Bill O'Leary/WASHINGTON POST - Rockville resident Toni Footer with a photo of her late father, Martin Privot. She says his experience “reinforced my already strong feelings that long-term-care [insurance] is a necessity.”
At the end of 2010, about 7 million Americans had LTC insurance, according to LIMRA, an association of life insurance and financial service companies. About 422,000 new policies were written in 2010.
The 2010 health-care law has a provision creating a voluntary program of LTC insurance. However, in October, the Obama administration announced it would not implement the provision because it was financially unsustainable.
(Bill O'Leary/WASHINGTON POST) - Mary McClelland found that many of her mother’s expenses were not covered by her long-term-care insurance plan.
According to Slome, the average age of the buyer is 57, with three-quarters of the policies written when purchasers are between 45 and 64.
When buying insurance, the younger the consumer, the lower the annual premiums. Today, according to Slome’s association, a 55-year-old couple in generally good health can expect to pay $2,675 a year for $338,000 of benefits; that figure would grow to $800,000 by the time they reach 80 if the policy contained a 3 percent annual compounded escalation clause. If they are 65, however, that same policy would cost $4,660 a year and grow to only $527,000 in coverage when they are 80.
For Washington area residents, even that coverage can be less than needed. The Guide to Retirement Living SourceBook, a comprehensive listing of retirement community, nursing home, assisted living and rehab facilities and home-care options in the area, puts the daily local cost per person of nursing home care at $235 to $304, or nearly $86,000 to $110,000 a year. Daily assisted living costs run between $108 and $162. (The SourceBook is owned by The Washington Post Co.)
Steep rate increases
One of the key concerns among consumers is the rise of premiums.
“It’s probably the most frequent complaint I hear,” says Praeger, who heads the National Association of Insurance Commissioners’ health and managed care committee. “The problem is, the older policies weren’t priced right to begin with. Companies expected about 8 percent of customers to stop paying their premiums, when, in fact the lapse rate is closer to 2 percent.” That meant the insurers had to cover more beneficiaries than they expected at a time when the economic downturn has meant less return on their investments.
Praeger acknowledges that rate increase requests have posed a dilemma for insurance commissioners. “If we don’t give them the rate increase they need, the insurance carriers could become financially impaired, and that doesn’t help people,” she says. In fact, in recent years, a number of companies have stopped selling policies. As a result, she adds, it’s hard to turn the increases down.
The policies can be very complicated, and Praeger advises consumers to consult with their accountant, attorney or other trusted financial adviser before purchasing a policy.
This article was produced in collaboration with Kaiser Health News. KHN is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health-policy research and communication organization not affiliated with Kaiser Permanente.
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