From the July 2010 issue of Investment Advisor • Subscribe!

July 1, 2010

Insurance Update: A Wider Embrace of LTC

Same-sex LTC insurance benefits now available for federal employees

The Office of Personnel Man-agement (OPM) has announced that, as of July 1, long-term care (LTC) insurance coverage will be available for the same-sex partners of gay and lesbian federal employees. Access to such benefits was actually extended in a memo issued by President Obama in June 2009; the announcement by OPM spells out just who's eligible. The full list, available at ltcfeds.com/eligibility, and the section of the regulations that expands the definition of "qualified relative" was published in the Federal Register on June 1.

"Private insurers have been offering [same-sex partner coverage] for years," says Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI), although primarily in individual rather than group plans.

Some companies do offer the option in group plans, however; one of the largest group LTC carriers says that coverage is offered to domestic partners of the same and/or opposite gender. The client company specifies at the time of sale, says the insurer, whether or not it wants to offer its plan to employees' domestic partners. Also, in certain states, coverage must be offered to civil union partners.

While Slome says that "the gay/lesbian marketplace offers significant sales opportunities, as there are approximately eight million gay, lesbian, and bisexual adults in the U.S.," that's about the same number as current long-term care insurance policy owners. More important, he says, there are about 800,000 same-sex couples--a group he describes as "an overlooked market . . . because many seek employment with government entities in order to obtain access to more liberal benefit programs." The estimate of eight million is based on the 2005/2006 American Community Survey, an extension of the U.S. Census.

Regarding the sale of individual policies, Slome says, "Discounts already available for committed partners living together may be the best-kept secret in long-term care insurance, and the awareness created by the federal LTC plan will definitely heighten awareness."

Is it a Good Idea, Though?

Another factor to consider about LTC policies is that the federal long-term care insurance program offers minimal health underwriting, which means, says Slome, those in better health subsidize those in poorer health. He adds, "Individuals who can qualify for good health and couples and partners' discounts not offered by the federal plan can likely purchase more coverage for fewer dollars in the individual marketplace." AALTCI compared rates for a 50-year old purchasing a $100-per-day benefit, unlimited (lifetime) benefit with 5% compound inflation growth. "The Federal LTC plan cost $1,714 per year, while equal coverage purchased on an individual basis could cost as little as $1,085 from one company or $1,135 from another when the couples' and preferred health discounts are factored in," Slome explains. Rates vary from one insurer to another.

He adds that the rules determining who qualifies as a partner for coverage vary by carrier and "can even vary by state. For the federal program, certification is required that the applicant is an eligible same-sex domestic partner; applicants must provide a Declaration of Domestic Partnership form to prove eligibility. Further proof than that is not required; OPM said that requiring additional proof "would impose a greater burden on domestic partners than other qualified relatives." The OMB ruling, by the way, does not apply to opposite-sex unmarried couples, since they can marry to be eligible for coverage.

Slome points out that the rationale for buying a LTC policy is the same, whether the couple is gay or straight: "So you can care about your loved one and not be forced to care for them." He adds that the other prominent reason for purchasing coverage is to make sure that, if one person needs care, the other is not wiped out financially by that care. There is a certain amount of safety in knowing that, legally, one person's assets are protected.

However, Slome says the question is whether a committed couple will really do that when the time comes. "If you're committed to someone, it's really hard to look at them and say, 'We've blown through your [money and we won't use mine].'" Instead, the reality is that the first person who needs care leaves the second person financially destitute. LTC insurance can buy time to make necessary decisions and "to get everything, both mentally and financially, in order."


Marlene Y. Satter, a freelance business writer who can be reached at harpwriter@verizon.net.

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