A Conversation With Rosanne Angel
How to pay for long-term care is a question on a lot of people's minds these days. Baby boomers, in particular, are wondering how they will cover the long-term care expenses they might incur, while also grappling with the current or expected care needs of their parents.

As a result, interest is rising in long-term care insurance, a relatively new form of insurance that can be used to cover the cost of caring for people with chronic physical or cognitive illnesses and disabilities, either at home or in an assisted living or nursing facility. These services, which can be very expensive, are not covered by Medicare or by traditional health and disability insurance plans.

Still, the concept remains something of a mystery to many people. For answers to some of the most common questions about this insurance, Bay Area Summit spoke with Rosanne Angel. The owner of Golden Benefits Insurance Services in San Anselmo, Angel has specialized in long-term care plans for more than a decade.

Bay Area Summit (BAS): In your opinion, what is the most important reason people should consider buying long-term care (LTC) insurance?

Rosanne Angel (RA): The main reason is to protect your retirement assets. The chances that you will need some form of custodial care as you get older are pretty high. Statistics show that one of every two women over the age of 65, and one of every three men, will require some form of long-term care. And the cost of this care is exorbitant. In the Bay Area, a room in an assisted living or skilled nursing facility can cost more than $50,000 per year, and in-home health care costs even more. LTC insurance is the only type of insurance that covers custodial care. Without LTC insurance, you'll end up paying all this money out of your own pocket.

BAS: What is the best time to purchase this insurance?

RA: Middle age is the best time to start thinking about buying LTC insurance. Most of my clients are between the ages of 57 and 65. It's an age when most people begin thinking about wills and trusts and retirement planning, and it's an age at which most people are still healthy and eligible for a policy. The younger and healthier you are, the lower your premiums will be.

BAS: Is there a maximum age at which you can qualify for LTC insurance, and is there an age at which you believe it no longer makes sense to buy LTC insurance?

RA: It's very difficult to qualify for LTC insurance after age 65, even if you're in good health. In answer to the second question, I've had clients who qualified and purchased LTC insurance in their 90s. The premiums they pay are a lot cheaper than the cost of paying for long-term care out of their own pockets .If people can qualify and afford the premiums, then I think buying this insurance is a wise decision at any age.

BAS: What are the health problems that could disqualify an LTC insurance applicant?

RA: People with Alzheimer's or other serious cognitive problems are uninsurable. Likewise, people with serious illnesses such as AIDS, Parkinson's, emphysema, diabetes coupled with another health problem, or a history of strokes or alcoholism are usually ruled out. However, you may still be insurable if you have had heart problems or cancer, unless it's severe or ongoing. It's important to remember that all companies differ in their underwriting. If one company does not accept you, that doesn't mean all companies will decline your application.

BAS: How much does LTC insurance cost?

RA: Rates vary depending on the type of plan you purchase - the length of time of coverage, for example, and whether it includes a daily benefit and inflation protection. Factors such as your health, your age, whether you smoke, and whether you're married or single also help determine the cost. For an individual who is 65 years old and in good health, the average annual premium is usually in the $2,500 to $3,500 range. That's less than most people pay for one month of care in a nursing or assisted living facility.

BAS: Does a policy that carries a $2,500 to $3,500 premium cover the entire cost of long-term care?

RA: A policy that costs $2,500 to $3,500 a year usually covers most of the cost of living in a nursing or assisted facility or the cost of home health care. Some policies also cover the cost of hospice, medical equipment, drugs, home modifications and other things that aren't covered by traditional insurance or Medicare. You can get a plan that covers the entire cost, but I usually recommend a plan that covers about 80 percent. This level makes it possible for most people to afford long-term care.

BAS: What triggers the payout of benefits?

RA: Under most plans, people qualify for benefits, and cease paying premiums, when they become deficient in at least two activities of daily living (ADLs), such as not being able to dress or use the bathroom without assistance. This often occurs following a medical incident that requires hospitalization. I advise my clients to purchase policies that have a short waiting period before benefits are disbursed. For a small difference in cost - usually $150 to $250 per year - you can reduce the waiting period to about 30 days, as opposed to about 90 days under most policies. This can help reduce your out-of-pocket expenses.

BAS: Should everyone who can afford it buy LTC insurance?

RA: Long-term care insurance is not for everyone. Before buying a policy, people should take time to consider the cost and whether the cost of premiums will lower their standard of living or force them to give up other things they need. People should make sure they'll be able to afford the premiums if their income declines.

BAS: What are the advantages of buying LTC insurance as opposed to, say, investing $2,500 to $3,500 a year in a mutual fund? Is it possible to save enough money on your own to cover long-term care costs?

RA: Even if you put $3,500 away each year for 20 years you'll only have $70,000, which is about what one year of long-term care costs today. Even if your investment does better than that, it's unlikely that you'll be able to save enough money on you own to cover long-term care, which will cost a lot more than it does today due to inflation. It's estimated that assisted living will cost about $110,000 a year, as a national average, by the year 2030, and that a semi-private room in a nursing facility will cost more than $190,000 a year.

BAS: Are there any policy protections to watch for?

RA: It's important to make sure your policy has inflation protection. Some carriers don't offer this protection. I also advise my clients to look for policies with a survivorship benefit. If, for example, a spouse who has held a policy with this protection for at least 10 years dies, the remaining spouse is paid in full. There are only a couple of carriers left that offer this protection. Most important, though, is to look at the financial standing of the insurance carrier. As with most things in life, you get what you pay for.

Rosanne Angel can be contacted at (415) 454-3359 or via Golden Benefits at www.goldenbenefits.com. Information about Long-Term Care insurance is available at www.ltcfeds.com, www.familycaregiversonline.com/Understanding-LTC_Ins.html
and www.hiicap.state.ny.us/home/link08.htm#links.

Disclaimer: The views and opinions expressed by the subject of this interview are not necessarily those of Bay Area Summit's staff or its sponsors.

(This article originally appeared in the Fall 2004 issue of Bay Area Summit)

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