7 tips for selecting long-term care insurance

Newswise — As the massive Baby Boomer generation braces for retirement, many are turning to long-term care insurance to prepare for potential age-related care.

Long-term care insurance helps cover the costs of assisted-living facilities, nursing homes and at-home care. To receive coverage for a specific period of time, policyholders pay a premium based on age, health and the type of plan. According to trade group America’s Health Insurance Plans, a typical long-term care policy bought in 2002 with inflation protection added would cost a 50-year-old $1,134, while a 65-year-old would pay $2,346 and a 79-year-old would fork out $7,572.

In addition to covering the cost of their own health care, many of the nation’s approximately 78 million Baby Boomers are also pitching in to help pay for the medical needs of an elder parent.

"More than a quarter of those responding to the NAELA Elder Issues National Survey made long-term care arrangements for themselves or a family member," said G. Mark Shalloway, CELA, president elect of NAELA. Of that group, the majority chose nursing homes – which typically cost more than $75,000 a year – over assisted living or home-based care. The NAELA national survey of elder issues polled 1,001 Americans aged 35 and older about aging issues such as concerns about growing older, long term care, elder debt, healthcare insurance costs, Medicare Part D, living wills, retirement, and elder abuse.

About 8 million Americans now own long-term care insurance protection, a number that has risen in recent years. Elder law attorneys nationwide, however, have seen a subsequent escalation in the number of grievances and lawsuits filed against the insurers. The majority of those complaints allegedly stem from unnecessary delays and unfair regulations related to the claims process.

To avoid the complications and possible surprises, NAELA offers several tips on choosing long-term care insurance:

1. SELECT THE RIGHT KIND OF COVERAGE. Home Health Care Coverage, for example, means you receive insurance benefits covering in-home care services provided by a licensed or registered practice nurse or therapist. Respite Care guarantees a facility will offer some help – about one to two weeks each year – to those caring for a homebound person. Adult Day Care can also help, ensuring assistance is provided during the day for recreational, therapeutic and personal care.

2. REQUIRE ADMITTANCE TO ALL LEVELS OF CARE. You should be able to use any skilled, intermediate or custodial care facility without having to start at the highest level of care. Skilled care, for example, is the highest level an individual can receive outside of hospital confinement and requires constant medical attention from licensed medical professionals under a physician’s supervision. Intermediate care, which is handled by a licensed practical nurse, involves occasional nursing and rehabilitative care.

3. AVOID POLICIES WITH A PRIOR-HOSPITALIZATION REQUIREMENT. "Make sure your policy does not require hospitalization before benefits are paid," said Shalloway. Typically, certain conditions must first be met – usually by measuring a person’s ability to do one or more "activities of daily living" such as bathing, eating or dressing – before benefits are activated for nursing home care or assisted living. Preferred policies will require the insured to be unable to do two of the "activities of daily living" rather than rely on a "medically necessary" standard.

4. SELECT HIGHLY-RATED POLICIES. Financial strength is important, helping determine the insurer’s long-term survival and whether they can pay future claims. "Look for a company that has an "A+" rating from A.M. Best Co. and a triple "A" rating from at least one other service,’ says Shalloway. Policies from the same insurer vary from state to state, so verify the information is appropriate for your particular region.

5. SECURE FRONT END UNDERWRITING TO HELP IMPROVE YOUR INSURANCE PLAN. Front end underwriting requires an attending physician’s statement at the time of application and can help protect against claim denial due to underwriter mistakes. Expect the procedure to take up to a month and a half.

6. KNOW THE DIFFERENCE BETWEEN "GUARANTEED RENEWABLE" AND "NON-CANCELABLE." Non-cancelable means the policy stays in force as long as the premium is paid and the insurance company is unable to raise the premium. Guaranteed renewable means the insurance company can’t drop the policy unless you skip payment, but premiums can be raised for all policyholders within a particular group.

7. OBTAIN INFLATION ADJUSTMENT. Since medical costs increase with inflation, you should consider obtaining an inflation adjustment factor. The three most common types of inflation protection are indexed, simple percentage and compounded percentage. Indexed is initially the cheapest, but might not protect you down the road. Simple Inflation Protection sets a fixed annual percentage increase. Compounded Protection is best, but typically the most expensive.

These are just some options to consider when evaluating long-term care insurance plans. Long-term care insurance is more complicated than life insurance or health insurance, so it’s best to consult with a financial planner, Elder law attorney or insurance professional prior to any decision-making.

ABOUT NAELA

Established in 1987, the National Academy of Elder Law Attorneys (NAELA) is a non-profit association that assists lawyers, bar organizations and others. Members of NAELA are elder law attorneys who are experienced and trained in the legal, medical, financial, social and family issues of people with special needs and people as they age NAELA currently has more than 5,000 members across the U.S., Canada, Australia and the United Kingdom. For more information or to find an elder law attorney, visit http://www.naela.org.