Long Term Care Insurance
Jul. 9th, 2009 10:47 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
livingdebIt's that time of year again where I get to decide which employer insurance offers I want to take advantage of for the next fiscal year.
What's different this year is that I'm thinking about long-term care insurance again. When my employer first offered it, it sounded like a good idea (insure being stuck in a nursing home which for some reason is not covered by regular health insurance) except that I thought it would cost me $350 a month or something. But my co-worker, who's about my age, says she's paying more like $50 per month.
Today we had a benefits fair which is like a regular fair except that instead of cotton candy and pie contests, they have toothbrushes and insurance booklets and instead of carnival rides they have PowerPoint presentations relating to insurance.
Based on what I learned there and from subsequent web searches, I have come up with the following pros and cons.
Why I Should Get Me Some of This
* Long term care can be catastrophically expensive (averaging $125/day in my state); 72% of those admitted to a nursing home are impoverished within a year. I like insuring against catastrophe.
* It's not already covered. Long term care is what you receive in a nursing home or even your own home when, according to my employer's policy, you can no longer do some "activities of daily living" such as bathing, dressing, eating, and getting to the bathroom or when you get a severe cognitive impairment requiring help to keep from being a hazard to yourself and others. Health insurance covers only "acute care," not this kind of care, and disability insurance replaces part of your income but won't cover this added expense.
* Often this care is done by relatives, but I don't have kids and now that I'm no longer dating 21-year-olds, it's likely I'll outlive any spouse I may acquire.
* Medicaid would cover that, if they are still solvent by the time I need it, but only after I (and any spouse) have become impoverished.
* Lots of people actually need long-term care at some point in their lives, not just when they're dying of old age, but also when they've been in a horrible car wreck.
* Once I buy it, I lock in my rate which otherwise would increase with age.
* I am protected against inflation - I can either periodically increase my coverage with reasonable rate increases or I can pay more up front and the benefits will increase 5% per year while my premiums remain constant.
* Premiums are waived while receiving benefits.
* If I pay for at least three years and then quit, I'll still have some benefit equal to either 30 days worth of benefits or the total amount I contributed, whichever is higher.
Why I Don't Need Any of This
* There is a 90-day wait period--I'd have to pay for the first 90 days myself anyway. And 46% of those admitted to a nursing home are impoverished within 3 months.
* The majority of people who go into a long-term care facility are discharged in less than a year, so it might not be so crazy to self-insure.
* My policy pays for only five years.
* Rules of thumb - don't pay more than 5% of your income and don't buy it unless you expect to have substantial income ($50,000 per year) and assets (over $300,000 in today's dollars) in addition to your house at some point. No matter which plan I get, my current income is high enough but some options might be pushing it with my post-retirement income. I am quite unlikely to ever have these "substantial assets," though I suppose I might marry into some.
* I might have a retired spouse by then who can take care of me cheaply.
* Companies can and do raise rates, though they have to do it for everyone of the same age. There is nothing to keep them from raising the rates just when your age group becomes risky. Or companies in trouble can make it very difficult to make a claim. Or your company could go out of business, and there you are relying on the government again.
* Plans may improve between now and when I need it, but I will be stuck with this one. For example, fifteen years ago, care in assisted-living facilities wasn't covered, but now it's a standard.
Monthly Rates for People My Age
Daily maximum benefit of $100:
$16.17 - flat
$45.18 - inflation protected
Daily maximum benefit of $125:
$20.21 - flat
$56.48 - inflation protected
Daily maximum benefit of $150:
$24.25 - flat
$67.77 - inflation protected
Daily maximum benefit of $200:
$32.34 - flat
$90.36 - inflation protected
Pondered Strategies
The trusting strategy - go for the $56.48 inflation protected $125/day benefit plan. This would be my favorite if I trusted insurance companies, but it's not currently in the running.
The sweet spot strategy - wait until the age right before a big premium jump, and start then. The next big jump is at age 50, but that jump is only about twice as big as the other jumps.
The start small strategy - go for the $16.17 flat $100/day benefit plan. This is how I started saving for retirement and how I sometimes recommend people start using their flexible spending accounts.
The work-the-system strategy - go for the $24.25 or $32.34 flat $150 or $200/day strategy, but only for three years. Then I will qualify for 30 days of benefits ($4500 or $6000) or the total I have contributed ($873 or $1164), whichever is higher, for the rest of my life.
