed.

Analysis Paralysis*

Back in April, an agency client (we'll call him Mark) inquired about Long Term Care insurance (LTCi). As usual, I forwarded the link to FoIB Herman Bruns' evergreen primer on purchasing this valuable coverage.

Yesterday, I received this in email:

"Hi,

Just wanted you to know I am still here, just sidetracked with other responsibilities.

I am back to reading about LTC. 

Also I am curious about the combination policies that link together LTC and universal life [ie hybrid plans]; not sure I understand the death benefit. If I don't use the LTCi funds my heirs would receive a death benefit i.e. life insurance?  But you put a lot of money in upfront? Not sure how that compares with annual premiums.

Lots of questions. and apparently one can decide on certain components of traditional LTC.

I am almost at the time where we need to talk."

So, rather than try to answer all that via email, I called him.

The conversation ran for almost an hour, but I took away a few key points that I thought would be helpful to our readers.

First, I told Mark that, while I certainly encourage my clients to be informed consumers, there's a point where that becomes "information overload," and one simply shuts down, unable to make an actual decision.

And that would be bad.

Why?

Well, to paraphrase a dear friend:

The best LTCi plan is the one that is in force on the day you enter the nursing home.

The worst plan is the one that you never bought, and so wasn't in force when you needed it.

So ultimately, it doesn't really matter which plan you buy, as long as you make the conscious decision to either pull the trigger or self-insure.

Now, one may quibble as to which plan design represents the "best bang for the buck," and I'm happy to have that convo, as well. But the bottom lime is that a well-designed plan, that fits one's budget (both current and projected) is the goal.

It really is that simple.

(* Thanks, Jeff M!)

LTCi: The New Normal

According to The Gray Lady, about a third of all CV-19 deaths have occurred in nursing homes:

"While just 11 percent of the country’s cases have occurred in long-term care facilities, deaths related to Covid-19 in these facilities account for more than a third of the country’s pandemic fatalities."

This makes sense, of course; these are pretty much the most vulnerable among us, kept in a relatively small,confined environment.

Heck, even now, politicos know enough to move their own parents out of these places:

"Pennsylvania Health Secretary Rachel Levine’s mother moved out of a personal care home with the health secretary’s help, after Levine ordered all nursing homes and long-term facilities in the state to accept coronavirus patients from hospitals."

#SomeAreMoreEqualThanOthers, one supposes.
 
So what does this have to do with Long Term Care insurance?

Well as FoIB (and LTCi Guru) Randy G explains, the impact of this is enormous:

Knowing that most (all?) nursing homes have been essentially on lock-down for the past two-plus months, and deaths are still mounting at them, it makes sense that, going forward, even more folks will opt for in-home care. Which is great for places like Visiting Angels and the like, but who pays for this?

If your immediate response was Medicaid, well, think again:

"[B]ecause most individuals would rather be cared for at home and home care is cheaper, all 50 states now have Medicaid programs that offer at least some home care."

The key word here is some, and as states are being saddled with more and more of the Medicaid financial burden, look for those to become even more curtailed. And it's also important to understand just what in-home services are being covered:

"Medicaid home care services are typically provided through home- and community-based services "waiver" programs."

Yikes.

And this is where a properly constructed Long Term Care Insurance plan comes in: one that covers both facility and in-home care (which is pretty much standard now) can offer peace of mind (and choice!). If you've been putting off looking at a plan, there are still a lot of choices available (and yes, that includes you folks over 65).

Oh, and if you think we're exaggerating about the impact of this situation on the future of nursing homes, Randy G also sent along this:

"Someday, most of us will return to life before COVID-19. Nursing homes will not ... Operators are being crushed by higher costs and shrinking revenues."

But wait, there's more:

"Even before COVID-19, the mixed business model of nursing homes was extremely challenging for all but the most efficient providers ... Some of those short-term challenges may fade over time. But some will not."
 
#SomethingToConsider

LTCi on pause?

