Margie Barrie, a veteran long-term care insurance agent, marketer and educator, has been writing articles about long-term care planning and related issues for years.
Here, she handles a question about what to say to clients who are worried about LTCI headlines.
Question: I’m working with a number of clients in their 40s. They ask me: “Does it make sense to buy long-term care insurance now, or should we wait?” What should I advise them to do?
Answer: The current headlines make providing long-term care planning more important than ever. I will be advising my clients to buy insurance now and not wait.
Here are the 10 things I tell clients.
1. This protection is not for everybody.
It is for those who have sufficient assets or very large pensions and have good health.
It is not for the Have Nots, meaning those who know they will have to rely on Medicaid for their long-term care expenses. These people, and their families, will have a problem.
2. Will the need for long-term care disappear?
No! With people living longer, the need will continue to grow.
3. Will the government pay for long-term care, so we don’t have a need for private insurance?
No! This was attempted several years ago with the CLASS Act, part of the Affordable Care Act. Government actuaries ultimately determined they basically couldn’t come up with a successful formula to fund this eventual expense. Congress is not going to tread those waters again.
It was interesting to observe that throughout this tumultuous presidential campaign, you never heard either candidate mention having the government pay for long-term care.
4. What about state governments paying for long-term care?
No! Thirty states already have in their laws the Filial Responsibility Act. This legislation requires children to be responsible for repaying the state if Medicaid funds are used for a parent. To my knowledge, only two states so far are enforcing that – Pennsylvania and Maryland. But it would be logical to think that as Medicaid expenses balloon because of the increasing number of people needing long-term care and not having the funds to pay privately, more states will be activating this law for financial relief.
With people living longer, the need for long-term care insurance will only grow. (Photo: iStock)
More long-term care insurance questions answered
5. Will Medicaid pay for long-term care?
For the most part, it will pay only if you are in the nursing home.
Important fact: Most of the care is now being received outside the nursing home. A recent Genworth study found that only 18 percent of care is being received in the nursing home. Sixty-nine (69) percent of claims start at home, and 60 percent end at home.
Also, an industry trend is that an increasing number of nursing home beds are being changed to rehab. The result is that sicker people are going to assisted living facilities.
6. When you need long-term care, will your children take care of you?
Which child would you prefer to live with? Which child is willing to give up their profession and personal life to become your caregiver? Do you want them to bathe you and do the other personal care that would be needed?
When my own mother needed home health care, she didn’t want me to bathe her or take her to the bathroom. And I didn’t want to either. By hiring an excellent home health agency, I can supervise the care from 1000 miles away. I did spend three months at her home taking care of the emergency, but after that I was able to take back my own life and resume working full time.
I have two sons. I certainly expect them to be involved in making care decisions for me, but do I want them to provide hands-on care. No!
Will they want to? No!
Will my two daughters-in-law want to give up their professional careers to take care of me? Are you nuts?
7. Why are carriers stopping to sell long-term care insurance?
For an insurance company to successfully provide this product, it is a tricky combination. You must sell a lot of product; otherwise, the numbers don’t work. You can’t sell too much, because of the reserves concern.
When you own a long-term care policies, the span of time is decades from purchase to utilization. Actuarial assumptions made at time of purchase are subject to significant variables that are challenging at best to anticipate. These include return on investment opportunities to pay out future benefits, claims expectations, the cost of capital and shareholder returns and more.
This is a win-win for policyholders, but presents an on-going challenge to the carriers and their bottom line.
The bottom line: Those with long-term care insurance should count themselves as the fortunate ones. (Photo: iStock)
8. What about the rate increases? Will we see more?
The rate increase that have occurred are for the most part on the policies written before the year 2000. (An upcoming column will address that in detail.)
A study by the Society of Actuaries reports these projections:
- Policies priced in 2014 have only a 10 percent chance of a future rate increase and such an increase would likely be about 10 percent.
- Assumptions in 2014 (compared with assumptions in 2000) were based on 16 times as much data. And for policies that were written over 10 years ago, we now have 70 times as much data.
9. Why did LifeSecure, John Hancock and Med-America stop selling individual policies?
Here is my assessment:
LifeSecure: They are still selling this product, but just focusing on work-site and multi-life, which is a significant portion of their business. I think they stopped selling individual policies because it was much more expensive to underwrite and support that line of business. Also, it was a very well-priced and popular product, so they decided to better protect their present clients and not have to increase the amount of reserves. (This is just my opinion on this.)
MedAmerica: Their marketing efforts never produced enough sales to sustain staying in this industry.
John Hancock: Their parent, the Canadian company of Manulife, is said to have issued the order to stop because of low sales. The unit needed about $40 million in premium to cover the overhead of running a long-term care division and it was way below that. I personally felt that the company’s new product, a life-LTC mix, was too difficult to explain for many of us who are long-term care planning specialists and not life insurance agents. And, I am a huge advocate of built-in inflation protection.
10. What safeguards are in place to further protect my clients when they buy this protection?
This product is tightly regulated by the federal government, every state’s department of insurance and the National Association Of Insurance Commissioners.
Here’s the bottom line: If your clients have sufficient assets, if they are in good health, if they understand and agree that long-term care planning is important… then they should get this protection now while they can – and consider themselves fortunate!
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