Tag Archives: Insurance Study

Home Care Equals One-Third of All Long-Term Care Claims Paid in 2006

Home Care Equals One-Third of All Long-Term Care Claims Paid in 2006

A recent American Association for Long-Term Care Insurance study revealed that total long-term care insurance claims rose to $3.3 billion for 2006.1 This figure represents the highest amount of benefit payments to Americans for a one-year period ever.

Of the total, 34 percent of the insurance benefit payments made by eight of the nation’s largest insurers covered home care expenses. Additionally, 30 percent of benefits paid were for assisted living costs and the remainder, 36 percent, was allocated toward nursing home care. The largest single claim paid to date was more than $875,000. In fact, the largest claims paid by leading insurers ranged from well over $350,000 to one approaching $900,000.

The data also revealed that approximately eight million Americans now own long-term care insurance obtained individually or through their employer. The researchers concluded that the increasing amount of benefits paid to policyholders is proof of the growing need for long-term care insurance.

To encourage more consumers to buy long-term care insurance, The National Association of Insurance Commissioners has developed the following consumer guidelines to help you select the right policy:

·   The policy should cover at least one year of nursing home or home health care, including intermediate and custodial care. Nursing home or home health care benefits should not be limited primarily to skilled care.

·   The policy should also provide coverage for Alzheimer’s disease if the policyholder develops it after purchasing the policy.

·   Inflation protection is critically important. The policy should offer a choice between:

o   Automatically increasing the initial benefit level on an annual basis.

o   A guaranteed right to increase benefit levels periodically without providing evidence of insurability.

·   Your insurer should offer you a coverage summary that describes the policy’s benefits, limitations, and exclusions, and also allows you to compare it with others. They should also provide a long-term care insurance shopper’s guide that helps you decide whether long-term care insurance is appropriate for you.

·   There should be a guarantee that the policy cannot be canceled, non-renewed, or otherwise terminated because you get older or suffer deterioration in physical or mental health.

·   The insurer should permit you to return the policy within 30 days of purchasing to receive a full premium refund.

·   No requirements should exist that policyholders:

o   First be hospitalized in order to receive nursing home benefits or home health care benefits

o   First receive skilled nursing home care before receiving intermediate or custodial nursing home care

o   First receive nursing home care before receiving benefits for home health care

1 2007 LTCi Sourcebook published by the American Association for Long-Term Care Insurance

Obtain Long-Term Care Insurance While Young for the Best Rates

Obtain Long-Term Care Insurance While Young for the Best Rates

An American Association for Long-Term Care Insurance study of all 2005 long-term care insurance applicants revealed that 42 to 58 percent of all applicants between the ages of 50 to 59 qualified for good health discounts. Additionally, the percentage who qualify for good health discounts decreases somewhat for applicants in their 60s, but drops dramatically for applicants in their 70s.

Consumers who are in good health typically qualify for discounts that can decrease the cost of long-term care insurance by 10 to 20 percent each year. This means that a couple can save hundreds of dollars annually for the protection they need.

The researchers exemplified their findings by breaking down the total number of applicants into percentages who qualified for good health discounts by age range:

·   Under Age 30 – 66.5%

·   Between 30 to 39 – 61.0%

·   Between 40 to 49 – 53.7%

·   Between 50 to 59 – 44.2%

·   Between 60 to 69 – 31.9%

·   Between 70 to 79 – 18.8%

·   80 and Over – 11.2%

Eight leading long-term care insurers that represent approximately 80 percent of all individual policies sold in the U.S provided the study data. The researchers concluded from examining the statistics that consumers understand they will need long-term care at some point in their life. However, they often wait too long to plan for that eventuality. This failure to plan causes them to purchase long-term care insurance late in life and they end up paying a much higher premium as a result. The researchers went on to note that consumers don’t realize changes in their health can result in higher premiums for long-term care insurance, or make them ineligible for coverage at all.

There were two other important conclusions drawn from the study. First, consumers should begin investigating long-term care insurance options while they are still in good health, which for most people is in their 50s. The second is that consumers with less than perfect health should seek advice from a long-term care specialist who knows which health conditions various insurers will accept. Once a consumer has been declined by one insurer, they may find it impossible to obtain coverage from any insurer.

Study Shows Shorter Duration Long-Term Care Policies Are Adequate to Meet Most People’s Needs

When asked why they haven’t purchased long-term care insurance, most people answer that the coverage is simply too expensive. However, that excuse may be eliminated thanks to a national study conducted by Milliman, a leading independent national long-term care insurance actuarial firm.

The researchers examined claims data from approximately 1.6 million policies currently in-force. Their goal was to determine what percentage of long-term care insurance claimants with shorter duration policies actually exhausted all of their policy benefits. What they discovered is that only 14.4 percent of closed long-term care insurance claims lasted longer than 24 months. The study further revealed that approximately 33.2 percent of open claims last longer than 24 months, only 5.6 percent of closed claims lasted longer than 36 months, and only 16.2 percent of open claims last longer than 36 months. The study concluded that for a three-year benefit period, only 8 out of every 100 claimants exhausted their benefits.

Of course, there are catastrophic situations where individuals may need long-term care for many years. However, according to the study’s findings, the majority of consumers can receive adequate long-term care insurance protection with a shorter-duration policy. This is an important discovery, especially for those who believe unlimited protection is too expensive. The researchers added that some protection is better than none at all, and a shorter-duration policy is clearly more affordable. A consumer can reduce the cost of long-term insurance protection by 35 to 40 percent by purchasing a three-year benefit versus an unlimited benefit.

In an April 2006 article entitled Six Steps To Buying A Long-Term Care Policy, which was published on www.kiplinger.com, the author Kimberly Lankford offers the following advice about choosing a long-term care insurance benefit period:

“Increasing your benefit period from three years to lifetime could double your annual premium, so you should weigh the odds that you’ll need long-lasting care versus the extra price you’ll pay for coverage. The average nursing home stay is less than three years, but those averages include people who are in a nursing home for just a few weeks after a hospital stay and others who are in the nursing home for a decade or more, says Driscoll. (Marilee Driscoll is the author of The Complete Idiot’s Guide to Long-Term Care Planning and is quoted throughout Lankford’s article.)

“And these statistics do not include the home health care, assisted-living facility care and informal (unpaid) care received elsewhere,” she says.

Most people opt for a three-year or five-year benefit period, but it may be worthwhile to pay extra for a longer benefit period if you have a family history of Alzheimer’s or some other chronic disease.

If you’re trying to save money, Driscoll recommends shortening the benefit period rather than extending the waiting period.”