Family Caregiver Education Long Term Care Insurance

Texas 65+ Population 2007: Over 2 million 2025: 4.3 million (and estimated over 70 Million NATIONWIDE)

Terminology Long term care (LTC): medical or personal services needed when you can’t care for yourself LTC insurance: specific policy to cover expenses & help preserve retirement savings

LTC…… Helps a person perform normal daily activities; which are bathing, dressing, taking medications, transporting to/from doctor, etc.. May not permanently improve or correct physical problems, but can make these ADL’s easier with help.

Changing Times Longevity – people are living longer due to health care improvements Family structure is changing Gender of who lives longer is changing

Common Misconceptions! Many people think… Government will pay Health insurance will pay Risk is less than 25% they will need some type of ST Rehab or LTC before reaching age 90.

Is Anybody Ready? AARP survey (age 45-54) 61% say Medicare covers nursing home costs Only 15% accurately estimated the cost of nursing home care in their area Insurance industry estimates 6% have purchased a LTC policy Average purchase age: mid-60s

LTC Helps With… Health Medical Social needs Personal care Chronic/prolonged illness & disability Cognitive disorders

LTC Can Take Place At… Home Nursing home Assisted living Adult day care Continuing care retirement center

How is LTC Paid For? Medicare: Skilled care - temporary basis Supplemental Health Insurance: will not cover Personal resources/savings, or family commitment Reverse Mortgage – if eligible or suitable Medicaid – very few qualify for state financial aid Medicare = 9% Personal = 37% Medicaid = 47% Supplement = ? Private (not defined) = 3%

Other Payment Options Accelerated death benefits: cash now from life insurance contracts if terminal Cash Value from whole life insurance if any has accumulated Long term care insurance to transfer financial risk of LTC need to an insurance company, much like auto and homeowners insurance Accelerated: cash now while the policyholder is still alive Viatical: sell rights to death benefit and get a percentage of the face value of the policy. The viatical company pays the premiums and collects the face amount upon death of insured.

LTC Insurance Complex Relatively new Evolving Like health insurance, premiums are NOT guaranteed to NOT increase

What Does It Protect? Your Assets Your Family Your Lifestyle Your Independence/dignity

Who is a Good Candidate? Sufficient assets to protect Can afford now & later Unwilling/unable to pay out-of-pocket for long time Not disabled or poor health Want independence & control without depending on family members

Who is NOT a Good Candidate? Few assets or low income Those unable to afford premiums IF already disabled or poor health Can self-insure IF you are willing to put all of your assets at risk

What Does LTC Cost? Rough estimates $4k to $5k per month for nursing home or assisted living facilities 24/7 care Premiums for LTC insurance: $2,500 per year at age 65 for: $120 daily benefit, $60 home care 90 day elimination, 6 benefit years 5% simple inflation protection

What Affects the Premium? Age Health Daily benefits Length of benefit period Elimination period Extra Riders; IE: Inflation, Etc… Compound inflation is figured on the new benefit each year. Simple inflation is figured on the original benefit amount.

What Triggers Benefits? Must need help with at least 2 of the ADLs; or Cognitive Impairment Doctor Statement to prove needs Contract Waiting/Elimination Period Must be satisfied, and Insurance premiums must be current

Standard Exclusions Alcoholism or drug addiction, if before policy issued Illness from act of war or service-related condition Intentionally self-inflicted injury Conditions from riot, felony or any other illegal activities

How Do LTC Policies Work? Not standardized When you’ve seen one, you have NOT seen them all! Make sure you read the “Outline of Coverage” before buying!

What Features Can Vary? Coverage options: Nursing home Home health Hospice Respite Payment methods: Expense-incurred Indemnity Expense-incurred: based on actual expenses Indemnity: a fixed amount

Features That Vary (2) Tax implications: Elimination period: Tax-qualified Non-tax qualified Most are Tax Qualified now! Elimination period: 0, 30, 60, 90 or 120 days Some have new elimination for each period of care if more than 6 months gap

Features That Vary (3) Pre-existing conditions: 6 months or longer, if excluded Duration of coverage for each level of care might vary, depending on contract provisions

Policy Requirements Outline of coverage 30-day free look of contract Guaranteed renewable, as long as premiums are paid 31-day grace period to pay premium or reinstate policy 65-day grace period: to pay premium Reinstatement: if loss of capacity causes policy to lapse

Mandated Optional Benefits Nonforfeiture Benefit – Shortened Benefit Period equal to at least what was paid, if policy lapse due to non payment of premium – STATE MANDATED Inflation protection must be offered, but at additional cost Third party notice of lapse to protect against unintentional lapse, MANDATED Nonforfeiture: guarantees a percentage of benefits if policy is cancelled Inflation protection: 5% annual benefit increase, compounded Third party notice: designates 3rd party to get notice

Optional Benefits: Some At Additional Cost Depending On Policy Respite Care Benefit for Caregiver Caregiver Training & Homemaker service Durable Medical Equipment Benefit Bed reservation for nursing home Alternative care/Care Coordination Home Modification Benefit Spouse Shared Benefits/Paid up survivor

How to Choose Consider current/future needs Consider finances Compare benefits, (read outline of coverage)

Shopping Tips Take your time Know the agent & company Understand the policy Don’t buy duplicate policies Never sign a blank application Never pay in cash

Texas Department of Insurance 1-800-252-3439 www.tdi.state.tx.us Assets, liabilities, etc. A.M. Best rating

This module of the Area Agency on Aging Family Caregiver Education program includes information provided by the Texas Department of Insurance , North Central Texas Area Agency on Aging, and professionals in financial planning and elder care planning. Includes information provided by Tena Burrell, Certified Senior Advisor