Long-term-care insurance companies are changing the rules after baby boomers, who have opted to buy the insurance, have been paying premiums for years.
The insurance is complicated, and therefore difficult to regulate, according to the Los Angeles Times article "Long-Term-Care Policies: Pouring Money Down a Hole?"
Boomers are seeing their premiums go up.
The most common problem with long-term-care insurance has been mispricing. During the 1990s, insurers set rates low to increase sales, and they failed to keep enough reserves to pay for the care they promised. The companies threw in lifetime benefits and inflation protection to attract consumers, only to discover that these were a problem, because they didn't know how to price the risks, the article reports. Insurance company reserves also are down.
Now companies are asking consumers to pay more in premiums or accept reduce benefits. For consumers who are getting older and have paid for the policies for years, this is a hardship.
About eight million Americans have long-term-care policies, compared with 255 million covered by health insurance.
State governments and the federal government are encouraging consumers to buy long-term-care insurance in an attempt to reduce the amount they pay for nursing home care. About 70 percent of the cost of nursing home care is paid for by Medicaid, a government program for low-income consumers.
The average nursing home stay is 2.4 years, reports the Long-Term Care Link. The average cost of nursing home care is $200 a day, and that doesn’t include additional fees for specialized services like care for patients with Alzheimer’s or dementia, reports The New York Times article "Stressful but Vital: Picking a Nursing Home."
Whether to buy long-term-care insurance is a difficult question. You may die suddenly and never need nursing home care. Or you could spend years in a nursing home after a heart attack or stroke or other debilitating illness and incur cost that wipe you out financially.
See the following resources for information on how to buy long-term-care insurance:
"Long-Term-Care Insurance" – National Clearinghouse for Long-Term Care Information
"Long-Term-Care Insurance" – AARP.org
"Should You Buy Long-Term-Care Insurance?" – The Motley Fool
"The Basics of Long-Term Care [in New York State]" – New York State Department of Insurance
"Long-Term-Care Coverage: How to Scrutinize a Policy" – Consumer Reports
Copyright 2010, Rita R. Robison, Consumer Specialist