Co-blogger Bob emailed us with this info he learned from a trusted source:

"I was told this today...with an effective date of applications starting tomorrow. I have several folk 65+ who are trying to apply, and I have to say sorry, but I have more expensive options for you to look at.

Throughout the rapidly evolving pandemic, Mutual of Omaha has been continuously evaluating our underwriting and new business practices to support business continuity, deliver a consistently high level of service, and maintain our financial strength.

As a result, effective Thursday, April 16, 2020, we are implementing a temporary change. We will not be accepting LTC applications for individuals age 65 and older. All LTC cases not already approved or issued will be postponed and processed as an incomplete application.

We will continue to prequalify applicants 64 and younger. The prequalification will be good for 60 days. If the health of the client changes or the prequalification is past 60 days, you will need to prequalify the applicant again."

I then confirmed this with FoIB Randy G, who added:

"MOO, TransAmerica, NGL, and Thrivent are not accepting any applications for those over the age of 65.

They say temporarily….

Reason is that individuals over the age of 65  will require a home face to face interview.

The nurses who conduct those interviews don’t have sufficient PPEs to enter homes.

Anyway, that’s the story I got.

The companies will still accept applications for those 64 and under. However, there are restrictions to this as well."

Thanks, Herman and Randy!

Oh, my take?

I think it's bullcrap: have none of these carriers ever heard of Skype?

LTCi: When to make a claim

Courtesy of co-blogger Mike:

During a visit to my doctor, I asked him, "How do you determine whether or not an older person is ready to make a Long Term Care claim for Assisted Living?"

"Well," he said, "we fill up a bathtub, then we offer a teaspoon, a teacup and a bucket to the person to empty the bathtub."

"Oh, I understand," I said. "A normal person would use the bucket because it is bigger than the spoon or the teacup."

"No" he said. "A normal person would pull the plug. Here’s your claim form."

😃

About your LTCi plan and the Stock Market

As the stock market continues its roller coaster ride, this seems like a good time to remind folks about the folly of self-insuring Long Term Care expenses:

Even though her #investments are down about 20%, my mother-in-law's #longtermcare insurance policy will pay the full cost of her assisted-living facility this month just like it did last month. #bearmarket #personalfinance #RetirementPlanning

Thank you, @johnhancockusa! https://t.co/aVzSy4Nit2

— Scott A. Olson, CLTC (@LTCShop) March 10, 2020

That is, regardless of how the market does (or doesn't do), once you're on-claim, you're on-claim for the duration of your policy's benefit period.

 

On the other hand, if you've chosen to self-insure, that certainty becomes a lot less ... certain.

Just sayin'.

Mutual of Omaha LTCi Underwriting: Behind the Curtain

Over the past few months, we've been featuring videos from the folks at Mutual of Omaha, which in turn feature some of that carrier's senior Long Term Care insurance underwriters. They're an opportunity to peek "under the hood" at how carriers assess and price risk.

In this final installment, MoO's Director of Underwriting, Allen Gregoire, "discusses the effort his LTC underwriting team puts into quick turnarounds, and wonders how the future of insurance underwriting, especially concerning genetic testing and cognitive diagnoses like Alzheimer's and dementia."

We've touched on genetic testing before, and all I can say is that we'd better be aware of just how insidious its inclusion in the underwriting process would be.

Here's Allen:

LTCi in the news

Fresh off the presses:

Just Released: 2020 LTC insurance premium deduction and tax-free benefit increases! https://t.co/GFpR5KIDrX pic.twitter.com/9viLCFMYY1

— Bill Comfort, CLTC® (@comfortltc) November 7, 2019

Potential good news for folks considering an LTCi purchase.

Not sure about timing? Well, consider this timeless post from our friend Herman Bruns:

"As more and more baby boomers become aware of the devastating financial and emotional effects that a long term care need can have on their family, the average age at which people purchase LTC insurance has been steadily dropping every year."

LTCi Rate Increases: The More You Know

From FoIB Scott Olson, the REAL reason why older long-term care insurance policies have had such large rate increases:

Problem solved? Sorta, maybe.

