Long-Term Care Insurance for AFSA Members and Retirees:
What should I consider?

Q. Does AFSA have a long-term care insurance program?

A. Yes, AFSA is now offering group rates brokered by The Hirshorn Company for nine insurance carriers. The long-term care offerings feature excellent coverage with more competitive premiums in most instances than the Federal Plan. The Hirshorn Company offers personalized service in choosing a company and plan that fits members' needs. Contact Hirshorn representative Carl Shaifer at 1(800) 242-8221 or cshaifer@hirshorn.com. For those interested in considering the Federal Long Tern Care Insurance Program (FLTCIP), go to www.ltcfeds.com for information.

Q. What is long-term care?  

A. Long-term care, given to people with ongoing physical illnesses, disabilities, or cognitive impairments, includes assistance with activities of daily living, home health care, respite care, adult day care, nursing home care, and care in an assisted living facility.

Q. Should I be concerned about long-term care?

A. It is hard to predict whether and when you might need long term care, but studies indicate that about half of all women and a third of men over the age of 65 will spend some of their last years in a nursing or retirement home. Government projections show that the number of nursing home residents will double by 2030 and the yearly cost will increase five-fold by that time.

The cost of long-term care without insurance can be catastrophic. Seventy percent of single people without such insurance are impoverished within one year of entering a nursing home, and fifty percent of all couples without insurance are impoverished within a year after one spouse enters a nursing home.

Q. How do people pay for long-term care?

A. People pay for long-term care by using their personal or family resources, purchasing long-term care insurance, or, if at the poverty level, with Medicaid assistance. Medicare does not pay for most long-term care needs.

Q. Should I consider buying long-term care insurance?

You should not buy long-term care insurance if you cannot afford the premiums, you have limited assets, or you have difficulty paying for basic living expenses.

You should consider buying long-term care insurance if you have significant assets, some of which you want to protect, and you want to pay for your own care and maintain some level of independence. As a rule of thumb, premiums should fit into your budget and should not exceed 10% of your annual income.

6. What kinds of long-term care policies are available?

Long-term care insurance can be purchased from private insurance companies, through your employer or association, or through the federal long-term care program. Most policies are sold to individuals. Employers and associations may offer group long-term care insurance plans.

There may be advantages to group policies. One may not have to meet medical requirements to qualify, and retirees, spouses, and parents may also qualify for coverage. Since plans offer different combinations of health benefits, it is important to shop among policies, companies, and agents to get coverage that best fits your needs.

Federal law gives tax advantages to people who buy certain long-term care insurance policies under the Health Insurance Portability and Accountability Act of 1966. If you have a federally-qualified long-term care policy and you itemize your deductions, you may be able to deduct part or all of your premiums for the policy and add the premium to your other deductible medical expenses. Additionally, long-term benefits paid from a tax-qualified policy are generally not taxable as income.

Q. What should I look for in a long-term care policy?

A. Services covered. Long-term care policies differ in their coverage of a number of services -- including nursing home care, home health care, personal care at home, assisted living facility care, and adult day center care. Policies also differ in the ways they cover these services. For example, a policy may pay only for home care from licensed home health agencies or it may pay for other licensed health care providers, such as practical nurses and home health care aides.

Types of facilities covered. Again policies vary as to what facilities are covered. Some may pay for care in any state-licensed facility; others limit the kinds of facilities they cover.

Exclusions and limitations. In addition to other exclusions, most long-term care policies do not cover mental or nervous disorders other than Alzheimer's disease or dementia.

Amount of coverage. Your policy will state the amount of coverage in terms of the maximum benefit in years or the maximum benefit in dollar amount. Policies with longer maximum benefit periods cost more. Policies generally pay given amounts of benefits by the day, week, or month. When considering these benefit amounts, find out how much nursing and assisted living facilities, and home health care agencies charge for services in the area where you think you will retire.

Eligibility for benefits. Long-term care insurance companies use "benefit triggers" to determine when to pay benefits. The most common benefit trigger is the inability to perform activities of daily living (ADLs), such as bathing, continence, dressing, eating, toileting, and transferring. Generally, a policy pays benefits when one cannot perform a given number of ADLs. In choosing a policy, examine how it defines the inability to perform a task.

An important additional trigger is cognitive impairment or mental incapacity. The inclusion of this trigger gives greater assurance that cases of Alzheimer's disease will be covered.

When benefits start. Most policies have an elimination period before benefits will be paid for long-term care. If you choose a short elimination period, the policy will be more expensive. If you choose a longer period, you will have lower premiums, but will have to bear the costs of care during the elimination period. Another consideration is whether a policy considers a second stay as part of the first stay or requires another elimination period.

Inflation protection. Because of the rising costs of long-term care, inflation protection, whether automatic or periodic, is critical. Inflation protection can be a simple inflation adjustment which results in the addition of the same amount each year or a compound adjustment which increases in amount each year, adding to the ultimate amount of the benefit.

Additional benefits and options. Be sure to ask the insurance company about other benefits and options, such as a non-forfeiture benefit, which assures that you will receive some value for the money paid into the policy in the event you drop your coverage.

Q. Will my health affect my ability to acquire long-term care insurance?

A. Companies vary in the way they underwrite long-term insurance coverage. Some companies check medical records only when a claim is filed; this practice of "post-claims underwriting" is illegal in many states. Others ask applicants a few questions about their medical history; and others ask more questions, look at medical records and ask for a statement from a doctor. Companies in this latter category insure fewer people with health problems, particularly certain long-term conditions. It is important to answer all questions correctly and completely, particularly about a pre-existing condition.

Q. What do long-term care policies cost?

Long-term care insurance can be costly. The cost depends on a number of factors – age, state of health, amount of daily benefits, the maximum benefit period, and inflation protection. In purchasing coverage, consider not only your current financial situation, but also your future income in retirement and projected increases in the cost of premiums.