Long-Term Care Insurance: Whether, When and What Kind?
By Catheryn Koss

The elderly are one of the fastest growing and most vulnerable segments of our society. Providing much-needed legal information and assistance to seniors and their caregivers is an excellent way for practicing and retired attorneys to make a difference.

Those interested in helping seniors with Medicare and other insurance issues can volunteer with the Oklahoma Insurance Department’s Senior Health Insurance Counseling Program. Call 1 - (800) 763-2828 to find out when the next three-day training session is scheduled. Attorneys can also do pro bono work for older clients through the Senior Law Project at Legal Aid Services of Oklahoma. Contact Sharon Ammon, (405) 557-0020 in Oklahoma City, or Jeanie Wheeler, (918) 584-3338 in Tulsa. If you are interested in giving free community presentations on elder law issues, contact Catheryn Koss at the Senior Law Resource Center, (405) 528-0858.

Long-Term Care Insurance Overview

According to a recent report published by Genworth Financial, the average annual cost of a private room in an Oklahoma nursing home is $48,136. 1 The rising costs of long-term care combined with recent changes in institutional Medicaid eligibility requirements 2 are heightening the public’s interest in long-term care insurance. Older people are frequent targets of long-term care insurance advertisements and sales pitches. This article briefly explores how to help your clients determine if and what kind of long-term care insurance is right for them.

Is Long-Term Care Insurance Right for Your Client?

Before clients purchase long-term care insurance, they should assess their financial situation and preparedness for more immediate financial risks. Do they have adequate retirement savings and health insurance? If appropriate, do they have sufficient life and disability insurance? 3 Insurance companies are required to provide a potential buyer with a “personal worksheet” designed to assess the suitability of long-term care insurance. 4

Most basic policies offer coverage only as long as the policy holder pays the premium. Unless they opt for a non-forfeiture benefit (discussed below), clients should be confident in their ability to pay the premiums (taking into consideration future rate increases) for the rest of their lives, or at least until they need long-term care. 5

When Should Your Client Buy Long-Term Insurance?

If your client has decided to purchase long-term care insurance, the next question is at what age the client should buy the policy. Arguments for early purchase include lower premiums, the risk of becoming ineligible due to future deteriorating health and the possibility of needing long-term care sooner than expected. On the other hand, younger consumers will likely pay premiums for several decades before ever needing long-term care. Unanticipated financial difficulties may force some to allow policies to lapse. Because most policies are designed with the current healthcare system in mind, medical advances, changes in how care is delivered and policy reforms may diminish the value of the coverage. 6 Clients should balance these risks, taking into consideration their age, health and financial situations, to decide when to purchase. Younger purchasers should strongly consider purchasing inflation protection (discussed below).

What Kind of Policy Should Your Client Purchase?

Begin by helping your clients identify their reasons for buying long-term care insurance. If the client wants to preserve assets for the next generation, the benefit amount should be high enough to cover most or all of the anticipated costs of care. If the client simply wants to remain independent and at home as long as possible, more limited coverage may allow the client to prevent impoverishment during shorter, temporary periods of care. 7

Once the client’s goals are identified, assess how well particular policies would meet those objectives and weigh the costs of increased coverage. Variables in policies include: 8

Covered Services and Exclusions – Some policies specify particular services covered or limit the kinds of facilities where care can be received.

How Benefits are Paid – Benefits are paid either based on actual expenses (“expense-incurred) or at a set dollar amount (“indemnity method”).

Amount of Coverage – Policies have lifetime benefit maximums as well as daily, weekly or monthly limits. Often different types of services ( e.g., nursing home care versus home care) will carry different maximum benefit amounts.

Benefit Triggers – Eligibility for covered services is based on the policyholder’s inability to carry out a specified number of “activities of daily living” (ADLs). ADLs may include bathing, dressing, toileting, continence, transferring (moving in and out of a chair or bed) and eating. Because bathing is one of the first ADLs to be lost, finding a policy that includes it as a benefit trigger is preferable. Alternatively, eligibility may be based on a loss of cognitive ability.

Elimination Period – Most policies have a waiting period after the policy holder begins to receive long-term care.

Inflation Protection – Inflation protection helps to ensure that the coverage will still be adequate many years in the future. Some policies allow holders to increase the benefit amount periodically for an additional cost.

Waiver of Premium – This allows the policy holder to stop paying premiums at a point after long-term care begins or after the company begins paying benefits.

Nonforfeiture Guarantee – This option protects policyholders unable to continue paying premiums. If the policy is cancelled, the company will return a portion of the money paid.

Conclusion

Consumers should research the insurance company before purchasing a policy. The Financial Division of the Oklahoma Insurance Department can determine if a company is licensed in Oklahoma and in good standing. The Department’s Senior Health Insurance Counseling Program, 1-(800) 763-2828 is an excellent source of information. SHICP trained volunteers provide free insurance counseling for seniors, and can be contacted at 1- (800) 763-2828.

About the Senior Law Resource Center

The Senior Law Resource Center is a non-profit organization providing legal information and services to elders and caregivers in Oklahoma. Attorneys give free community presentations on a variety of elder law issues, and one-on-one legal services are offered on a sliding-scale basis. For more information, call (405)-528-0858 or go to www.OklahomaSeniorLaw.org.

Ms. Koss is executive director of the Senior Law Resource Center.

1. Jim Killackey & Jeff Raymond, Health: Long-term Care Planning Urged, Nursing Home Costs Average $48,136 a Year, The Oklahoman, April 4, 2007, at 11.
2. Deficit Reduction Act of 2005, Pub. L. No. 109-171, 120 Stat. 4 (Feb. 8, 2006).
3. Mark Merlis, Private Long-Term Care Insurance: Who Should Buy It and What Should They Buy 7 (The Henry J. Kaiser Family Foundation) (March 2003).
4. 36 O.S. § 4429(C)(2).
5. Oklahoma Insurance Dep’t, 2003-05 Shopper’s Guide Long-Term Care Insurance Senior Health Insurance Counseling Program “SHICP” 7.
6. Merlis at 9-12.
7. Id. at 27-9.
8. 2003-05 Shopper’s Guide Long-Term Care Insurance at 9-15.