Scenes of adult children looking through windows holding signs that said “I love You” to their parents, who were being held in assisted living and nursing homes during the coronavirus epidemic reinforced a trend in America: the desire to stay at home as long as possible.
Jesse Slome is the executive director of The American Association for Long-Term Care Insurance. He says that they are getting more calls. “The first reports on COVID-19 were focused on nursing homes, and the number of infected people and deaths in these homes.
He says that this made people want better options like aging in place. There aren’t any guarantees that everyone will live out their final days in their home. However, there are ways to make this more likely financially.
Long Term Care insurance was first made widely available in late 1970s. It was used primarily to pay for the cost of nursing homes. Almost all policies today cover home care. According to the American Association of Long-Term Care Insurance statistics, 51% of all claims filed in 2018 were for home care. The rest was split roughly equally between nursing homes and assisted care facilities.
The association also noted that home care accounted for 43% of all long-term care claims. Most (72%) were terminated due to death, 13% due to exhaustion of benefits, and 14% due recovery.
Unlike in the past, nearly all policies sold today will include a pool benefit that helps pay for home care, nursing home, assisted or memory care as well as other similar services. Barbara Franklin, a long term care specialist and founder Franklin & Associates, long term care insurance brokers, said:
Long-term care insurance can be purchased and you can stop paying premiums if you are diagnosed with a cognitive impairment. Your contract will determine the nature of your benefits, but here are some provisions you should look for in a policy that provides long-term care with an eye towards aging at home.
Is your policy able to pay for informal caregiving? Franklin states that many policies don’t cover caregivers unless they are provided by licensed agencies. Franklin also says that you may need to pay at least three to four hours per day for caregiving services.
However, some policies will cover non-licensed caregivers such as friends and family, and in certain cases, nurses who provide in-home caregiving. Vince Bodnar is a partner at Oliver Wyman and long-term care practice lead at the management consulting firm.
A hybrid policy, also known as a linked or combination insurance policy and connected to life insurance, is a new type of long term care insurance. Because of the death benefits, hybrid insurance is typically more expensive than traditional long term care insurance. Bodnar states that the policies can be bought with either a large upfront lump sum or with premiums. They also have more flexibility in terms of when they pay out.
Hybrid policies have lower premiums than traditional long-term insurance. If the long-term benefits are not used or not fully utilized, policyholders will get money back. When the policies do begin to pay out, they draw first on the life insurance, then the additional long-term insurance.
Another way to pay for long term care, and often informal caregivers too, is to purchase a life insurance policy. This allows you to access the money while you’re still alive. This is called accelerated death benefits. This feature is offered by some companies at no charge while others charge extra. Franklin says that accelerated death benefits can only be triggered by chronic or critical illnesses, and not inability to perform certain activities of daily living.
This area of coverage is complex, so make sure you consult an agent who represents many companies and can provide a range of options to help you compare.
What is the alternative cash benefit? This option, which is available in both hybrid and traditional policies, allows customers to receive cash benefits up to a certain amount. Franklin states that policyholders can spend the money however they wish, and Franklin cites recent examples of how the money might be used to care for elderly people. The older generation could hire a grandchild or child to care for the elderly, as many young adults are returning home to their parents.
She says that companies are becoming more aware of the fact that a home-health agency’s services may be more expensive than they need. They’re offering a little flexibility.
These provisions are more common in hybrid policies because you draw down on your own life and health insurance. Mary Swanson, vice president and actuary at Mutual of Omaha, states that you can take 25% of a monthly benefit, such as $1,000 of a $4,000 payment, in cash.
She says that you don’t lose $3,000; it simply stays in your funds pool until you need it. This has the additional benefit of prolonging your benefits.
Bodnar states, “As the care landscape evolves, who knows what care will be provided in 10 or 20 years?” “I love looking for cash.
Is the policy inclusive of care coordination and management? A care coordinator can help you organize care at home.
Bodnar states that they are designed to help people navigate the home healthcare system. While some form of care coordination is a part of most policies, it has evolved in a more precise way over the past few years.
Franklin adds, “Companies don’t mind paying that because it is going to be used more effectively than someone who is floundering around on his own.”
What is the elimination period? This is insurance jargon that describes how long you have to wait before your policy begins paying. You can pay more to shorten the waiting period. However, elimination periods usually last between 30 and 90 days. Franklin states that some policies have different elimination times for home care and medical facilities. Franklin also says to be aware of whether the elimination days are service or calendar days.
She says, “Nobody ever looks at it, and that’s coming to bite them in the back end.”
According to the American Association for Long-Term Care Insurance, only 10 million Americans have bought long-term insurance policies. However, the pandemic is prompting people think about how and where they will live.
Bodnar states that it appears that more people will receive care at home in future. He also points out that home technology is improving to make this possible.
He said, “On the opposite side.” There are some really innovative concepts in facility care such as aging communities. These may also emerge as people realize that this may be the most cost-effective way to receive care in a setting, not just at home but in a facility.
The number of people who need care will eventually exceed the amount that is available. According to Mercer, the United States will experience a shortage of home-health aides by 2025. Bodnar believes that the only solution to this problem is to find better ways to provide long-term care.
“Ingenuity, innovation and creativity will drive that.” Insurance policies should be flexible enough for that to be recognized.
