1 Life & Health Insurance Advisor 359 East Main St., Suite 1 American Fork, UT Serving Utah since 1990 Long-Term Care November 2013 Volume 6 Number 11 Women and Long-Term Care: Taking Care of the Caretakers November is Long-Term Care Awareness Month, a good month to examine and prevent the significant gender gap in long-term care preparedness. In our society, women assume more responsibilities for caretaking than men. Whether it s a baby, disabled adult or fragile elderly person, chances are a female family member is providing care. Although many, if not most, women would readily step in to care for a family member in need, many have neglected to plan for their own long-term care requirements. What Is Long-Term Care? When people have mental or physical disabilities that prevent them from performing everyday This Just In November is Long-Term Care Awareness Month. Perhaps not coincidentally, calls to longterm care insurers claims departments increase 15 percent during the holiday season, found a 2012 study by the American Association for Long-Term Care Insurance (AALTCI). Some calls are to initiate claim benefits, but most are just general policy inquiries from adult children of aging parents who possess longterm care insurance, said Jesse Slome, the association s executive director. Many people use holiday visits to assess the health and safety of elderly parents. Suggestions offered by the AALTCI include:
2 Long-Term Care Life & Health Insurance Advisor November 2013 personal health or care activities, long-term care services can help them live as independently and safely as possible. The need for long-term care can arise suddenly for example, after a stroke or accident or gradually, as with Alzheimer s disease and other dementias. Although most long-term care recipients are over age 65, younger people sometimes need long-term care services as well. Some long-term care recipients will eventually recover, but many will need care for the remainder of their lives. Long-term care services include a variety of health and personal care services and supports. Depending on your family circumstances and health, your options range from informal, unpaid care by a family member, to professional in-home help, to residential facilities. Women and Long-Term Care A variety of factors make women more likely to need long-term care than men. Y Women live longer: The U.S. Census Bureau calculates that the average woman born in 1960 who makes it to age 65 will have another 15.8 years of life. That s three years longer than her male counterparts. The longevity gap grows for people born in 1970: Women who live to age 65 have an additional life expectancy of 17 years versus 13.1 years for men. Y Women account for two-thirds of Alzheimer s patients in the country: At any given age, men and women have roughly equal rates of Alzheimer s disease and other dementias, but women have a higher lifetime risk due to their longer life spans. Y Women suffer more disabilities than men: In the 2011 Community Survey, 12.4 percent of non-institutionalized women reported being disabled, versus 11.9 percent of men. The Financial Impact of Long-Term Care In addition to having a higher risk of needing long-term care, women often lack the familial and financial resources of their male counterparts. Women live longer and tend to marry older men (more than half of all husbands are two or more years older than their wives, according to Census Bureau data). This makes women more likely to end up widowed and living alone than their husbands. Women also earn less, on average, than men. Among full-time wage earners, women earned 82 percent of the median earnings of their male counterparts in Over a lifetime, the earning gap widens, since women are more likely than men to take time off from work or reduce work hours to care for children or other family members. Professional long-term care services, whether in the home or in an institution, such as an assisted living facility or nursing home, can quickly exhaust a retirement savings fund. This Just In Y Look for unopened mail, especially unpaid bills. Y Correct safety problems, such as loose rugs or wires, that could cause falls. Y Has the parent lost weight? Is there outdated and spoiled food in the refrigerator or pantry? Y Write down important information, including the license plate of the parent s car. That way, if it is gone, you ll have information to share with the police. Y Make a list of medications and physician contact information. Y Make a list of local repair services, such as plumbers and electricians, and their contact information. Y If the parent owns long-term care insurance, record the policy number and claims contact information. Why Long-Term Care Insurance? Even if you have health insurance, you do not have coverage for long-term care. Health insurance policies, including Medicare, only cover long-term care services for a very limited time typically 30 days and only if you need them after a covered hospital stay. Medicaid covers long-term care services, including personal care, home health care, adult day care, and nursing home care. However, you must meet certain financial and health requirements to qualify. People with financial resources above a certain limit will most likely not qualify unless they first use