The rejection strategy - continue not having this coverage.
What's different this year is that I'm thinking about long-term care insurance again. When my employer first offered it, it sounded like a good idea (insure being stuck in a nursing home which for some reason is not covered by regular health insurance) except that I thought it would cost me $350 a month or something. But my co-worker, who's about my age, says she's paying more like $50 per month.
Today we had a benefits fair which is like a regular fair except that instead of cotton candy and pie contests, they have toothbrushes and insurance booklets and instead of carnival rides they have PowerPoint presentations relating to insurance.
Based on what I learned there and from subsequent web searches, I have come up with the following pros and cons.
Why I Should Get Me Some of This
* Long term care can be catastrophically expensive (averaging $125/day in my state); 72% of those admitted to a nursing home are impoverished within a year. I like insuring against catastrophe.
* It's not already covered. Long term care is what you receive in a nursing home or even your own home when, according to my employer's policy, you can no longer do some "activities of daily living" such as bathing, dressing, eating, and getting to the bathroom or when you get a severe cognitive impairment requiring help to keep from being a hazard to yourself and others. Health insurance covers only "acute care," not this kind of care, and disability insurance replaces part of your income but won't cover this added expense.
* Often this care is done by relatives, but I don't have kids and now that I'm no longer dating 21-year-olds, it's likely I'll outlive any spouse I may acquire.
* Medicaid would cover that, if they are still solvent by the time I need it, but only after I (and any spouse) have become impoverished.
* Lots of people actually need long-term care at some point in their lives, not just when they're dying of old age, but also when they've been in a horrible car wreck.
* Once I buy it, I lock in my rate which otherwise would increase with age.
* I am protected against inflation - I can either periodically increase my coverage with reasonable rate increases or I can pay more up front and the benefits will increase 5% per year while my premiums remain constant.
* Premiums are waived while receiving benefits.
* If I pay for at least three years and then quit, I'll still have some benefit equal to either 30 days worth of benefits or the total amount I contributed, whichever is higher.
Why I Don't Need Any of This
* There is a 90-day wait period--I'd have to pay for the first 90 days myself anyway. And 46% of those admitted to a nursing home are impoverished within 3 months.
* The majority of people who go into a long-term care facility are discharged in less than a year, so it might not be so crazy to self-insure.
* My policy pays for only five years.
* Rules of thumb - don't pay more than 5% of your income and don't buy it unless you expect to have substantial income ($50,000 per year) and assets (over $300,000 in today's dollars) in addition to your house at some point. No matter which plan I get, my current income is high enough but some options might be pushing it with my post-retirement income. I am quite unlikely to ever have these "substantial assets," though I suppose I might marry into some.
* I might have a retired spouse by then who can take care of me cheaply.
* Companies can and do raise rates, though they have to do it for everyone of the same age. There is nothing to keep them from raising the rates just when your age group becomes risky. Or companies in trouble can make it very difficult to make a claim. Or your company could go out of business, and there you are relying on the government again.
* Plans may improve between now and when I need it, but I will be stuck with this one. For example, fifteen years ago, care in assisted-living facilities wasn't covered, but now it's a standard.
Monthly Rates for People My Age
Daily maximum benefit of $100:
$16.17 - flat
$45.18 - inflation protected
Daily maximum benefit of $125:
$20.21 - flat
$56.48 - inflation protected
Daily maximum benefit of $150:
$24.25 - flat
$67.77 - inflation protected
Daily maximum benefit of $200:
$32.34 - flat
$90.36 - inflation protected
Pondered Strategies
The trusting strategy - go for the $56.48 inflation protected $125/day benefit plan. This would be my favorite if I trusted insurance companies, but it's not currently in the running.
The sweet spot strategy - wait until the age right before a big premium jump, and start then. The next big jump is at age 50, but that jump is only about twice as big as the other jumps.
The start small strategy - go for the $16.17 flat $100/day benefit plan. This is how I started saving for retirement and how I sometimes recommend people start using their flexible spending accounts.
The work-the-system strategy - go for the $24.25 or $32.34 flat $150 or $200/day strategy, but only for three years. Then I will qualify for 30 days of benefits ($4500 or $6000) or the total I have contributed ($873 or $1164), whichever is higher, for the rest of my life.
The rejection strategy - continue not having this coverage.