Just about two years ago, we reported on a potential problem still lurking under the radar:

"For decades, life insurance carriers ... sold permanent universal life insurance policies, marketed as "insurance for life," utilizing outdated mortality tables that did not take into account the fact that Americans were, and are, increasingly living to and past the age of 100."

To be sure, there are still quite a few other permanent-type plans out there with the same issue.

And what issue is that, Henry?

Well, when these plans "mature" while the insured is still alive, that person is likely to be hit with a pretty hefty tax bill; that is, the policy is paid out as a lump sum to the insured, and any excess over the total premiums paid are taxable. That could be a sizeable sum indeed, and is a double whammy (since that policy is now canceled).

Until now, there really wasn't much one could do about in-force plans (hence the clarion call for a class action lawsuit).

But in a Long Term Care insurance (LTCi) product training session last week, I learned about another product that might be a solution to the tax issue:

OneAmerica Life offers an annuity product that's available to folks up to 99 years old, and doesn't require forced annuitization (or Required Minimum Distributions). While marketed as a potential LTCi alternative, it struck me as solving at least part of that "maturation" problem, since there's no immediate funds to pay out and thus be taxed. Called "Legacy Care®,"  it lets one roll-over the cash value of an existing life insurance policy and continue to defer taking the tax "hit" (although it's going to fall to one's heirs eventually).

Not perfect, of course, but at least a little light at the end of the tunnel.

[Hat Tip: FoIB Randy G]

Up next from MoO

Mutual of Omaha, that is:

"We hope the first video interview we did with Demerri Bond was helpful and insightful. Now, we're excited to bring you the next in the series, an interview with underwriter Carol Carville."



MoO is currently our primary LTCi carrier (due to great value and strong financials), but the points Carol makes apply to pretty much all carriers.

1,000 Words on LTCi

From Bill Comfort, CLTC:

 

[click to embiggen]

Says it all, really. Have a plan.

Some Good LTCi News

John Hancock, long a fixture on the Long Term Care insurance scene, is enhancing some in-force plans, at no additional cost to their insureds):

"We are excited to let you know that John Hancock is planning to pilot a variety of wellness programs for our Long Term Care (LTC) policyholders that will provide them with information that may help them live longer, healthier, and more independent lives."

Nice!

(Particularly for those with lifetime benefits)

The first one, called LIFT Wellness is a voluntary program that includes an in-home visit by an RN who will "conduct an assessment, and may recommend certain [lifestyle] changes and/or home modifications with a focus on fall prevention."

The program itself is being offered free of charge, one presumes that the cost of any actual renovations done will be borne by the insured (which is fair).

And speaking falling, our friend Roger D reminds us that some Medicare Advantage plans offer a complimentary fall detection device with 24 hour monitoring. Be sure to ask if your plan offers such a benefit, too.

Evergreen State Long Term Care

So the great state of Washington has passed legislation implementing what appears to be the first "Social-Insurance Program for Long-Term Care" in the nation.

Cool.

But what, exactly, does that mean?

Well first, let's look at what this plan isn't:

It is not an individually owned, Partnership Compliant long term care insurance plan (it's not, in fact, 'long term care' coverage at all, but we'll circle back to that). That's not to say it's evil, fattening or carcinogenic, just noting its limitations.

On the other hand, it's also not the late, unlamented CLASS Act, so it actually seems to have some decent value, especially relative to cost.

Okay, that's nice, Henry, but what is it?

Pretty simple, really:

"All residents will pay 58 cents on every $100 of income into the state’s trust. After state residents have paid into the fund for ten years—three if they experience a catastrophic disabling event—they’ll be able to tap $100 a day up to a lifetime cap of $36,500 when they need help with daily activities such as eating, bathing, or dressing."