3 Life & Health Insurance Advisor November 2013 up their own resources to pay for care, called spending down. Private long-term care insurance can cover your long-term care needs without requiring you to deplete your assets. You can purchase nursing home-only coverage or a comprehensive policy that includes both home care and facility care. Coverage terms and prices vary among insurers, but in general, the younger and healthier you are, the less you ll pay. Most long-term care insurers will discount policies for married couples. Some will also write policies on a shared care basis, which gives a married couple a pool of funds to share. This option could work well for couples who cannot afford to buy unlimited benefit policies on both members. A study by Genworth Financial found women used long-term care insurance more than men, accounting for two-thirds of all claims filed. Are you one of the women who will need long-term care services? Only time can answer that, but many women find that having long-term care insurance gives them peace of mind, knowing they ll have the resources available to pay for care when they need it. For more information, please contact us. Ten Things You Need to Know about the Affordable Care Act Affordable Care Act Even though the exchanges, or Health Insurance Marketplaces, created by the Affordable Care Act opened in October, misconceptions still abound. If you need health insurance coverage, here are ten things to keep in mind. 1 Open enrollment dates have been extended. Individuals who lack coverage and want to avoid the Affordable Care Act s penalties can enroll in a plan in the Health Insurance Marketplace s open enrollment from October 1, 2013 until March 31, For 2015 and later years, the open enrollment period will be October 15 to December 7 of the previous year. Individuals may also qualify for special enrollment periods outside of open enrollment if they experience a qualifying life event. These include moving to a new state, certain changes in your income, and changes in your family size (for example, if you marry, divorce, or have a baby). 2 Although open enrollment dates have been extended, the deadline for obtaining coverage has not. Starting in 2014, the individual shared responsibility provision calls for each individual to either have minimum essential coverage for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return. The provision goes into effect on Jan. 1, It applies to each month in the calendar year. The amount of any payment owed takes
4 Life & Health Insurance Advisor November 2013 Affordable Care Act into account the number of months in a given year an individual is without minimal essential coverage or an exemption. The law does allow for a short coverage gap exemption for a continuous period without minimum essential coverage of less than three full calendar months, if it is the first short coverage gap in the individual s taxable year. 3 It will take time for your coverage to become effective. Health insurance coverage usually becomes effective on the first day of a month, and it can take around two weeks to process an application. That means you should allow at least six weeks for coverage to become effective to avoid incurring a penalty. In other words, to have coverage effective by April 1, you need to apply no later than mid-february. 4 The marketplaces offer four levels of coverage. The major medical plans include bronze, silver, gold and platinum plans. All these plans cover the same set of essential health benefits; they differ in the percentage the plan pays of the average overall cost of providing essential health benefits to members. The percentages the plans will spend, on average, are 60 percent (bronze), 70 percent (silver), 80 percent (gold), and 90 percent (platinum). This isn t the same as coinsurance, in which you pay a specific percentage of the cost of a specific service. The level of coverage you select will affect your premiums and out-of-pocket expenses. 5 The Marketplace also offers lower-cost catastrophic policies to protect people under 30 and those with hardship exemptions from very high medical costs. These plans meet all of the requirements of qualified health plans (QHPs) but don t cover any benefits beyond three primary care visits per year before the plan s deductible is met. These plans usually cost less, but your out-of-pocket costs for deductibles, copayments, and coinsurance are generally higher. 6 A group health plan that was created or an individual health insurance policy that was purchased on or before March 23, 2010 might qualify as a grandfathered health plan. Grandfathered plans are exempted from many changes required under the Affordable Care Act. Although these plans might not meet all the provisions of the Affordable Care Act, they qualify as health insurance coverage. Health plans must disclose if they are grandfathered in all materials describing plan benefits. In the case of an employer group plan, even if you enrolled after March 23, 2010, the plan might be grandfathered. Check your plan documents, or ask your employer s human resource department for information. 7 In 2014, penalties will be the lesser of $95 or 1 percent of household income per month in which you lack qualifying coverage. Fines apply to each individual included in the taxpayer s shared responsibility family, or every dependent. Dependents include qualifying children and other qualifying relatives claimed as dependents. 8 Fines will increase in 2015 and beyond. In 2015, minimum fines will increase to $325 per person per month or 2 percent of household income; in 2016 they increase to $695 or 2.5 percent of household income per month. After that, a cost-of-living increase will apply. 9 You can also obtain qualifying coverage through other programs. These include government-run health insurance programs, such as Medicare or the military s TriCare program, and private health insurance programs. Medicare Advantage plans, an employer s group medical plan or an individual major medical plan that you buy on your own could all meet the requirements of the Affordable Care Act s individual responsibility provisions, as long as they cover certain essential health benefits. A policy should state whether it meets the requirements of the Affordable Care Act or is a grandfathered plan. 10 Your insurance agent or broker can probably help you obtain coverage on the Marketplace, at no additional cost to you. However, you might find a wider variety of plans and provider networks in plans offered outside the Marketplace. For more information, please contact us.
