Long-Term Health Care Insurance Costs Creep Up, Benefits Fall

One of California’s, and our nation’s, demographic trends is the increasing longevity of our citizens. We are spending longer in retirement, and a much longer time in nursing homes at the end of our lives. This has resulted in an insurance product — long-term health care insurance. But what happens if the insurance doesn’t cover expenses? That is something that should be taken into consideration during estate planning.

A thoughtful estate planning approach uses a combination of tools including wills, trusts, living trusts, health care directives and increasingly – insurance for long-term care. The problem is that the premiums for the insurance are increasing, even though the benefits are not. According to a recent study, about one-third of claims are denied the first time.

In the past year, many of the premiums have increased by 40 or 50 percent. In three states, the premiums have gone up 90 percent. The product is also complicated, leading some to believe they will receive benefits not actually covered by the policy. Even so, the cost of having the insurance is typically outweighed by the risk of not having it.

When purchasing long-term health care insurance as part of a full estate planning strategy, sources recommend a few considerations and factors to weigh.

Consider having coverage limited to three or five years, which is less expensive.
Decrease premiums by forgoing inflation protection.
Buy before 50 to obtain lower premiums.
Find out if your employer offers a less expensive plan.
Buyer beware – know what you are, and are not, getting with your purchase.

As the baby boom generation reaches retirement age, more and more individuals may be facing medical issues and end-of-life decisions. It is undoubtedly a wise idea to plan ahead.

Source: Huffington Post, “Long-Term Health Care: Higher Costs, Less Coverage,” March 21, 2012