We read articles and listen to the media reports which say, “Own a long-term care plan because it will protect your assets and provide peace of mind for your family.”
Owning extended care benefits — long-term care benefits — is not about the plan. It’s about the care and where people will receive care: in the home or, eventually, in a care center.
Extended care benefits insurance has evolved over time. It began as nursing home benefits, because the expectation was that people would spend their final year before dying in a care facility. Buying benefits for home care was not often considered, because family, friends, and the work environment let family and friends care for loved ones at home.
Caregiving and where it is provided has transitioned because of work, family, and lifestyle.
Home care has become a more common preference, and for a longer period of time. This is because of factors such as broadband internet links for home monitoring equipment, and because most people choose to stay at home. Many people want to enjoy their lifestyle with friends and family as long as there are care services available to assist with daily activities.
There are traditional plans and hybrid benefits that can pay for home or care center services for various lengths of time: two to six years, or, in some cases, for a lifetime.
Hybrid plans provide similar services as the traditional plans. The difference is that a traditional care plan is an expense, and a hybrid plan is an asset.
There is a third type of product, which can be used independently or combined with a regular or hybrid long-term care benefits plan: short-term care benefits. This is a care benefit that pays for home care or care in a facility for up to a year. The benefit is available in some state, but, unfortunately, not in all states.
Some states are not approving short-term care benefits products, although these plans would be valuable, in a variety of ways, both to the people who will need care and to the people who will be responsible for meeting their loved ones’ need for care.
In states where short-term care benefits products are not available, there’s a disconnect between what officials say and what they do. Officials encourage people to try to plan to pay for care, and to avoid making unnecessary use of safety-net programs such as Medicaid. But, in the states without short-term care plans, officials are not doing enough to provide access to the tools people need to protect themselves.
Here’s why short-term care plans are important.
As people progress in their path in life, they become personally and emotionally involved with family members and friends who need care. Every day people are obligated to make an important decision whether to live at home or transition to a care center.
In the movie “Jerry Maguire,” Rod Tidwell says, “Show me the money.”
For Tidwell, playing football is about the love of football, but it’s also about being paid to play football.
The same logic applies to the care people get. Getting care is about needing care, but it’s also about money.
Most people do not allocate any part of their cash flow towards paying for caregiving, which is unfortunate, because the cash flow you earn from assets or income is used for your lifestyle and for commitments, now and in the future.
Owning a short-term care benefits product is of value both to those who now own long-term care benefits plans or who are at an age, or with a health status, where regular LTC benefits products are not available.
Premiums, health, and underwriting criteria are simplified so that people can get some level of benefits for one year or less.
This amount of coverage would be enough for people who need the time to reposition their assets, or for families to decide how and where care will be provided. For others, short-term care benefits may be all that’s needed. You get care for a few weeks or a few months, and then you die.
Another source of value is that these benefits are useful for people at younger ages. Some plans offer benefits designed so that they will be restored. That means that, if you use your plan because of illness or accident and then do not need the benefits for a period of time, the benefits are restored to their original value.
Disability benefits pay for your lifestyle expenses. Short-term care benefits pay for your home care.
Regulators in some states are still considering whether to approve short-term care products. They may not be convinced that the products are worthwhile.
Here’s a question for the insurance commissioners in those states to consider: If you are concerned about people feeling as if they need not provide for their own care costs, because they believe (incorrectly) that they are automatically entitled to benefits from Medicaid or other public programs, can’t we have a conversation about approving short-term care benefits products?
Asking that question is especially important in states that offer few or no short-term care plans, such as California, Oregon, and Washington state.
Agents, financial planners, and financial professionals need to collaborate with insurance carriers, and organizations such as the American Association for Long-Term Care Insurance and the National Association of Insurance and Financial Advisors, to have conversations about why short-term benefits help people and protect the resources of safety net benefits programs.
We need to talk to state insurance commissioners and elected officials about the need for consumers to have access to the full range of care benefits plans, including traditional plans, hybrid plans, and short-term care plans.
All of those plans help people who may need care and want to take responsibility for paying for their own care.
— Read Short-Term Care Insurance Gets Its Own Regulator Panel on ThinkAdvisor.