Dear Clients and Friends,
A worthy VENT about Long Term Care Insurance from one of my readers:
Your newsletter regarding Long Term Care insurance premiums is relevant to the situation my husband and I have. We bought good LTC policies, of a type called Partnership with New York State, from Travelers Insurance about 25 years ago. Over time, the policies were taken over by Met Life, which has since placed them in a sub-division called Brighthouse Financial. To make the situation more opaque, there is a relationship between Genworth, which processes the premium payments, and Brighthouse. At first, we got no premium increase for a number of years because it was a feature of our policies that premiums would not increase. Later, premium increases began – and are imposed every three years – because the company pleads with the NYS Financial Department on the basis that people are living longer than the company expected and not as many people dropped their policies, as they also expected. (The company stopped selling these policies about 10 years ago).
An insurance company can send legal teams to make such pleas, but where is an organization of policyholders to do the same? The person whose example you were pointing to in your newsletter said something about their company being considerate enough to give them “options” – like lowering the benefits they are covered for. The hard fact is if your policy doesn’t cover enough to keep your assets from being eaten away when you are in a nursing home, what’s the point of paying for insurance? There is another thing that’s interesting here:
Medicare covers the first 20 days in full in an LTC facility. If the LTC policy, as in our case, does not kick in until 100 days have elapsed because Medicare is paying 80% during those eighty days, the policyholder must pay the other 20%. That 20% co-pay has, most recently, gone up to about $185 per day. That comes to roughly about $15,000 that the policyholder must pay out-of-pocket right off the bat. I’m not good at math, so maybe this isn’t accurate, but if $185 is 20% of what Medicare is paying out, then Medicare is paying the nursing home about $925 for each of those eighty days.
I’ll close by saying that twenty-five years of premiums for two people comes to a heck of a lot of money and insurance companies appear to be grinding their policyholders into the ground as they are nearing the end of their lives.
I totally understand this frustration. I personally have long-term care insurance and my fingers are crossed that it doesn’t turn out to be a big waste of money. I have also seen it be a godsend for some clients. It certainly is by no means perfect and it seems like a rip-off at times if the premiums keep going up to the point it becomes unaffordable. It still remains an option but the problems and costs of these policies are why so many resort to protecting their assets with Irrevocable Medicaid trusts, relying on the Medicaid system to help pay for their long-term care. A full discussion of all options needs to be undertaken every time.