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| Posted on: Thursday, April 14, 2005 |
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If you’ve read this far you likely have a family member or friend who has or will experience the need for Long Term Care (LTC), that is, be in a Nursing Home or need assistance in their home due to a medical problem. If an individual does not die within weeks of a serious accident or onset of a prolonged medical illness, he/she will face the need for Nursing Home Care, and LTC insurance is one option to be considered to help pay for that care.
Sobering Reality:
As reported by AARP News Release December 20, 2001 ’Most Americans Unprepared for Long-Term Care Costs’: As of 2001 the national average annual cost for nursing home care was $56,000. It is projected that by 2030, that cost will increase to $190,600 annually.
Below is a brief overview of important issues to be considered that could help deciding if LTC insurance is right for you.
Purpose of LTC Coverage:
1. Insure some of an individual’s future Nursing Home/Home Care expense.
2. Provide peace of mind that relatives and family will be less burdened should such care be needed.
Reality:
1. Most Nursing Home stays are 6-18 months in length.
2. Medicaid (State and Federally funded) typically cover care for individuals with modest or no assets. However, not all nursing homes accept Medicaid patients.
3. 2004 Colorado Nursing home costs are $4,000-$5,000 per month and vary based on the Nursing Home’s accommodations and services. Costs are expected to likely increase at 3-5% per year.
Funding Options:
1. Set aside funds in Savings or 401(k) to meet such needs (requires fiscal discipline).
2. Purchase an Individual or Group LTC policy. Level premium beginning at age 55 could be from $125 to $200/month. Premium rates increase as an applicant’s age increases.
3. Insurance issues to consider:
a. Employer sponsored Group coverage can be a better value
(terms/underwriting/price) but 5-15% participation of eligible staff is
required.
b. Acceptance for coverage is not guaranteed for applicants with serious
health problems but Group acceptance rules are typically more liberal than
Individual Policy rules.
c. Employer ’sponsored’ Group or ’list bill’ Individual LTC plans require
Human Resources and Payroll resources which takes time and costs money.
d. Individual LTC policies are readily available to individuals privately.
e. Policies typically offer various coverage options. Applicants can choose
coverage limits, waiting periods before benefits start, and duration of
benefits.
f Cost of Living (COLA) and Home Care options and numerous other
“features” are available. Because Nursing home costs will increase, LTC
coverage without a COLA will become inadequate.
Employer Subsidies:
Employers rarely subsidize LTC premiums for employees. Providing quality medical care plans is so expensive, funding for LTC is seldom possible or comes at the expense of reductions in other benefits.
Should you have any additional employee benefit questions or would like to discuss this material in detail, please don’t hesitate to call the Denman Team.
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