Got LTCi Says Wall St. Journal Didn’t Go Deep Enough into Long Term Care Insurance Rate Increases
Hendersonville, TN (PRWEB) July 04, 2013 -- Long-term care insurance author Phyllis Shelton says the July 1 2013 WSJ article about long-term care insurance rate increases entitled “Long-Term Care Insurance Gap Hits Seniors” throws the baby out with the bath water. It overlooks three important areas:
1. How to evaluate a rate increase
2. There are long-term care insurance policies that allow the policyholder to buy less expensive coverage and protect assets if the insurance isn’t enough and they have to turn to Medicaid for help.
3. The impact of discouraging people from buying long-term care insurance is to leave them with Medicaid as their only option to pay for long-term care, which takes dollars out of the state budget that could have gone to educate their children.
How to Evaluate a Rate Increase: “When people come to me to help them evaluate their rate increase, I first show them what it would cost to buy the same coverage today at the age they were when they bought their policy. It is nearly always would cost more today. Then I multiply the new premium to age 80 to compare the total payout to the benefits available at age 80, or to age 85 if they have longevity in their family. It’s generally about 10% premium paid in vs. benefits available at that time. Then I ask, is it easier to come up with their annual premium each year or $6,000 - $8,000 a month to pay for care today? And if historical trends continue, will they be able to come up with at least $30,000 a month in 30 years to pay for care?
After this discussion which shares the value of their policy, most people accept the rate increase and save the benefit reduction offered by the insurance company for the next rate increase if there is one.”
When Doug and Brenda Crockett of Gallatin, Tennessee were faced with a 90% rate increase from John Hancock, they found Phyllis Shelton online and asked her opinion. They were planning to reduce their coverage from six years to four years, their daily benefit from $246 a day to $200 a day and their inflation factor from 5% compound to 3% compound. These changes would reduce their premium by 40% from $4,454 to $3,169. Since they were 65 and 63, Phyllis showed them how the $25,700 savings over 20 years paled in comparison to losing $1.4 million in benefits with these reductions. She also reminded them this is not a one-time decision. They could still reduce their premium in the future by reducing their benefits. At this time, however, they chose to accept the full rate increase and keep their benefits the same.
The Long-Term Care Partnership: Consumers can save money by buying shorter benefit periods with the appropriate inflation benefit for their age in the 40 states that have approved Long-Term Care Partnership policies, Shelton says. These policies cost the same as non-partnership plans but allow the policyholder to protect assets equal to the benefits paid out if care is needed longer and it becomes necessary to apply for Medicaid. All of the 40 states except California reciprocate the asset protection so people are free to move around, she says.
“The inflation benefit is critical,” Shelton emphasizes. “When considering the hybrid life insurance/LTC policies this article references, be sure and ask the agent what the policy will pay on a monthly basis for LTC when you are 80-85 years old. You may wind up putting more in or combining it with a traditional LTC policy to get the level of coverage you want.” It is possible, she says, to buy a life/LTC policy with guaranteed annual premiums instead of a large lump sum.
The Real Choice: Shelton maintains that Americans do not understand the real choice they are making when it comes to planning for long-term care. “Most people think this is a personal choice that affects only them,” she explains. “It’s not. Not only does it affect the family members or friends who wind up taking care of them, it affects all of us. It is so important for people to understand that every dollar paid for long-term care out of Medicaid is a dollar that could have stayed in the state budget for education, public safety, better transportation, public jobs, and so forth.” She offers a free brochure that makes this point.
The article does cite changes in long-term care insurance correctly about gender rating and more intense underwriting with blood tests and other medical screening, she says. “Not all companies have implemented changes like this so there are still great deals in long-term care insurance if you know where to look.” Got LTCi is committed to providing this kind of education to consumers in Phyllis Shelton’s latest book Protecting Your Family with Long-Term Care Insurance.
Phyllis Shelton is the President of LTC Consultants, a Nashville-based company that she founded in 1991 specializing in long-term care insurance sales training, consumer education and marketing materials. For more information, see her consumer website at http://www.GotLTCi.com.
Phyllis Shelton, Got LTCi, http://www.GotLTCi.com, 615-590-0306, [email protected]
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