5 Financial Planning Annuities vs. Life Insurance Although these financial instruments have some things in common, they serve very different purposes in your financial portfolio. Life insurance pays a benefit to the beneficiary when the insured dies. You can select from two basic types of coverage: term life or whole life, often called permanent life. As the word term suggests, these policies provide coverage for a specific period of time only from typically one year, five years or ten years. After the policy term, your premiums can increase or the insurer can even cancel your coverage. Term life insurance policies pay death benefits but build no cash value. Whole life, universal life, and other cash value policies combine a long-term savings and investment product with life insurance. They cost more than term coverage, but premiums for these policies stay the same throughout the life of the policy regardless of your health. An annuity is a contract between you and an insurance company that is designed to meet retirement and other long-range goals, under which you make a lump-sum payment or series of payments. In return, the insurer agrees to make periodic payments to you beginning immediately or at some future date. These periodic payments may last for a definite period, such as 20 years, or an indefinite period, such as your lifetime or the lifetime of you and your spouse. Similarities Y You can buy both life insurance policies and annuities from a life insurance company. Although you can buy lump-sum policies or annuities, most often you make periodic payments to the insurer for your policy or contract. Y Both require underwriting, where a specially trained underwriter, aided by software, will calculate your mortality risk, decide whether to offer you a policy or an annuity contract, determine the appropriate premium, and write a policy or annuity contract to cover you. Y State insurance departments regulate insurers and agents/brokers who sell both traditional life insurance policies and fixed annuities. Variable annuities and variable life insurance policies have an investment component and therefore are securities regulated by the SEC. Y A licensed life insurance salesperson can sell either life insurance or annuities. Y Both life insurance and annuities are designed to meet long-range goals. Y Both life insurance and annuities come in three basic forms. For whole life policies, you can choose from ordinary whole life, universal life and variable life. (Some insurers offer variable universal life policies, which combine features of universal and Life & Health Insurance Advisor November 2013 variable policies.) There are generally three types of annuities fixed, indexed, and variable, which refers to how your funds are invested. In a fixed annuity, funds grow at a specified minimum rate of interest during the annuity s accumulation phase. In an indexed annuity, your funds grow based on changes in an index, such as the S&P 500 Composite Stock Price Index, with a guaranteed minimum contract value. In a variable annuity, you can choose where you invest your purchase payments, typically from a selec-
6 Life & Health Insurance Advisor November 2013 tion of mutual funds. The rate of return on your purchase payments, and the amount of the periodic payments you eventually receive, will vary depending on the performance of the investment options you have selected. x Differences Y People usually buy life insurance to protect their beneficiary from loss of income due to their death and to assist with final expenses. People usually buy annuities to protect themselves (and possibly their spouses) from outliving their assets. Y Generally, a life insurance policy pays one lump-sum benefit at the death of the insured. Annuities usually make periodic payments for a specific amount of time, as detailed in the contract. This may be for the rest of your life, or the life of your spouse or another person. Like a life insurance policy, however, the annuity has a death benefit. If you die before you start receiving annuity payments, the person you name as your beneficiary receives a specified payment. Y Both life insurance and annuities have tax advantages. Although annuities typically offer tax-deferred growth of earnings, when you take withdrawals from the annuity, they count as taxable income. In most cases, life insurance beneficiaries receive the death benefit free of income tax. Y A whole life policy builds a cash value that you can withdraw, without penalty or tax consequence, after it reaches a certain amount. If you withdraw funds from your annuity early, you may pay substantial surrender charges to the insurance company, as well as tax penalties. Which is better, life insurance or annuities? Each has its advantages and place in a family s financial plan. For more information, please contact us. Protect Your Retirement Savings with a Health Savings Account According to AARP, American seniors spend an average of 20 percent of their income on healthcare costs per year. The association reported that out-of-pocket healthcare costs averaged about $4,600 for Medicare recipients last year. Although healthcare cost inflation has moderated somewhat in the last year, it is still growing faster than the general rate of inflation, with no end in sight. If you are a few (or more) years away from Medicare eligibility, you might want to consider setting up a health savings account (HSA) to help fund some of your postretirement healthcare costs. Created in 2003, HSAs give individuals a tax-advantaged way to pay for medical expenses. Any adult who has health coverage through a highdeductible health plan may establish an HSA. To qualify for an HSA, you cannot be claimed as a dependent on someone else s tax return, and you cannot have other comprehensive health insurance, including Medicare. Exceptions exist for policies that cover a specific disease or illness, such as cancer insurance; policies that provide a fixed amount per day (or other period) of hospitalization, and policies that limit coverage to accidents, disability, dental care, vision care or long-term care. HSAs offer these advantages: Y You can contribute up to $3,300 for 2014 and deduct this amount from your taxable income. Individuals over age 55 can make an additional $1,000 catch-up contribution. Y Your funds can grow tax-free. Y You can take distributions free of income taxes if you use them to pay qualified medical expenses. Y HSAs have no use it or lose it provisions. Although you cannot contribute to your HSA after you enroll in Medicare, you can continue to make withdrawals after that to pay qualified medical expenses. Y Spouses cannot have joint HSAs; each spouse who wants an HSA must set up his/her own account. However, you can use funds in an HSA to pay qualified medical expenses of your spouse or dependents. Y It s easy to set up an HSA if you have a qualifying highdeductible health plan. You do not need to obtain permission or authorization from the IRS. You will need to work with a trustee. A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. For more information on HSAs and qualifying highdeductible health plans, please contact us. SmartsPro MARKETING The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. SmartsPro Marketing does not engage in the solicitation, sale or management of securities or investments, nor does it make any recommendations on securities or investments. This material may not be quoted or reproduced in any form without publisher s permission. All rights reserved SmartsPro Marketing. Tel