Long Term Care Options That Can Cushion the Financial Reality of Aging

Posted on October 5, 2010.

Author: Frank Darras

There is wise saying: "Aging is not for sissies." The truth is that aging presents tremendous financial and wellness challenges for each of us. In uncertain times, it's important for consumers to stay well and protect ourselves and those we love by making good, solid financial decisions and obtaining proper insurance protection.

Baby boomers are now considered the largest growing segment of populations across America. Millions of boomers are looking for economic stability and protection for their futures, and it's important to help your clients understand what they need to know about the financial realities of growing older, as well as products that keep their assets safe.

Health and wellness

As we age, minor health issues we experienced when we were younger can easily escalate into something far more serious. A broken bone at 35 is usually more of an inconvenience than anything, but at 70, can become a seriously debilitating problem. Similarly, an illness we shrugged off in our 20s can trigger myriad unforeseen complications when we are older.

Those who understand long term care insurance consider it to be just as important as health, life, or homeowner's insurance. Since LTCI is specifically designed to help protect clients' assets and legacy, the baby boomer demographic is a particularly good market to target. A healthy younger adult would pay a much smaller LTCI premium than someone who is older or in worse health. Buying young saves premium dollars and ensures terrific coverage and an independent lifestyle as the consumer ages.

Encourage the purchase of private LTCI by people who can afford to take greater personal responsibility for protecting themselves against the rising cost of long term care services. Those helping care for their parents while bringing up their own children are usually more aware of the financial stress of at-home care, assisted living costs, senior center pricing, and the crippling cost of decent nursing home care.

Recent changes

In January 2010, new tax rules began allowing for more favorable treatment for payment of long term care benefits and riders. Is your carrier offering new products, such as combination, linked, or asset-based products? There is a variety of long term care planning options that can help you grow your business and help your aging clients, so make sure you are up-to-date and can navigate the new legislation successfully.

  • The Community Living Assistance Services & Supports Act ( CLASS Act) was passed under the Patient Protection and Affordable Care Act ( PPACA), and is set to begin in 2012. It is still unclear what options will be available to those who want it, but some of your clients may not be able to afford to wait.
  • For those who can't wait, are uneasy about CLASS, or believe PPACA will be repealed, consider offering a public-private approach to long term care. To date, 34 states offer long term care partnership programs between private insurers and individual states; most programs aim to eliminate dependence on Medicaid's long term care funding. Often, policyholders may exempt some of their assets during the Medicaid eligibility process. Generally, the assets that can be disregarded depend on the amount of insurance benefits received from the qualified long term care policy. For a list of partnership programs, both current and pending, in each individual state, visit ASJ's LTCI Resource Center and scroll down to "State Partnership Plan Web Sites."

The hybrid alternative

Agents may also want to consider offering LTCI through hybrid products that combine long term care benefits with life insurance, annuities, or disability insurance.

In the AARP Public Policy Institute's " A Look at Hybrid Insurance Products with Long-Term Care Insurance," the organization found that:

  • These products may overcome psychological barriers and/or misinformation for some consumers when it comes to LTCI.
  • Hybrids may be one way for individuals to more easily choose which risks to insure against.
  • Some combination products may encourage an LTCI purchase earlier in life.
  • Most linked benefit products do not offer substantial pure economic appeal.

According to AARP, "the difficulty of determining the specific policy that is best for an individual may be multiplied when considering a hybrid that combines two types of insurance. These types of insurance also present potential issues from a consumer perspective. This is one reason why long term care insurance, life insurance, disability insurance, and annuities are regulated at the federal level, the state level, or both."

All individual insurance components in a hybrid can be complicated in their own right and present areas of concern to consumers. Agents will be required to provide better consumer education on hybrid insurance products while understanding and explaining government protections in the face of increasingly complex decisions for clients.

Products and legislation will come and go, but we are all getting older and need strong protection. Make sure you introduce long term care into every annual financial review with your clients. Take the time to review all the current and key information, and make adjustments for long term care inflation trends, the cost of care, and current policy features. Your clients will thank you – now, and in the long run.

Frank N. Darras is founding partner at DarrasLaw. He can be reached at 800-458-4577.