From the Financial Hotline

By: Financial Hotline
Fall 2018 (Vol. 36, No. 3)

Call, fax or e-mail for answers to all your financial questions.

Q: My employer is offering long term care insurance, but the premium is pretty high. What do I need to know before I buy?

A: Long term care insurance (LTCI) is not for everyone. Some reasons for buying would include: It may provide protection against costly care. In addition, if you have family caregivers, a policy that provides for extra home care coverage may help you remain at home longer. LTCI premium costs increase with age. Once you develop a serious medical condition, you probably will not qualify for coverage. So if you decide to buy – it’s better to buy early.

You probably should not buy LTCI if you cannot afford the premiums or don’t have enough assets to protect. The National Association of Insurance Commissioners recommends spending only 5 percent of your income on an LTCI policy. If your goal is to avoid nursing homes, keep in mind, most LTCI policies lack sufficient home care coverage to keep an individual out of a nursing home unless family members or informal caregivers are available to help provide care. LTCI policies return from 60 percent to 65 percent of total premiums paid in benefits. This return rate is much less than returns from other types of health insurance. Those with assets over $2 million may be better off going the self-insured route or simply paying costs as they come up.

Q: What is the typical cost for LTCI?

A: Premiums for LTCI vary greatly, depending on your age at the time of purchase, the comprehensiveness of the coverage, and the company selling the plan. In general, in 2018, a 60-year-old married couple would pay $3,490 per year for long-term care insurance coverage.

A 55-year-old single male purchasing new long-term care insurance protection can expect to pay $1,870 a year for benefits according to the data in the industry report. A 55-year-old single woman can expect, on average, to pay more than a single man for similar coverage; $2,965 annually in 2018. Costs still vary significantly from insurer to insurer for identical policies so it’s a good idea to shop around.

Q: I was told an alternative to long term care insurance is “Medicaid Planning”. What is that?

A: This is basically giving away or transferring your assets to qualify for Medicaid. The downside of giving away assets is that there is less flexibility and fewer resources to pay for care.

The Medicaid program provides coverage for longterm care services for individuals who are unable to afford it. In the past, some people gave away their assets to qualify for Medicaid and make sure their heirs received an inheritance; however, the passage of the Deficit Reduction Act of 2005 introduced new rules that discourage the improper transfer of assets to gain Medicaid eligibility and receive long-term care services. Now, there is a period of ineligibility depending on date of transfer. For individuals transferring assets before February 8, 2006, state Medicaid officials only look at transfers made within the 36 months prior to the Medicaid application (60 months if the transfer was made to or from certain kinds of trusts). For anyone who transferred assets after February 8, 2006, date, the period is 60 months. In addition, assets transferred, sold, or gifted for less than they are worth by individuals are prohibited for purposes of establishing Medicaid eligibility.

Q: What is a Medicaid trust?

A: A Medicaid trust is a legal and financial relationship created to help an individual qualify for Medicaid, a United States health-care program for qualifying lowincome and disabled individuals and families. A trust gives another party the title and control of property owned by the person who is attempting to qualify for Medicaid. Not all trusts will qualify but If created and planned carefully, it can render a person’s assets exempt from consideration when he seeks Medicaid.