Long Term Care Policies Will Soon Cost More For Women
Long Term Care Policies Will Soon Cost More For Women
The gender gap is about to get a little wider as the formerly egalitarian Long Term Care insurance market starts charging higher prices for women.
While life insurance has long been priced by sex, companies that provide Long Term care insurance (LTCI), mainly used to cover healthcare expenses in old age or for severe illness, have long avoided it. But for the first time this year, they will introduce gender-based pricing, starting with policies from Genworth Financial, Inc. the nations largest seller.
The aim is to reflect actuarial realities – women live longer and prepare ahead more for their futures by buying policies. Genworth says two-thirds of it’s LTCI claim payouts go to female customers, and overall, women account for 57 percent of all policy sales in 2011, according to data from LIMRA, the insurance research and consulting group.
Genworth will introduce gender-specified policy pricing by this spring, if the plan passes regulatory hurdles. That will boost the cost of new policies for women by 20 to 40 percent, depending on the applicant’s age and benefit package, according to the American Association for Long Term care Insurance (AALTCI).
Industry experts expect gender-based pricing will be adopted by other carriers before the end of this year – both for individuals and married couples.
Gender-based pricing is the latest stopgap measure for an industry that already is struggling. The ultra-low interest rate environment has made it difficult for the insurance companies to earn enough on their fixed income portfolios to fund benefits.
Another challenge for insurance companies, ironically, is customer loyalty. Only about 3 percent of policyholders allow their coverage to lapse. It’s a smart consumer move to hold onto policies, but it is costly for carriers, who ultimately wind up paying more claims.
Also, the stressed Medicaid system is the nation’s largest insurer, which puts stress on federal and state budgets. Outside of that, family members are the most common source of care.
So, what can women do to get the lowest rates possible in this new environment?
1. Get Started Now – If you have been thinking of buying Long Term care insurance, this would be a great time to get going. Genworth is applying now for gender-based rate increases to individual state insurance regulators. 2. Apply As A Couple – If you are married, applying as a couple will keep your cost down. Genworth and the rest of the industry apply discounts for couples who apply for coverage together. 3. Ask Questions – To find out more information about this article and to get informed on Long Term Care basics, give me a call.
Abe Glickman, LTCA, LTCP Member: AALTCI, NAHU, NAIFA, SOA Abe Glickman Insurance Group Toll-Free Phone: 877-298-5824 Email: AG@AbeGlickman.com
“It is better to create a plan 10 years too soon than one day too late.”
Questions or Comments? Give me a call!
Top 15 Most Expensive States for Long-Term-Care: 2015
Boomers are not happy campers when it comes to the cost of health care in retirement, and they have cause. Genworth Financials annual study on the cost of long-term care highlights the way that costs have continued to rise. The study’s figures for the most expensive states in which to receive care certainly give weight to boomer fears. An Insured Retirement Institute report has also found that boomers are the least confident they’ve been in five years about having enough money to get through retirement; one of the expenses causing the most worry is health care. Fully 81 percent of boomers don’t feel financially prepared to cope with LTC needs, according to IRI. In addition, 28 percent are looking to postpone retirement until age 70 or later, because they don’t believe they have enough money to deal with the expenses, including health care, that retirement will bring. Genworth’s study points out that LTC costs in other ways, too. It reports that 46 percent of unpaid family caregivers for those who remain at home end up footing a bill of more than $5,000 annually for a myriad of expenses, from last-minute grocery purchases to putting in grab bars in the shower for a loved one. Then there are the hefty demands on a caregiver’s time and attention, which can negatively affect everything from her job to her health. LTC is expensive; no way around that. Since Genworth’s study provides insights on how much the cost varies from state to state, perhaps some people might want to contemplate relocating to a state where care is more affordable — and there is a tremendous difference among states. According to the senior living referral service A Place for Mom, prices for all types of senior living, including independent living facilities, hit record highs in 2014 — not a reassuring trend. In addition, facilities providing “memory care” (care for those with Alzheimer’s disease and other forms of dementia) and assisted living are increasing in cost in the West and Midwest faster than in other parts of the country. For the 12th year, Genworth’s Cost of Care Survey, conducted by CareScout, provides not just the data, but includes a mobile app on Genworth’s website and an interactive map. The data, from more than 47,000 provider survey outreaches, comes from 440 regions across the country, covering all 50 states and Washington, D.C. Also included are potential cost growth rates, as well as a look at how expenses in each category have risen over the past 5 years.