That is, they'll be eligible to receive up to a year of extra help with common tasks (assuming care costs $100 a day, and this amount increases each year). Which is, quite frankly, pretty remarkable. And at a tax rate of about 6/10th's of 1%, quite affordable. Given the state's average income of $70,000, that comes to about $400 a year per taxpayer.

So, is this a good deal?

Depends, no?

I'm ambivalent as to its likely result:

On the one hand, as it relates to encouraging folks to at least discuss the idea of long term care (and insuring it, obviously), raising awareness, I think that can be good.

What I'm afraid of, though, is that it will give folks a false sense of security as to the need to self-insure. I see this quite a bit with folks who think "oh, I don't need LTCi, Medicare will pay for it."

Uh, no, no it won't.

But a lot of folks believe that it does. And I'm concerned that folks will think that this is indeed Long Term Care insurance when it's not even really Short Term Care coverage.

On the gripping hand, it may well be all that many (most?) Washingtonians want, or need, or even qualify for.

Then here's this: proponents say that "[a]ll working people will pay into the fund through a payroll tax and then be able to claim a benefit when they need it."

Oh, really?

Then what happens if I pay into the plan for 20 years, and then decide to retire to Florida?

Time will tell, no?

[Hat Tip: Bill Comfort]

Under the Radar Long Term Care issue

We blog pretty regularly about Long Term Care (LTC), and more specifically about Long Term Care insurance (LTCi). But we haven't really spent much time discussing the impact of caring for a loved one can have on one's own finances. The last time we addressed the issue was almost a decade ago:

"About 73% of the primary caregivers – and 40% of the secondary caregivers – said they had reduced contributions to savings accounts as a result of caregiving responsibilities, and 80% of the primary caregivers and 55% of the secondary caregivers said they had reduced retirement contributions."

So we see that immediate and long term consequence in terms of savings. But what about earnings?

Recently, colleague Ian Kremer alerted us to this article that addresses the question of re-entering the workforce after an extended absence to care for a loved one:

"For the individuals that had to take a long break from their career to become a full-time caregiver the prospect of re-entering the workforce can be intimidating. Most likely you will find unique challenges that may make it difficult to land the job that you want. There are some ways that you can prepare for success."

As I replied on Twitter:

"This is an important issue, and one that very few people (especially those caregivers) have thought out beforehand."

Really recommended.

How 'bout that! LTCi edition

Recently, a long-time long-term client passed away. Many years ago, he and his beloved had purchased a pair of (linked) John Hancock Long Term Care insurance (LTCi) plans. In fact, it was so long ago that I'd forgotten a key feature.

Recently, Jack passed away, and we helped Jill alert the Hancock folks. Over the weekend, she received two premium refund checks, one for Jack's policy (of course) but also one for hers.

This was a problem: we certainly didn't want to lose her coverage, and we couldn't understand why they would have cancelled it and not just Jack's.

As we waited on hold yesterday for the Hancock rep to help us out, I casually mentioned to their son (who is also a client) that I had a vague recollection of a long-ago feature available on those plans that basically said that if one spouse dies, the survivor's plan is automatically paid up for life. but I couldn't recall any details or even if it was, in fact, a Hancock feature or option (although at least one compsny still offers this as an optional benefit).

After a few moments, Melissa came back on the line to let us know that this was, in fact, the case, and that Jill's policy is now completely paid up and in-force. She will never have another premium (or, one presumes, premium increase).

Bravo!

Phrasing: An LTCi story

Recently, I had an interesting Twitter conversation about Long Term Care insurance. It all started when our friend Allison Bell tweeted:

"While a lot of insurers are hiding from stand-alone long-term care insurance... National Guardian Life is out there getting its product Partnership program approvals."

[ed: Partnership-compliant plans have special powers]

I replied:

"Good for them! Challenge: They still use Service Days for Elimination Period."

And that's when things got interesting.

A Twitter friend responded "Educate us please... What is that, and why bad?"

So I explained:

"Long Term Care insurance (LTCi) plans have a "deductible" in the form of waiting periods until benefits begin. Some (most?) are based on *calendar* days; that is, I've been eligible for benefits for 90 days now, go ahead and send those checks.

