Can my Smart People who know about Long-Term Care Insurance

[Ginevra]

Brief me, please? It is available to me through work but I don’t know that much about it, as I have not had any parents or other elderly relatives who had/have it. Are there pitfalls I should be looking out for? 

[Katy]

No, just get it, especially if it’s subsidized through work. Chances that you’ll need it are high, and it helps a great deal. 

[prairiewindmomma]

Usually there is a per diem limit, which generally doesn't meet the full cost. You should also look to see if there is a limit to the number of benefit years. But, something is better than nothing.

[Spryte]

LTC insurance was a lifesaver for my ILs. They had many years in assisted living and then many in nursing homes, and between their retirement and LTC insurance (their savings covered the gap between the per diem limit and what was owed), it covered most of that time. Their care was running around $20K per month, so 15+ years of that (or close to it) burned through their savings. The LTC meant they could stretch out their savings as long as possible. Once both were gone, they transitioned to Medicaid just before they passed, so it almost covered the entire time they needed it.

I will always be grateful to them for buying that policy.

[Miss Tick]

Does the payout window start counting down even if you aren't using the maximum per diem? I was flipping through my parents' policy yesterday and it wasn't clear to my if they should start claiming benefits as soon as they start using qualified services (like periodic in-home nursing care), or wait until they would be using the maximum allowable (like a move to a graduated living facility.) The window on their policy is 10 years. Right now it is still vaguely in the future, but that won't be the case forever.

[Ginevra]

20 minutes ago, Miss Tick said:

Does the payout window start counting down even if you aren't using the maximum per diem? I was flipping through my parents' policy yesterday and it wasn't clear to my if they should start claiming benefits as soon as they start using qualified services (like periodic in-home nursing care), or wait until they would be using the maximum allowable (like a move to a graduated living facility.) The window on their policy is 10 years. Right now it is still vaguely in the future, but that won't be the case forever.

Ok so that gives me something to consider. I don’t know yet but will find that out.

[Ginevra]

40 minutes ago, Spryte said:

will always be grateful to them for buying that policy.

For sure! 

[Harriet Vane]

1 hour ago, Katy said:

No, just get it, especially if it’s subsidized through work. Chances that you’ll need it are high, and it helps a great deal. 

Yeah. What she said.

[Harriet Vane]

Similarly to Spryte, my fil maintained long-term care insurance and it made a huuuuuuuge difference. MIL needed a ton of care for many years due to Alzheimer's. They were able to get in-home care as well as residential care later when she transitioned into a facility. She also had no difficulties at all transitioning between facilities when there was a need to place her closer to her daughter. It was the same with fil--when he lived with us, we were able to access much-needed and much-appreciated in-home services, and then there was no issue transferring him into a residential facility when his needs due to Lewy body dementia became overwhelming and profound.

[Starr]

I thought people here said on another thread that the insurance had so many qualifications and payout limits that it wasn't always helpful. Does anyone remember any of that?

[Pawz4me]

9 minutes ago, Starr said:

I thought people here said on another thread that the insurance had so many qualifications and payout limits that it wasn't always helpful. Does anyone remember any of that?

I think that's often true for plans purchased by individuals. Plus you have to make sure there is a cap on how much the premium can be increased each year. From what I understand it's really difficult now to buy long term care insurance on your own. So many insurers have stopped offering policies because they lost so much money on them that now the premiums are astronomical. But it may be different for employer sponsored plans?

[livetoread]

My folks decided against it after lots of consideration and consultation with their financial advisors. They are wealthy and decided to save the premiums instead. I don't think it's always a good thing to buy; really depends on a lot of factors. 

[Clemsondana]

We looked at what was available to us when we got our first real jobs after grad school (in our late 20s).  For full coverage, it was going to be $300/month/person.  It would be a huge help if somebody started needing long term care at a relatively young age, but if we were needing a more typical amount we wouldn't see a benefit relative to just saving the money, and of course as with any sort of insurance there's always the possibility that you don't need it at all.  We decided to instead put as much money as possible in a health spending account and then not use the account for anything else.  The HSA is acting as savings for long term care if needed but has the benefit of being available if there is another major medical need.  

But, all of this is part of an overall insurance strategy - we are fortunate that nobody has chronic high medical costs, so we have chosen a high deductible health care plan.  That's what allows us to have the HSA.  So, this plan may not work for a family for a lot of different reasons but I wanted to post in case it would work for somebody else.  