Keep reading for the 15 most expensive states for long-term care:
- Oregon Average Annual Cost: $55,338 Adult day care: $23,010 Licensed home care: $49,764 Assisted living: $46,560 Nursing home (private room): $102,018
- Maryland Average Annual Cost: $55,547 Adult day care: $20,540 Licensed home care: $44,616 Assisted living: $46,800 Nursing home (private room): $110,230
- North Dakota Average Annual Cost: $55,805 Adult day care:$19,562 Licensed home care: $59,854 Assisted living: $38,865 Nursing home (private room): $104,938
- Washington Average Annual Cost: $58,196 Adult day care: $17,563 Licensed home care: $54,088 Assisted living: $55,500 Nursing home (private room): $105,631
- Vermont Average Annual Cost: $58,386 Adult day care: $32,136 Licensed home care: $48,048 Assisted living: $48,240 Nursing home (private room): $105,120
- Rhode Island Average Annual Cost: $59,518 Adult day care: $17,290 Licensed home care: $53,768 Assisted living: $63,900 Nursing home (private room): $103,113
- Maine Average Annual Cost: $60,923 Adult day care: $28,080 Licensed home care: $50,336 Assisted living: $57,600 Nursing home (private room): $107,675
- Delaware Average Annual Cost: $62,648 Adult day care: $17,995 Licensed home care: $45,760 Assisted living: $68,940 Nursing home (private room): $117,895
- New Hampshire Average Annual Cost: $63,326 Adult day care: $16,900 Licensed home care: $52,899 Assisted living: $61,230 Nursing home (private room): $122,275
- Hawaii Average Annual Cost: $63,797 Adult day care:$17,225 Licensed home care: $54,912 Assisted living: $48,000 Nursing home (private room): $135,050
- New York Average Annual Cost: $63,946 Adult day care: $22,100 Licensed home care: $48,048 Assisted living: $49,200 Nursing home (private room): $136,437
- New Jersey Average Annual Cost: $66,237 Adult day care:$22,165 Licensed home care: $46,332 Assisted living: $68,700 Nursing home (private room): $127,75
- Massachusetts Average Annual Cost: $68,605 Adult day care: $16,900 Licensed home care: $54,340 Assisted living: $63,600 Nursing home (private room): $139,580
- Connecticut Average Annual Cost: $72,896 Adult day care:$20,150 Licensed home care: $45,760 Assisted living: $66,900 Nursing home (private room): $158,775
- Alaska Average Annual Cost: $110,291 Adult day care: $31,829 Licensed home care: $59,488 Assisted living: $68,430 Nursing home (private room): $281,415
Targeting High Net Worth Clients With LTCI
“I’ll self-insure.” Every long-term care insurance (LTCI) advisor certainly has heard that objection to an insurance proposal. That’s not just an objection for wealthy clients, however—it’s the truth. While long-term care costs can seriously disrupt most Americans’ finances, for the wealthy it’s just another expense, albeit an unpleasant one.
But does the ability to pay out-of-pocket for care mean that high net worth (HNW) clients should forgo LTCI? That’s a false conclusion, according to several experienced advisors. Here are the primary reasons they cite for wealthy clients to own some form of LTCI.
LTC planning isn’t solely about the financial costs, according to William R. Borton, CLU and managing principal with W.R. Borton & Associates LLC in Marlton, New Jersey. In a recent LinkedIn Pulse article he wrote about the emotional impact that an LTC-event can have on family, friends and neighbors.
Showing clients that LTCI isn’t just about the contract’s cost allowances can illustrate valuable benefits the client might overlook. A quality LTCI contract offers access to care coordinators who can act as the insured’s health care advocate, he notes. This can help the insured navigate the LTC delivery system, identify caregivers and facilities and provide other services that would otherwise fall on the insured’s family or friends. While HNWs and their family members could afford to duplicate these services, their lack of experience and the stress of dealing with the care system can help justify coverage purchases.
HNWs usually have a good grasp of finance, said Kim Natovitz, CLTC with the Natovitz Group in Bethesda, Maryland, and that understanding can help them appreciate LTCI’s role in wealth preservation. These clients understand that they incur an opportunity cost if the additional expense of paying for long-term causes them to spend their capital. That recognition moves the discussion from cash flow to opportunity costs. “Many of them really appreciate the fact that, yes, I could certainly self-insure for a half a million dollars of expenses,” said Natovitz. “But why would I want to because if I kept that half a million dollars invested, what that becomes in the future is very meaningful.”
Kevin Meehan, CFP with the Wealth Enhancement Group in Itasca, Illinois has found that HNWs focus more on estate preservation than asset protection when considering LTCI. It’s a risk-transfer decision, he said. How much of the risk do I want to keep versus how much do I want to shift to the insurance company? “If I want to shift it to the insurance company, I’m probably making a conscious decision that this isn’t so much to protect myself,” he said. “It’s really more to preserve the estate to transfer it either to entities like charities or to individuals like children.”
That line of thinking influences policy design, as well, added Meehan. Higher net worth clients can afford longer elimination periods. That decision is often coupled with the benefit amount to find an acceptable trade-off between how much risk to transfer and at what cost. Younger HNWs may prefer a compounded inflation adjustment because of the longer time horizon while older clients prefer a simple adjustment.
HNWs have clear care preferences that influence policy design, in Natovitz’s experience. They prefer to stay at home for as long as possible and want round-the clock care (like all clients); consequently, they’re willing to spend more on care so they can age in place. “Not just someone who lives in and sleeps eight hours a day, but where they have two or three shifts,” she said. If they are in a facility, they may want to have some private duty staffing if they believe the staffing ratios in a facility are inadequate. They will also be willing to spend more to avoid transitioning to a nursing home.
“Many of those high net worth individuals are staying in an assisted living facility for the balance of their life,” she said. “In addition to the care from the assisted living facility, many of them will have round-the-clock care brought in as opposed to transitioning into a nursing home.”
Because HNWs’ long-term care plans interact with their estate plans, advisors can use LTCI products creatively to meet both needs. Citing a hypothetical married couple, Borton will use a traditional shared-care LTCI contract to provide the base coverage. For the husband, he then adds a universal life policy with a LTC or chronic illness rider to provide both an additional potential lifetime benefit and the residual death benefit. The wife purchases a linked life-LTCI policy, as well. (so three policies for the couple? This isn’t clear nor is the why…)
This approach creates a diversified coverage portfolio with varying benefits and refund features, he adds, another factor that appeals to HNW clients. “There’s generally a waiting period on the traditional plan; there’s no waiting period generally on the life-linked plan and/or the universal life accelerated death benefit plan,” he said. “Some of them are indemnity rather than reimbursement. When you use multiple contracts, they can be used concurrently or consecutively. So, there’s a whole lot of flexibility this way.”
From article: http://www.talkaboutltc.com/2015/04/30/targeting-high-net-worth-clients-with-ltci?utm_source=IA051315&utm_medium=eNL&utm_campaign=Genworth