Dilemma — should you keep your long-term care insurance?

Twenty years ago — more or less — you might have taken out a longterm care insurance policy to cover you and your spouse if either of you needed care in a facility or at home in the future. As costs rose you could have questioned whether eventually it would become unsustainable or should you discontinue the policy and take your chances? It is not an easy decision to make.

Recently our office has not heard as many concerns, which might mean either that prices have stabilized or clients have taken advantage of what were basically buy-outs offered by some companies as an option. Also, there are related alternatives such as hybrid policies that combine long term care insurance and either life insurance or annuities. There are also policies that combine husband and wife coverage such that, if one of them has not used the full benefit the balance can be transferred to the spouse.

Some policy holders who have kept their insurance wonder what it covers. Does it cover at-home care (usually this is an option for a defined number of hours or days at a given rate) or assisted living/personal care (usually as described). Here it matters to read the contract and our office has helped with this on several occasions.

Briefly, one significant question has been is it worth it to continue as is at a higher premium, continue under different terms or should the policy be permitted to lapse? Some policies discontinued issuing policies completely.

Typically, letters from a longterm care insurance company in the past several years presented the case in the following terms. The insured could — pay an increased premium and maintain the same level of coverage; make some changes to coverage and retain the same or similar rate; increase the “elimination period;” reduce the term; or cash out on their terms.

This discussion relates to the typical traditional LTC insurance contract and not hybrid products or policies obtained under employment. Here are some considerations.

You need to know the terms

• WHAT IS THE “ELIMINATION PERIOD?” >> The elimination period under a long term care insurance policy is the time that must elapse after the policyholder would otherwise be entitled to benefits but before benefits will actually be paid. A longer elimination period results in a pe

riod when other sources typically must be found to pay. These might be Medicare or private pay, for instance. I have had clients who died during a long elimination period after having paid into a policy for several years. It happens infrequently. However, if one of your options is a longer elimination period your premium would reduce but you bear a risk of loss for some longer period

of time. • WHAT ARE “QUALIFIED LONG TERM CARE SERVICES?” >>

Read the definition in the policy. A good qualified long-term care services definition might say “necessary diagnostic, preventive, therapeutic, curing, treating, mitigating and rehabilitative services and maintenance of personal care services which are required by a chronically ill individual and are provided pursuant to a plan of care prescribed by a licensed health care practitioner…” A chronically

ill Individual is someone who is unable to perform, without substantial assistance from another individual at least two activities of daily living (bathing, continence, dressing, eating, toileting, transferring … or, in the alternative, a person who requires substantial supervision to protect from threats to health and safety due to “severe cognitive impairment.” The Plan of Care requirement is important. Basically it is a prescription by a licensed health care practitioner (typically a physician)

describing the care needed and how to be offered.

• WHAT IS THE DAILY BENEFIT AMOUNT? >>

Note the daily benefit and compare it to likely cost of care. If the daily benefit amount is very low compared to actual costs you might simply “go broke slower.” It can and often does differ depending on whether payment is for at-home, assisted living or skilled nursing care.

• WHAT IS THE BENEFIT PERIOD? >>

Some early policies provided the daily benefit for “lifetime.” That

is unlikely today. You could have, for instance, a two-year, three-year, or five-year benefit period.

• WHAT IS THE FINANCIAL CONDITION OF THE COMPANY MAKING THE OFFER? >>

Consider whether the company is financially sound. If it offers other products than long term care that might be a positive and help to balance its investment.

Janet Colliton is a Certified Elder Law Attorney by the National Elder Law Foundation and a member of

the Pennsylvania Association of Elder Law Attorneys. She limits her practice to elder law, life care, special needs and retirement planning, Medicaid, estate planning and estate administration and guardianships and is located at 790 East Market St., Suite 250, West Chester, 610436-6674, colliton@ collitonlaw.com. She is also, with Jeffrey Jones, co-founder of Life Transition Services LLC, a service for families with long term care needs.