I may have mentioned that I love to talk to people in the pool when I am on holiday. It is especially interesting when they are from another country which may place them in a position to have different paradigms and societal norms than we do. Most recently we were in Costa Rica and spent a good amount of time talking to a bunch of folks who were on holiday from various parts of Canada. Not only were they more informed about American politics than people I encounter here in the United States on a daily basis, but they were very open about their own day-to-day lives, politics, and societal norms. This year we met a City Councilman, a retired Battalion Fire Chief, a Financial Advisor, and as luck would have it, an estate planning attorney.
It is always fun to deal with the typical question(s) of “what do you do for a living? Are you retired?” Depending on how the question is posed, I have even gone so far as to say that I am in the witness protection program to see if it gets a rise out of people. Nonetheless, it never ceases to amaze me how people will often qualify their own answers or form opinions about you based on how you answer that typical “opening” question. Sometimes I will be creative in my response and say something like, “I help people protect their futures against the unknown.” That always leads to a series of follow-up questions. When it finally comes out that I gave up the practice of law for a career in the long term care industry we are off to the races, because that requires some explanation, and will quite often lead to a series of questions like the following.
1) Why would you give up the practice of law to become an insurance salesman? Were you disbarred?
I practiced law in Chicago for 13 years before being drawn to the LTCI industry, where I have been for 25 years now. The main reason is that I have been an unpaid caregiver to four generations of my immediate family—all four grandparents, my wife on five different occasions, my adult daughter at the end of her life, and my newborn grandson who had a one percent chance of survival. Some refer to the LTCI industry as a calling, and I guess that would apply to me as well. P.S. I was not disbarred.
2) What are the traditional benefits of having a long term care insurance policy?
For most people, the purpose for purchasing this coverage is protection and peace of mind. The number one reason I have heard over the years is that they want to avoid being a burden on their family. We are not the Waltons any longer. More women in the workforce, fewer children in the family, often scattered across the country, and very few multi-generation family homes. According to AARP, the unpaid work provided by family caregivers is valued at an estimated $600 billion. The burden on unpaid caregivers is nearly crushing as it impacts their own health, finances, and career progressions. Other reasons cited for purchasing these products include the desire to avoid welfare, a desire for access to quality care, maintaining personal and financial independence, and not spending down their estate to qualify for Medicaid.
3) How does somebody purchase a long term care insurance policy? Who do they talk to about the options?
The conversation should start with their financial advisor, estate planning or elder law attorney, and then progress to a LTCI professional. Most insurance producers do not offer this form of insurance because it is viewed as complicated when it really is not. It is all about tailoring a plan that meets the needs, wants, and desires of the client. One size clearly does not fit all, and over the past twenty years in particular, clients have had a much broader range of choices brought to the table by the carriers.
4) What are the options clients can choose from in designing a policy that’s right for them?
Depending on finances, family situation, family history, geography, as well as other considerations, a qualified LTCI advocate can design a plan that meets their needs, wants, and desires. The most important question is where do they want to receive care? For the vast majority it is in the comfort of their own home. That is also the desire of the insurance company, because this care is far less expensive than a facility. Based on all these factors, a plan can be tailored in terms of a daily or monthly benefit, the length of the plan (based largely on family history—i.e. if there is a history of stroke or Alzheimer’s that could lead to a prolonged stay in care, a longer plan is preferable). Whereas in the past the carriers only collected family history anecdotally, now it is a critical element of the underwriting process especially in terms of cognitive impairment. The daily benefit and length of the plan (the benefit multiplier), usually expressed in two, three, four, five years increments create a lifetime pool of benefits. Other features could include a joint plan for a couple in which benefits are shared, inflation protection to guard against the rising costs of care during the intervening years between purchase and the triggering of benefits, as well as other riders that reduce the elimination period or allow for return of premium and non-forfeiture.
5) What are the different types of policies that are currently available to consumers that weren’t available in the past?
