America has three major housing issues for seniors: affordability, physical accessibility, and access to medical care and other services. There is a need for creative solutions to housing.
Since the 1960s long-term care insurance is an option that allows people to be prepared for the future if they come to need nursing care. If they die without needing that care, the insurance company keeps the paid premiums. Policyholders that need long-term healthcare services have some or all of their costs covered by the insurance company.
Long-Term Care (LTC) Insurance Basics
For insurance companies to make money on LTC, they must take in more premiums than they pay out for care. They are betting that they will collect more money from policyholders’ premiums than they need to pay out in benefits. They might also make money by investing money from paid premiums, and that also comes with some risks.
Insurance actuaries use a lot of statistics to understand the balance of premiums paid and costs for care, so they ensure a profit. No one has a crystal ball about specific individuals. However, certain factors indicate probabilities on the number of people needing long-term care, the duration, and the type of care. These factors include:
- Life expectancy- the longer you live, the more likely you will need help one day. The life expectancy of women in the US is currently 81.6 years old. Men’s life expectancy is 76.6.
- Physically fit and healthy people are more likely to be able to age in place rather than need a residential facility.
- The age of people purchasing insurance affects the likelihood of whether they will ever use it. According to Longtermcare.gov, a 65-year-old person has a 70% chance of needing some long-term care. Therefore, older people will pay higher premiums than younger people. Of course, younger people pay premiums for much longer.
Why Insurance Costs Increase
A lot has changed since the 1960s. People live longer because of better access to medical care, advancements in disease treatment and management, and more knowledge about healthy lifestyles. The life expectancy of someone born in 1925 was less than 60 years old. Life expectancy was affected by high infant and child mortality, but people today still live much longer than those who survived childhood in the past. That means more people who buy LTC Insurance in the 2020s will use it than those who bought it in the 1960s. They might also need care for more years. People who develop conditions that require care may live for many more years needing active care with modern treatment and therapies. The progress is good news for individuals and their loved ones, but more people using benefits for longer means that insurance companies need to receive higher premiums to profit.
Longtermcare.gov published the following chart:
|Type of Care||Average Years of Care||Percent (%) Using this Type of Care|
|Any LTC Services||3||69|
|At Home Care|
|Unpaid Care Only||1||59|
|Any Care at Home||2||65|
|Any Care In Facilities||1||37|
Many insurers stopped offering LTC Insurance completely. In 2004, over a hundred companies offered LTC policies; now, only about a dozen do. Don’t worry if you bought and maintained a policy from a carrier that no longer offers insurance to new applicants. They still have to serve the people who bought policies. Almost all insurance companies are viable and solvent, even if their LTC divisions are not profitable.
Insurers reduce the coverage whenever they can. They do this by:
- Decreasing the maximum benefits
- Increasing the threshold required to receive care
- Reducing care benefits
- Increasing premiums
Deciding if Long-Term Care Insurance is Worthwhile
With rising premiums and decreasing benefits, many seniors question whether they should buy LTC Insurance. Your decision about whether or not to buy it will depend on many personal factors. Your age and health will determine whether you are eligible for a policy. Many conditions make people ineligible for coverage, and some of those conditions become increasingly common as you age. Therefore, don’t delay the purchase if you are thinking about getting it.
LTC Insurance can help protect assets for your heirs but will likely impact your cash flow. It may not be worth buying if your assets and cash flow are minimal. You might decide to rely on Medicaid, but be aware that Medicaid benefits mean you have to spend down your assets to meet eligibility requirements. There are many different types of policies with varying costs and benefits, so LTC Insurance doesn’t have to be an all-or-nothing decision. Maybe you settle for a less expensive policy that covers the worst-case scenario instead of paying for top-tier benefits.
Purchasing LTC Insurance should be part of a larger plan for your estate and family legacy. Let us help you determine how LTC Insurance fits in with other parts of your estate plan, including your living will, trusts, and other health and asset protection plans. We do not sell insurance ourselves and have no reason to encourage you one way or the other. We will help you think about how to align your financial and healthcare strategies to match your goals and situation. Please contact our Houston office today at (713) 582-5088.