Long-Term Care Insurance in 2018

For years, attorneys, accountants, financial planners, and insurance sale persons have been touting the benefits of long-term care insurance. “Buy in your 50s and you will never have to worry about your future long-term care expenses ever again” was the common refrain. It was sound advice. With the right long-term care policy your problems were solved. Daily benefit rates typically covered the lion’s share of the daily private pay rate preserving assets for much-needed extras and, in many cases, a tidy inheritance for the next generation.

Unfortunately, any aging population, the unexpected popularity of assisted living facilities, and a steady increases in the cost of care has made it all but impossible for insurance companies to continue to provide the promised levels of benefits without increasing premiums. It can be argued that insurance companies should have seen the baby-boomers coming but no one anticipated that so many seniors would prefer to transition to an assisted living facility foregoing the in-home care option. Insurance companies also expected a much higher percentage of customers to cancel coverage. A common theme across all types of elective insurance coverage types. The constant refrain from professional advisers to clients recommending that they retain long-term care insurance at all costs had the unintended effect of making LTC insurance untenable for insurers.

All of these unanticipated and unintended consequences has had a real impact on seniors. In some cases, premiums have as much as doubled in the past two years and Mass Mutual, one of the largest LTC insurance underwriters, is about to ask regulators to authorize an average increase in premiums of 77 percent.

Unfortunately the individuals most effected by these rate hikes are the very seniors who need LTC benefits in the immediate future. An increase in premiums of a $1,000 a year may be managed easily enough by a middle age individual who is still working full-time, but a long-retired senior in their late 80’s may be unable to find the room in their budget. This has led many to make the tough decision to allow policies to lapse for which tens of thousands of dollars may have already been paid.

So what can be done…

One option is to consider accepting a reduction in coverage. When purchasing a new LTC insurance policy, consider shortening coverage periods or accepting policies terms that delay the start of LTC benefits. 90 day waiting periods are not uncommon. Older policies have coverage periods or benefit amounts that may be unnecessary. Consider accepted reduced benefits in exchange for reduced premiums.

New consumers can also consider hybrid plans that combine elements of life insurance long-term care insurance. Hybrid policies allow the insured party to withdraw funds from the life insurance policy to pay for LTC. This policy may offer the best of both worlds, especially for adults with a clean medical track record.

Finally, government benefits such as Medicaid and VA Aid & Attendance exist to help those seniors who cannot afford their long-term care needs. With proper planning, seniors can save a significant amount of their assets while relying upon government assistance to cover most of their long-term care expenses.