[Bambam]

36 minutes ago, Clemsondana said:

We looked at what was available to us when we got our first real jobs after grad school (in our late 20s).  For full coverage, it was going to be $300/month/person.  <snip>

I thought this amount was amazing, and so I calculated the cost assuming the cost/month/person stayed the same, you started paying this at age 30 and paid for 35 years - and I'm curious if you still have to pay it till you need it? 
Anyway - So, assume 2 people, $300/month/person, 35 years = $252,000. 

I'm also assuming that if you leave that employer during that time, if you could continue that coverage with that insurer, that your premiums would go up drastically as you would be covering the employer portion too. 

I also think it is a bad assumption that the cost stays the same. 

Seems it might be a better strategy to just put that premium amount into an investment account? 

[skimomma]

I have experience with this.  I care for a person who is now living in assisted living who THANK GOODNESS has good LTCI.  When I first started poking into helping this person, their financial advisor warned me that even though they had LTCI, it likely had a lot of restrictions and limits.  (He was not the one that sold them the insurance).  But it was a happy surprise to find that was not true and it has been covering 100% of the AL facility for 4+ years now.  It will run out (soon) but it was a huge help.  However, as others have said, the level of insurance they have is no longer available to the individual.  I have spoken with our own financial advisor and he said they are pretty difficult to find and have very high premiums.  If you have something available via your employer, I would for sure check it out.  Just keep the following questions in mind:

1. How much is the OOP premium for you while are are actively employed?  

2. Will you still be eligible once you are no longer employed there and if so, are there limits to how much the premium can be raised?

3. What is the total benefit limit?   

4. Is there a monthly cap to payout and if so, can you make up the difference with other income?

5.  What exactly does it cover?  Assisted living?  In-home care?  Etc.....

6.  Take #1-5 into consideration to see how it would fit into your retirement plans.

Keep in mind that most LTCI policies cover assisted living whereas Medicaid does not.  Most people don't know that.  My person is almost out of LTCI and will need to rely on Medicaid, which means moving to a nursing home.  They do not really need that level of care at this time but there really are no other options.  The LTCI meant 5-6 years of being able to live in AL rather than a nursing home.  In their case, it might very well be that they paid out more in premiums than they ultimately got in payout.  I don't think that is true, but it is possible.  But even then, it was still a good move because this person would never have saved that premium.  It was like a forced savings plan.  

[sgo95]

35 minutes ago, Bambam said:

I thought this amount was amazing, and so I calculated the cost assuming the cost/month/person stayed the same, you started paying this at age 30 and paid for 35 years - and I'm curious if you still have to pay it till you need it? 
Anyway - So, assume 2 people, $300/month/person, 35 years = $252,000. 
...
Seems it might be a better strategy to just put that premium amount into an investment account? 

If you saved up 600/mo and invested it and assumed you increased the premium 2% each year, then at the historical rate of increase of the US stock market (10%), you'd have around $1.4 million after 35 years.

ETA: if you assumed you could get 8%, it would be around $990K. 

Edited June 8, 2023 by sgo95

[Bambam]

5 minutes ago, sgo95 said:

If you saved up 600/mo and invested it and assumed you increased the premium 2% each year, then at the historical rate of increase of the US stock market (10%), you'd have around $1.4 million after 35 years.

ETA: if you assumed you could get 8%, it would be around $990K. 

I was hoping someone would do this math for me! 

 

[Clemsondana]

1 hour ago, Bambam said:

I thought this amount was amazing, and so I calculated the cost assuming the cost/month/person stayed the same, you started paying this at age 30 and paid for 35 years - and I'm curious if you still have to pay it till you need it? 
Anyway - So, assume 2 people, $300/month/person, 35 years = $252,000. 

I'm also assuming that if you leave that employer during that time, if you could continue that coverage with that insurer, that your premiums would go up drastically as you would be covering the employer portion too. 

I also think it is a bad assumption that the cost stays the same. 

Seems it might be a better strategy to just put that premium amount into an investment account? 

