When we are young, it is hard to imagine that at some point we may need long term care for ourselves.  After all, we have youth on our side, and we feel invincible!  However, as we mature the cycle of care is evident.  When we are young our parents care for us.  Then as we become adults, we begin to see the effects of aging in our parents and we begin caring for them.

Whether you are currently taking care of your parents or other family members, at some point in time it may become necessary to consider long term care.  Long term care can include at-home care, assisted living, nursing home care as well as other types of care.  All of the long term care options mentioned have costs associated with them.  Those costs, when on a fixed income, may not be affordable.

*This blog is for educational purposes only and should not be considered legal advice.  The use of the Paths Law Firm website does not constitute a client-lawyer relationship.

Preparing for long term care is essential, however, according to a poll related to long term care, 71% of individuals aged 40 and over are not prepared for the cost of care that they may need in the future.  The poll cited that 29% of people questioned had set aside funds specifically to cover long term care and only 23% of those individuals had looked into long term care insurance as an option.

The Basics of Long Term Care Insurance

Long term care insurance was originally introduced in 1980 as nursing home insurance.  The main purpose of long term care insurance is to pay for any expenses that are associated with long term care services and services that support personal care and supervisory care.  This includes services at home for assistance with activities of daily living (ADLs), as well as care at assisted living facilities, skilled nursing facilities, and rehabilitation centers.

Long term care policies will reimburse the policyholder a set amount each day up to the amount selected for the policy limit.  There are many different options for long term care insurance.  When looking for a policy, it’s important to know what you want out of a policy and the cost that is associated.  Policies that do not have the coverage and terms you are looking for are a waste of money.  Be sure to research the insurance policy company to ensure that they are reputable and the terms of the policy on coverage, premium changes, eligibility, exclusions, and protection for inflation.

Basic and Instrumental ADLs

There are two categories of ADL’s that are looked at when determining coverage for long term care assistance.  Below is list of assistance that falls into each of the categories:

Basic ADLs

• Ambulating – The ability to move from position to position or walk independently
• Continence Management – The ability to control bowel and bladder function
• Dressing – The ability to dress independently
• Feeding – The ability to feed oneself independently
• Personal hygiene – The ability to bathe and groom independently
• Toileting – The ability to get to and use the toilet independently

Instrumental ADLs

• House cleaning and maintenance – The ability to clean up after themselves and maintain a clean environment
• Communications – The ability to make phone calls and send mail
• Finances – The ability to manage finances and pay bills
• Medications – The ability to get one’s medications and take them on their own
• Meal preparation – The ability to prepare a meal without assistance
• Transportation and shopping – The ability to shop for necessities such as groceries or clothing, and drive or obtain transportation

Many long term care policies use ADLs to help determine the qualification of benefits. In addition, the policies may indicate how many ADLs an individual must require assistance in order to trigger benefits.

Does Everyone Need Long Term Care Insurance?

In the United States, the population of individuals that are 65 years or older is growing exponentially each year.  And, according to the Population Reference Bureau (PRB), the number of Americans ages 65 and older will more than double by 2060 with nearly one-quarter of Americans being age 65 or older.  With our country aging at this rate, more individuals will need assistance and care than in the past. There are approximately 56 million adults age 65 and older as of 2020.  This number is estimated to grow to an estimated 98 million adults age 65 and older in 2060 according to longtermcarepoll.org.

The National Association of Insurance Commissioners (NAIC) has reported that they estimate 70% of Americans that are over the age of 65 will need some type of long term care during their lifetime with an estimated 35% needing an average of 1 year of nursing home care.  With these statistics, the probability of care is high for the majority of Americans.

Deciding whether or not to purchase a long term care insurance policy should be based on your Income, assets, and retirement goals.  If the only source of income that an individual has is through Social Security or Supplemental Social Security Income or income is at or below the poverty level, it’s likely that those individuals will qualify for some type of assistance such as Medicaid and may not need to purchase an insurance policy.

If an individual can pay for care out of pocket, but they do not want to use all of their income or assets, they should consider a long term care insurance policy.  This can be a difficult decision as we do not know in advance whether or not we will need the coverage.  Either decision to purchase or not to purchase can be risky.

What are the Qualifications for Long Term Care Insurance?

