Long Term Care for Consumers: Planning for Your Future Health Care in Plain English

Transcription

1 Long Term Care for Consumers: Planning for Your Future Health Care in Plain English Brought to you by and America's CPA Financial Planners Take Charge: Your Money. Your Life. 1

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3 Let s get this out of the way The general information contained in this web seminar is provided by the American Institute of Certified Public Accountants as a service to the public and our members. It is not intended to serve as tax, legal or any other professional advice applicable to any particular person or matter. 3

4 Your Hosts Ted Sarenski, CPA/PFS Based in Syracuse, N.Y. Regularly appears on Syracuse s NBC affiliate taking viewers calls. Quoted in many national publications including USA Today, Consumer Reports and Investment News. Leonard Wright, CPA/PFS Based in San Diego, Calif. Has his own radio show Financial Fridays on KLAV 1230 in Las Vegas. Also serves as a Money Doctor for the AICPA and works with national media, including Bloomberg.

5 What is Long Term Care? It is broad support and health service for anyone of any age who has a reduced capacity to care for themselves because of some form of impairment. That impairment, which could be mental or physical, severely limits their ability to perform certain activities of Daily Living. 5

6 Activities of Daily Living Ability to bathe oneself. Ability to feed oneself. Ability to transfer oneself from one area to another (ambulation). Ability to dress. Continence. Ability to use the restroom. Ability to maintain personal hygiene and grooming. 6

7 Long Term Care Insurance Long Term Care Insurance is a policy that will provide services to help the insured when two out of the 7 activities of daily living can no longer be performed. 7

8 Long Term Care Insurance History 8

9 Key Statistics Sources for Funding according to GAO Study Medicaid 48% Medicare 18% Out of Pocket 20% Private Insurance 9% Other private 3% Other public 3% Adjusted net income as a.83% percentage of Revenues of nursing facilities 9

10 Key Statistics Residents of Residential Care Facilities 85+: 54% 75-84: 27% 65-74: 9% <65: 11% Source: United States Department of Health and Human Services 10

11 Key Statistics Assistance given to residents Bathing: 72% Dressing: 52% Toileting: 36% Transferring: 25% Eating: 22% Female: 70% Source: United States Department of Health and Human Services 11

12 Key Statistics Average yearly cost of long term care ranges from $39,240 at an assisted living facility to $85,775 ($235 per day) for a private room in a nursing home (Source: John Hancock Study in 2011) 99%of plans cover home care, 75% of plans have inflation protection, with about 50% of plans that have compound inflation protection. The average age of purchase has declined from 68 years of age in 1990 to 59 years in (Source: America s Health Insurance Plans) 12

13 Key Statistics 69% of the population over age 85 is female. (Source: CDC Report) A greater percentage of women need help with personal care and routine needs over age

14 Key Statistics A GenWorth Study noted the following financial impact: Household Income: 88% indicated that their household income was reduced by an average of 34%. Expenses: 60% needed to cut back. Savings: 63% reported a reduction in savings by an average of 61%. Triggered by: Specific Illness: 45% Age related Frailty: 42% Cognitive Impairment: 23% 14

15 An Evolving Marketplace In 2000, the top six insurers: Aegon, CAN, Conseco, Fortis, GE Capital. IDS Life In 2011, the top six insurers: Banker s Life, Genworth, John Hancock, Massachusetts Mutual, Mutual of Omaha, New York Life 21 major insurance companies no longer offer individual long term care insurance. Premiums on existing policies have risen at many insurance companies. Today s low interest rates are adding pressure to premium pricing. The CLASS Act repealed A tax deductible (subject to limitations) and tax free program in its use. 15

16 Key Provisions The amounts and definition of policy provisions vary by state based on state regulations and additionally by company depending on the insurance policy submitted to the state insurance department and approved for sale in each state. 16

17 Key Provisions Benefit period Most policies offered today offer benefit periods of 3 to 7 years. The majority of lifetime polices have been discontinued being offered. Maximum monthly limit The amount that the policy will pay each month, often expressed as a dollar amount each day. Elimination period The period of time that you are on claim before the insured can begin to collect. Generally between 6 weeks to a year. Respite care The temporary relief to a primary caregiver limited to a maximum number of days per annum. 17

18 Key Provisions Non-forfeiture benefit A provision that will allow for the premiums that were paid to provide a benefit despite policy lapse in the future after a specified period of time. Spousal/companion discounts Often times may apply to Partners in addition to spouses. A discount for married spouses and partners who have resided in the same residence for a specified period of time. This could apply to sisters living together. Inflation protection An increase in the daily or monthly benefit based on an inflation rate. Some policies allow for inflation protection flexibility. 18

19 Key Provisions Guaranteed renewable The insurer must continue coverage for as long as premiums are paid on the policy. Waiver of premium A provision that release insured from payment of premiums when on claim. Exclusions There may be exclusions for alcoholism, foreign treatment, care provided by immediate family members unless the family member is employed by a qualified health agency. There may be a limitation to qualified health care providers. 19

20 How is Long Term Care Paid For? Self insure Agency Community Medicaid for those who have limited assets at or below the poverty level Long Term Care Insurance Policy Long Term Care Partnership Policy Life Insurance or annuities 20

21 Cost Advantage to Purchasing LTC Insurance Young Below are samples of 5 percent Inflation Protection for $200 per day for lifetime benefit and 3 month exclusion period. Age 45: $10,213 Age 50: $10,815 Age 55: $11,505 Age 60: $12,811 21

22 Assessing Insurance Company Strength The four agencies listed base ratings on the financial strength of the insurance company. These ratings are not recommendations of specific policy provisions, rates or practices of the insurance company. A.M. Best: Company Rating. Assesses an opinion of the ability of a firm to meet ongoing obligations to policyowners. Standard & Poors: Financial Strength Rating. Opinion on the financial security characteristics. Moody s: Financial Strength Rating. Opinion on financial security characteristics. Fitch Ratings: Financial Strength Rating. Opinion on Claims Paying Ability of Firm. 22

23 Questions and Resources Q&A Additional resources are available online at Among them: Checklists to use with your own return. Today s PowerPoint presentation. Archived recording of today s webinar. Tips on choosing a financial advisor. 23