Long
Term Health Care and Common Questions
There
is a reason that long term health care is a big topic right now. It
is a numbers game. 42% of Americans who are 65 today will enter a
nursing home during their lifetimes.
The current
average annual cost of a one-year nursing home stay is almost $50,000,
and none of this cost is covered by Medicare, Medigap or private medical
insurance. Even home health care, the least expensive form of long
term health care for someone who needs regular medical attention,
costs on average more than $1,000 a month. These averages tend to
understate the cost of long term health care in urban areas.
Women
are especially vulnerable in needing long term health care
because they have a 50% greater likelihood of needing nursing home
care than men.
Long
term health care insurance is costly, but…
The premiums for long term health care insurance are not cheap, but
unless you have assets of $2 million or more, you probably need it
-- especially if you want to preserve some assets for your children.
Premiums vary based on your age, sex, geographical location and long
term health care policy type, but annual costs can vary from $400
a year for a 40-something male to more than $3,000 for a man or woman
aged 70 or older.
Whether
you are married or single, with or without children, you should start
considering long term care health care insurance coverage as part
of your overall insurance needs. As with life insurance, it's cheaper
if you start younger, but if you're less than 30, you may understandably
question its value. What you have to ask is, "What would life
be like if a debilitating illness hit or if I was in a serious accident?"
Do you need life insurance? Get a quote.
There are several ways to keep long term health care insurance premiums
down. The first is to buy group coverage if you can, because it's
cheaper than a comparable individual long term health care policy.
Many employers now offer long term health care insurance as an optional
employee benefit. Usually the employee, the employee's spouse and
the employee's parents are eligible to buy long term health care coverage.
You can also save money by choosing a longer waiting period, lower
benefits or coverage that ends after a certain time frame. However,
as with life insurance, the amount of the premiums is not the most
important consideration when purchasing long term health care insurance
-- in fact, it is one of the least important considerations.
Ask
the right questions
What matters most are the long term health care policy benefit amounts
and the specific terms of the contract. These long term health care
policies are complicated, but if you ask these questions, you'll come
close to finding the best long term health care policy for you.
Purchase
a long term health care policy that is "qualified," because
only those policies allow you to take a tax deduction for the premiums
and pay out tax-free benefits.
Is
this long term health care policy guaranteed for life, or can the
insurance company cancel it?
Make sure that the insurance company cannot cancel your long term
health care policy if it finds out that you're in poor health. Note
that virtually no companies issue policies with guaranteed premiums,
because no one can predict future health-care costs.
What
is the waiting period, and does it only have to be met once?
The waiting period should be no longer than three months, and you
should only have to meet that requirement once during your lifetime.
Does
it cover home health care, as well as skilled, intermediate and custodial
nursing home care?
These provisions give you an option to stay at home and receive care,
as well as to receive all levels of care in a nursing home. That way,
if your condition changes, you don't lose any benefits.
Do
I have to be hospitalized before benefits begin?
Buy a long term health care policy where hospitalization is not required.
You may simply start needing home health care, and your medical insurance
might not pay for a hospital stay, in which case you would have to
pay out-of-pocket for a hospital visit.
What
are the conditions that trigger benefit payments?
The conditions should include cognitive impairment of any kind and
should explicitly include Alzheimer's disease. Other triggers should
include the inability to perform two out of five or six activities
of daily living (ADL) -- usually eating, bathing, dressing, using
the toilet, transferring (moving unassisted from a bed to a chair,
for example) and continence.
What
are the daily benefits for home health care and nursing home care?
Know the cost of these services in your area so that you can choose
a long term health care policy that adequately covers those costs.
Your insurance agent, or a state elder-care agency, should be able
to give you this information.
Is
there an inflation clause so that my daily benefits increase over
time?
The cost of home health and nursing home care has skyrocketed in the
past few years, so make sure that your long term health care policy
benefits will keep up with those costs. Again, your agent or state
elder-care agency can help.
How
long will benefits be paid?
If possible, you should purchase a long term health care policy with
a period of six years or more. The benefit period should be the same
for nursing home care and health care.
Is
there a pre-existing conditions clause?
This clause excludes pre-existing conditions (medical conditions or
ailments you already have prior to purchasing the long term health
care policy, which are usually listed on your application). Your long
term health care policy should not have a pre-existing condition clause.
Are
there specific, guaranteed protections against long term health care
policy lapses and reinstatements?
This protects you if you are having physical or mental difficulties
and forget to pay the premium. You can have the long term health care
policy reinstated even if your premium is late.
How
are benefits paid?
The traditional long term care long term health care policy is based
on reimbursement of eligible expenses -- you submit actual expenses
and get reimbursed. Other policies are indemnity-based -- if you qualify
for benefits, you receive the daily benefit and pay for your expenses
with it. You don't submit bills for approval.
How
long has the company been selling long term care insurance?
Choose a company that has a good track record in the sales and administration
of long term care insurance. Make sure you buy insurance from a company
that has been selling long term care insurance for at least five years.
What
are the insurer's financial-strength ratings from the major insurance
ratings services (A.M. Best, Standard & Poor's, Moody's, and Duff
& Phelps)?
You want to choose a company with solid financial strength so that
if expenses are substantially greater than expected, the company can
handle them with ease.
Ask for
a sample copy of the exact contract of the long term health care policy
you would be purchasing from your company.
Here is where you will probably get the answers to most of the questions
listed above. Do not depend on what an insurance agent tells you verbally;
it's what's in the contract that counts.