I don't remember the details.  We've checked on it twice, in 2 states about 10 years apart, different insurance agents.  We have investments and savings in different types of accounts and also consider the tax implications of the different approaches.  The HSA is not our only savings that could/would be used for long term care.  But, looking at the amount that the policy available to us would pay, what the restrictions on its use were, considering the cost of paying premiums for many years, and considering that we intended to put the maximum in our HSA anyway, we realized that it would function as the same type of 'forced savings' that somebody mentioned in another post.  But, it would give us the flexibility to use the money for anything from part-time in-home help to a nursing home without a lot of restrictions.  HSA money can also be invested (https://www.forbes.com/sites/robertfarrington/2021/02/15/how-to-invest-the-money-in-your-health-savings-account-hsa/?sh=119cf2453a08).  Again, I'm not advocating this approach for everybody - I'm just saying that in our particular situation this seemed to be a reasonable option.  I'm sure that some of this is also influenced by seeing our older relatives and what they've needed.  In-home help, even part time, has kept some relatives from needing long-term care, or has delayed it for years, but the long-term care insurance doesn't cover it.  We are also seeing new options for elder care that may decrease some people's need for long term assisted living.  It's hard to predict what will be needed or available in the future, or what it will cost.  

Edited June 8, 2023 by Clemsondana

[Storygirl]

We just bought private long-term care insurance, using our financial advisor to advise us. We are in our 50's and quickly made decisions when we learned that premiums would go up once DH turned 55, which was going to be very soon (at that time). We debated long and hard about it but decided to do it, because my family has a lot of Alzheimer's  -- the kind that comes on early-ish and makes people linger in dementia for a decade or more -- and DH's family has late onset dementia patterns. Not to mention other reasons that we might need it.

The policy is expensive -- just because, but also due to us adding some elements to it that cost more now but will pay out more in the end. Our policy also doubles as a life insurance policy, so if we don't use it for some reason, our survivors will get a payout on our death.

I have not heard of LTC insurance being offered through an employer! If you happen to have a financial advisor, I'd suggest having them look through the policy for you. Otherwise, go through the details carefully. I would wonder whether you lose it when you leave your job, or if you would have an option to continue paying for it privately. Know that the older you get, the more expensive the premiums will be, if you buy privately.

[Arcadia]

https://content.naic.org/sites/default/files/publication-ltc-lp-shoppers-guide-long-term.pdf#page39

page 39 onwards have useful checklists/worksheets. I don’t think my husband’s employer offers LTCI but this pdf is still helpful for me to read.

Edited June 8, 2023 by Arcadia
Link not working

[JIN MOUSA]

Infrequent poster here, but have some experience with this (that I wish I didn't). Another option to consider is a life insurance policy with an advanced use rider. My mom has this (I think it's either variable or universal life insurance), and we are planning on drawing on this rider. So the LTC is not a separate policy, but with certain qualifications (using a state-licensed home health care agency or state-licensed facility, and certification from a doctor of a diagnosis of dementia or requires help with 2+ ADLs), we can use up to the full death benefit for long term care expenses.

[Pawz4me]

3 hours ago, Clemsondana said:

HSA money can also be invested (https://www.forbes.com/sites/robertfarrington/2021/02/15/how-to-invest-the-money-in-your-health-savings-account-hsa/?sh=119cf2453a08). 

My DS, who works in finance for a super duper large and super duper well known tech company, is a firm believer in using his HSA as an investment tool. I'd never heard of it until he explained the ins and outs, and it certainly seems to make sense. He can (knock on wood) easily pay any OOP medical costs he has, so he leaves his HSA money untouched so it can grow.

 

7 minutes ago, JIN MOUSA said:

Another option to consider is a life insurance policy with an advanced use rider. My mom has this (I think it's either variable or universal life insurance), and we are planning on drawing on this rider. So the LTC is not a separate policy, but with certain qualifications (using a state-licensed home health care agency or state-licensed facility, and certification from a doctor of a diagnosis of dementia or requires help with 2+ ADLs), we can use up to the full death benefit for long term care expenses.

Our financial adviser has recommended this route, too.

[Miss Tick]

4 minutes ago, Pawz4me said:

My DS, who works in finance for a super duper large and super duper well known tech company, is a firm believer in using his HSA as an investment tool. I'd never heard of it until he explained the ins and outs, and it certainly seems to make sense. He can (knock on wood) easily pay any OOP medical costs he has, so he leaves his HSA money untouched so it can grow.

I wonder who sets contribution limits on HSA funds. It seems like when I looked at this a few years ago I couldn't put in with money that it wouldn't be spent before year's end. Perhaps that was a self-imposed limit, though. I mean we do fund it heavily, and also rely on it heavily.

[skimomma]

6 minutes ago, Pawz4me said:

Our financial adviser has recommended this route, too.

Our's too.  That is what we opted to do when we learned that traditional LTCI was out of reach for us.

[Pawz4me]

11 minutes ago, Miss Tick said:

I wonder who sets contribution limits on HSA funds. It seems like when I looked at this a few years ago I couldn't put in with money that it wouldn't be spent before year's end. Perhaps that was a self-imposed limit, though. I mean we do fund it heavily, and also rely on it heavily.