Long Term Care insurance policies are not guaranteed to anyone.  To obtain coverage, you first need to apply and be approved.  Many companies require that the policy have medical underwriting to ensure that the applicant is in good health at the time of the application process.  As most policies are based on health rather than age, it is advised to purchase a policy before there is a decline in health.

Some reasons for denial of coverage would be if the applicant requires assistance with any ADL, uses oxygen or a wheelchair, or is uses or needs at the time of application home health services or nursing home or assisted living care.  Additionally, applicants may be disqualified for pre-existing conditions of which there is a long list.  Some of the conditions that may disqualify an applicant are as follows:

• AIDS/HIV
• Certain types of cancer
• Cirrhosis of the Liver
• Muscular dystrophy (MS)
• Paralysis
• Parkinson’s disease
• Renal Failure
• Sickle cell anemia
• Alzheimer’s disease
• Dementia
• Schizophrenia

If you have a pre-existing condition, you may still qualify for long term care insurance.  The rules of medical underwriting change and can vary from carrier to carrier.  An Elder Law Attorney can help answer questions and assist in the application process or appeal.    Once an applicant has been qualified, the Long Term Model Care Act, created by the NAIC, mandates that insurance carriers cannot terminate a policy or refuse to renew a policy based on declining health, mental health deterioration, gender, or the age of any policyholder.

What are the Different Types of Long Term Insurance?

There are many different types of long term care insurance policies available.  Each type of policy provides different benefits and has its own questions associated with qualification and approval.

Group Policy

Group policies are oftentimes provided by employers.  These policies are similar to policies that can be purchased as an individual.  Some group policies may have options that you cannot get as an individual and may also have a lower premium to start.  If you are employed and have this type of group coverage you have the benefit of being able to convert the policy if your employer cancels it.  The premiums generally go up when this happens because of the buying power through a group policy versus an individual policy.

Federal Policy

The Federal LTC program is made available to current, retired, and former employees of the federal government and their qualifying dependents.  The downside is that all premiums are the policyholder’s responsibility as the government will not pay any part of the premium.  In addition, the premiums are similar to an individual policy.  Each State may also have similar policies for their employees.

Joint Policy

A joint policy is a policy that covers multiple people.  This would be a common policy for a married couple or partners.  These policies have higher premiums than individual policies, however, they are cheaper than the cost of two individual policies.  One factor to consider regarding a joint policy is that the benefits are shared.  This can pose a risk to one or both individuals because one person could deplete the benefit funds and leave the other person with little or no benefits available to use.

Hybrid Policy

Hybrid policies are a combination of long term care insurance and permanent life insurance.  These types of policies provide an investment component for savings.  In this type of policy, the policyholder can withdraw the funds needed for care.  When the funds run out, the insurance company begins paying for care.  A popular benefit of this type of policy is that if the policyholder dies, and has not used any of their benefits, the beneficiary will receive a death benefit.

Long Term Care Policy Benefit Payout

Benefits paid out for LTC policies are generally paid based on a daily limit or based on a monthly benefit, which is established by multiplying the daily amount by 30 days.  It’s important to establish what amount is needed on a daily basis to ensure that coverage meets your needs.  This can be done by contacting local agencies to find out what the average cost for the services in the area is.  Be sure to ask questions about the cost for long term care vs other care.  It is also a good idea to ask about the rates for private rooms and semi-private rooms.

When choosing a policy, be sure to ask about inflation protection.  This ensures that your policy is still valuable even with inflation and the rising cost of healthcare.  Inflation protection increases the benefit amount through the years that the policy is active.  In addition, its good to find out what the time limit is on the inflation protection as it could be anywhere from 10 years to 25 years based on the purchase date or based on a policyholder’s age.  Inflation protection does not mean that you will pay a higher premium, as some policies have this protection included.

In Closing

People purchase insurance policies for everything from life insurance, health insurance, home insurance, vehicle insurance, and more to protect themselves from unexpected events.  At times these premiums may be looked at as a waste of money however if the time comes that you need benefits, you will be happy that you are covered.  That extra protection provides you peace of mind and can help to prevent financial stress on you or your family.

If you or a family member needs assistance with the application process or appeal process for Long Term Care Insurance, Paths Law Firm has the expertise needed to help  We understand how important it is to protect your future and the future of those you love.  We help seniors and their families plan for the future to prevent financial and heredity issues that may arise during advanced years. Contact Paths Law Firm to schedule your consultation.  Thoughtful planning today can help you secure your future.