At the inception of the LTCI industry fifty years ago this year, choice was limited. These plans were basically “nursing home” plans and designed for catastrophic illness among the elderly. Now, they include home health care, assisted living facilities, adult day care, group homes, etc. Even though there is a 70 percent probability that a policyholder will utilize the plan, and for couples this rises to 90 percent, there are still those who honestly believe that they will avoid the need for this care, and as a result do not want to pay premiums for something they do not believe they will use. For these people, other products such as a life insurance policy or annuity with a LTC rider is ideal. Nobody I have ever spoken with has argued that they will never die. For those who think they can “self-insure” this risk, an asset-based product allows clients to build in a stop-loss because these products will return additional long term care benefits after their original deposit into these plans is consumed. We refer to all these non-traditional products with the mantra of Live, Die or Quit. If they require care, the long term care benefits pay; if they die, there is a death benefit; and if they change their mind down the road, they can receive a return of their money—quit. Keep in mind that all these protective plans are not only for seniors. We have clients who have gone into permanent care in their teens, twenties, forties, because of accident or chronic illness.
6) What are the health and age limitations for somebody to qualify for a long term care insurance policy?
Very soon after joining the industry I discovered that there were a great many people who were wisely seeking this coverage but were denied because of an underlying health condition. It led me to adopt the paradigm that one pays for this coverage with their money, but they purchase it with their health. As a result, the highest cost of waiting is often the loss of eligibility. Back in the day, coverage began as young as 18 and as old as 84. For most carriers, this window has shrunk to 40-79. The older one is at the time of application the less likely that the carrier will extend an offer of coverage because of a health concern, and the cost goes up with attained age as well. For these reasons, as well as the fact that a long term care insurance policy is a valuable and important part of everyone’s financial plan, it is always best to apply earlier rather than later.
7) What’s all the fuss about the state partnership programs and how they impact Medicaid programs?
Partnership is probably the best thing to have happened to our industry and, more importantly, to the general population. Medicaid is federally and state funded, but state administered. It is the number one line-item on every state budget and is the number one payor of long term care in the entire country. It is a huge drain on the budget, and often creates a budget deficit. After a trial run involving four states, and a further series of laws implemented by Congress going back to the 1990s, the Deficit Reduction Act of 2005, allowed all states to create their own State Partnership program. In a nutshell, a partnership plan is tax-qualified, which means that the premiums being paid each year are tax-deductible on the federal 1040 and/or a credit is given on the state return. These plans are really a partnership between the policyholder, the state and federal governments, and the insurance carrier. Essentially, for every dollar of benefit paid out by the carrier, the policyholder can shelter a dollar of their estate while still eventually qualifying for Medicaid in the event that they exhaust their plan and still require additional care. I always characterize a partnership plan as a reward to the policyholder for having the foresight to be proactive in creating a plan for themselves. The thing to remember is that Partnership plans are wonderful in sheltering assets, but applicants also must qualify for Medicaid based on income.
8) How can an attorney help their clients through the long term care insurance purchasing process?
An attorney need not be an expert on LTCI, but merely needs to understand that this is the number one cause of bankruptcy among seniors. Truly, an ounce of prevention is worth a pound of cure. Plans purchased when a client is younger can be far less expensive and should be considered as part of the overall financial estate plan. By being aware of the risks posed by LTC, the array of options available to mitigate these risks, and possessing a desire to assist the client in addressing this risk, this may constitute the single greatest service or “value-add“ that is provided to the client. There are attorneys who are licensed to provide this coverage, but most of them are content with referring their client to an in-house long term care planning specialist.
9) Talk about this real or perceived duty that professionals are now encountering.
Governments are correctly becoming more involved in protecting seniors against abuse, but also the general population by raising the standards of care exercised by financial and legal professionals. Under the Doctrine of Reliance, more and more professionals are being held responsible for the cost of a client’s uninsured long term care expenses if they did not make a discussion of these products part of their regular annual meeting agenda. Some would argue that this is grossly unfair to the professional, but the ever-increasing burden on Society in providing this care through the Medicaid program has warranted this higher standard. If a client is not willing to participate in a discussion regarding long term care, then it is wise to have them sign a waiver to this effect and to retain these waivers in the event children or heirs seek damages in years to come.
So, while we still make time to talk about important things like sports, religion, as well as raising children and grandchildren in this tumultuous world with our new friends, it is still my pleasure to talk about the long term care industry that has been so good to me and to my family.
“The important thing is not to stop questioning. Curiosity has its own reason for existing.”—Albert Einstein