His and our other son's HSA funds apparently roll over forever. They don't have to spend any of it until they want to. Theirs is funded through their employers, so IDK if that makes a difference?

[Miss Tick]

15 minutes ago, Pawz4me said:

His and our other son's HSA funds apparently roll over forever. They don't have to spend any of it until they want to. Theirs is funded through their employers, so IDK if that makes a difference?

Thanks. I probably have a lot more users on our HSA at this season in my life than they do. 😄 This year it was tooth extractions, sooo many tooth extractions. I'm going to look at it closely again though because this seems so logical.

[Clemsondana]

53 minutes ago, Pawz4me said:

My DS, who works in finance for a super duper large and super duper well known tech company, is a firm believer in using his HSA as an investment tool. I'd never heard of it until he explained the ins and outs, and it certainly seems to make sense. He can (knock on wood) easily pay any OOP medical costs he has, so he leaves his HSA money untouched so it can gro

This is what we do.  If we had to deal with catastrophic illness it would be different, but for normal sorts of things - glasses, sports physicals, etc - we pay out of pocket.  Spouse is also in tech...maybe this is more widely known in that industry for some reason?  

[sgo95]

1 hour ago, Miss Tick said:

I wonder who sets contribution limits on HSA funds. It seems like when I looked at this a few years ago I couldn't put in with money that it wouldn't be spent before year's end. Perhaps that was a self-imposed limit, though. I mean we do fund it heavily, and also rely on it heavily.

FSA funds must be spent within that calendar year. HSA funds always roll forwards. There are HSA contribution limits set by the IRS because HSA contributions are tax advantaged (you don't have to pay any income or FICA taxes on it)...similar to 401(k) contribution limits set by the IRS.

ETA: Also, you have to have a high deductible health plan to contribute to an HSA fund.

Edited June 8, 2023 by sgo95

[KSera]

2 hours ago, Clemsondana said:

If we had to deal with catastrophic illness it would be different,

So what happens then if someone doing it this way does have a catastrophic illness or other very expensive health care expense? They aren't usually things you can predict ahead of time, so I'm wondering how that works in that case.

[Clemsondana]

43 minutes ago, KSera said:

So what happens then if someone doing it this way does have a catastrophic illness or other very expensive health care expense? They aren't usually things you can predict ahead of time, so I'm wondering how that works in that case.

The high deductible plans are still insurance and ours still has decent coverage in the case of major illness, comparable to any other plan - it's just the everyday expenses that you have to cover because you don't meet deductible.  But, if we had a catastrophic illness we might tap into our HSA.  Most people in that situation use any savings that they have, and this is just one other account.  Likewise, I could imagine that somebody paying $600/month for long term care insurance might not be able to continue paying that if faced with a catastrophic illness.  i know that my relative, whose spouse died of cancer around age 50, had stopped paying all non-essential expenses for a couple of years (my parents and I helped to buy appliances that relative couldn't afford to replace when they broke).  A long-term care policy would have likely lapsed because it wasn't essential. 

In that sense, we wouldn't be any worse off from tapping in to our HSA, except that if somebody developed an illness we could use that money for their treatment or making them more comfortable instead of it being committed to long term care that they ultimately don't need because of the catastrophic illness.  Unless you are in a situation where assets are being evaluated to determine whether you qualify for government assistance, I'm not sure that it matters whether you have chosen to spend the $200,000 on long term care insurance or have banked it in a HSA (except that, if invested, the HSA might be worth more than what you put in to it).  But, either way, I don't think that you're obligated to use it when illness occurs, but it is an option that is available.  When (as in my relative's case) given a cancer diagnosis for which 10 years is a wildly optimistic prognosis, spending the money on treatment or care knowing that you weren't likely to live to need long term care as an older person could make sense.  For a non--terminal issue (horrible accident, maybe?) then spending other assets while leaving that money intact for long term care might make sense, but spending HSA money while not having to pay penalties to get to other assets, which could continue to grow, might also be the right choice.  I think at that point it's all highly dependent on family situation, income, other assets, taxes, etc, and not something that anybody can plan for completely.  

[datgh]

As my husband is approaching retirement, we went a bit of a different route. You can now get a combined LTC/Life Insurance policy. It's a little more expensive than a just a LTC policy but the difference is if you don't need it for your care your survivor's will get it as an inheritance.  It makes so much more sense than losing all the money if you die suddenly and don't use your insurance.