Long-term Care Insurance on Rise

By Ellen G. Lahr, Berkshire Eagle

January 4, 2008

Ron and Judy Turbin are among the baby boomers who have witnessed the decline of an elderly relative, whose final years were spent in a nursing home bed. 

Judy Turbin's father faded with strokes and dementia, and her mother eventually could no longer care for him alone. 

Their finances were modest, so Medicaid covered the cost of her father's nursing home care. He died in 2005, after six years in a Lenox facility. 

"Judy's parents were not loaded up with resources, and so his was a clear-cut Medicaid case," said Ron Turbin, a semi-retired lawyer and Williamstown selectman, whose wife recently opened a pastry business. "But we got concerned about our own situation." 

Long-term care costs, he said, could be "a financial earthquake, and we might have to sell our house." 

The Turbins, who are in their 60s and in fine health, bought a long-term care insurance policy two years ago, for which they spend around $4,000 per year. 
"It's worth it, but it's a sacrifice," said Ron Turbin. "Perhaps we have a little less for luxuries, but I really think it's worth it. It's peace of mind." 

The policy will pay for nursing home care, but also pays for what
The Turbins want to ease the potential burden of care on each other and their children, protect their home and assets, and leave something for their three grown children. 

Costs on the rise

With the elderly population living longer, their needs for daily help or all-around care are on the rise. 

In Massachusetts, average nursing home costs were $270 per day in 2007, according to the National Clearing House for Long Term Care. Assisted living costs an average of about $4,300 monthly, and in-home care runs about $20 per hour. 

Unless, and until, the patient is poor enough to meet federal poverty guidelines, nursing home bills must be paid with private funds. That means a potential depletion of savings, retirement funds, home equity, real estate or other assets. 

"You can retire with a half-million in the bank, and it can cost $100,000 per year to be in a nursing home," said Gary Kobran, financial services manager of Wheeler & Taylor Insurance in Great Barrington. "But long-term care insurance is a very tough sell. The people who need it most are the middle class, not poor, not rich." 

Those who do buy are getting younger, however, according to Jackie Metsma, a financial planner and long-term care insurance specialist for True North Financial Services, based in Williamstown. 

"People used to look at this option when they prepared to retire, but now more people are in their early 50s," she said. "People are now going through things with their parents, and they don't want their own kids to go through it." 

The American Association of Retired Persons estimated in 2005 that 7 million long-term care policies were in place, with the typical consumer at age 61. 

Nearly half of those policy holders had incomes above $75,000 per year and more than $100,000 in liquid assets. 

In 2005, the average annual insurance premium, across all age groups, was $2,000, according to the federal government's data. 

Industry changes allow discounts for couples, and some companies sell "hybrid" policies that combine long-term care insurance with life or disability insurance, said Metsma. 

Sharp hikes

The earliest policies written have taken sharp price hikes in recent years. 
George and Caroline Farley, of Pittsfield — he is 81, and she is 77 — bought policies 14 years ago through their son, Shaun Farley, a broker now with Greylock Insurance. 

The Farleys' initial annual premiums were $1,700 for him, and $1,100 for her, said George Farley, a retired schoolteacher. 

But their most recent bill was a shocker: $3,700 for him, and $2,700 for her. 
Though the policy cost has spiked, he said, "we will stick with it. We don't want to lose it." 

They also want to live at home as long as possible, he said. 
Kobran, of Wheeler & Taylor, said the Farleys are victims of the insurance industry's early errors in financial projections. 

The insurance industry, which is closely regulated, relies on income from interest earnings to pay claims, and interest rates have been low in the 20 years since long-term care insurance has been around. 

Second, insurance companies assumed a higher number of policies would lapse through non-payment. That, too, proved incorrect, he said. 

Most people with long-term care insurance keep it. 

Patrick Sheehan, of Sheehan Health Group, which owns Craneville Place nursing home and Sugar Hill Assisted Living, said many people who have purchased long-term care insurance have not yet reached the age of needing the benefit. 

Those people who do have it, he said, tend to use it for assisted living, but the numbers remain relatively small. 

He advised that anyone seeking long-term care insurance become an educated consumer, since benefits vary widely, he said. 

"Be smart consumers; use caution," he said. "You really need to shop around, make sure you're getting the best value for your money." 

At a glance ... 

Average costs in Massachusetts for long-term care
Semi-private nursing home room: $270/day
Assisted living facility: $4,300/month *
Home health aide: $20/hour * * Not covered by Medicaid
Tips for shopping for long-term care insurance: 
• Don't buy long-term care insurance out of fear or emotion. 
• Consult a certified financial planner to determine whether your money should be used on long-term care insurance. 
• Consult an insurance broker who has access to a wide variety of potential underwriters. 
• Consider benefit options: Do you want full, comprehensive coverage, and can you afford it? Do you want a lifetime benefit, or a five-year cap? 
• Can you tailor a less comprehensive plan that provides partial coverage, which you can supplement with income from assets or other funds? 
• Do you want a 'hybrid' policy, which combines life insurance or disability insurance with long-term care coverage? 
• Do you have a pre-existing condition? People already in need of long-term care services won't qualify.

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