NGL, though, uses service days; that is "I've been eligible for benefits for 90 days, but have only had care for 60 of those, so I still have 30 more days receiving care before I'm eligible.

It's not good/bad, just different, but I much prefer calendar to service. Often get benefits much quicker."

Our friend Scott Olson (a recognized LTCi guru) chimed in:

"My relative had a home health aide come to the house everyday for 90 days... just a short visit of a few hours. That satisfied the service day elimination period in only 90 calendar days and it didn't cost much."

I replied that I had nothing against service day plans, but that I preferred calendar-based ones. I then pointed out that home health care is not free; around here, it runs about $20 an hour. Based on a 90 day elimination period (by far the most popular option), that would cost about $3,600 just to access the claims process.

Scott agreed, but suggested that this could be offset by lower premiums on service day plans. My experience has been that this is rare (I've actually never seen it happen 'in real life.'). Still, worth considering.

You, Your Money, and Nursing Homes

Allison Bell is one of my very favorite insurance journalists, and we've quoted her work quite often. Her articles are typically first-rate: understandable, accurate and complete.

You just knew there'd be a "but" here, didn't you?

Recently, she posted an article on the cost of nursing home care depending on whether one was self-pay (including long term care insurance), Medicare and Medicaid:

"If nursing home owners had a choice, they might prefer to see Medicare patients come through the door."

That;'s because (apparently) Medicare pays about 60% more for nursing home care than private payers (including the aforementioned LTCi policyowners) do.

Which makes sense, actually, since Medicare doesn't actually pay for long term care, which is where the nursing homes would then make up any shortfalls. And for short term, Medicare-eligible stays, it's unlikely that very many LTCi plans would pay a nickel, since most will have a 20 or 90 (or longer) day waiting period. It's also important to note that the criteria for Medicare reimbursement is quite different than what would trigger an LTCi claim, further reducing the number of those actually paid for such short term stays.

Now what would be interesting would be to include those newfangled short term care plans in this mix.

One wonders how they might fare.

LTCi News: Up & Up

As our population ages, Long Term Care insurance has become more and more popular as a cost-effective way to preserve one's hard-earned nest egg. After all, the cost of a nursing facility stay (or even at-home care) runs into the thousands of dollars a month, and can quickly eat up one's savings.

The challenge,of course, is that as we age we tend not to get healthier, and the odds of having such a claim increase each year. Which begs the question: how is this affecting carriers' bottom lines?

Well, we have one answer here, thanks to co-blogger Bob:

"Unum Falls as Long-Term Care Loss Ratio May Prompt Reserve Charge"

Um, Henry, what does this even mean?

Quite simply, their actual loss ratio was almost 10% higher than last year's (loss ratios are metrics of how much is paid out versus premiums paid). That's not exactly a prescription for long term financial stability. A big part of the problem is that those on claim for cognitive impairment (eg Alzheimer's and the like) are living longer, which is nice (kind of) for them, but a direct impact on the insurer's bottom line.

Which may mean another round of rate increases.

Or not:

Stunning LTCi News [UPDATED]

[Please scroll down for update]

Today's Long Term Care insurance (LTCi) plans generally max out at 5 or fewer years of claims, and at a certain dollar limit ("bucket of money" concept). But back in the day, one could buy a policy with no such limits; these were called "unlimited" plans.

We actually still have a couple of those on the books.

It's been a while since carriers have offered these, and one can imagine why.

But if you can't, then I recommend this item by FoIB Allison Bell over at ThinkAdvisor:

"[O]ne male policyholder who has received about $1.6 million in LTCI benefits, over a period of 9 years and 10 months."

This gentleman paid in about $56,000, and has (thus far) received almost 30 times that in benefits.

Heckuva deal.

UPDATE: I've been reliably informed in the comments that (at least) one carrier, National Guardian Life, still offers the "unlimited benefit" option.

Nice - Thanks, Scott and Tom!