As the number of elderly Americans continues to rise, the cost of long-term care insurance has become a concern, with many here unable to afford the coverage and some choosing to buy hybrid or partial policies, some industry experts here say.  

Paul Viren, managing principal of Spokane-based financial planning and employee benefits advisory company Viren & Associates Inc., says he’s seen sales of long-term care insurance drop over the last few years. 

“I’ve probably sold less in the last two years than in my 20 years of practice, because it’s become so unaffordable,” he says. 

According to the American Association for Long-Term Care Insurance, about 8.1 million Americans have long-term care insurance. Yet, with the elderly population at 41 million and expected to double by 2050, the need for long-term care insurance could be increasing.  

Cydney Stedman Brown, a certified long-term care specialist and financial representative for the Spokane-based Hubbell Network Office with Northwestern Mutual Life Insurance Co., of Milwaukee, says Northwestern Mutual has been experiencing steady sales of long-term care insurance. 

 “In a long-term care study in 2013, we found about 40 percent, or two of five people who were in the study, said that they didn’t know how they’re going to handle (long-term care),” she says. “So it’s certainly a large problem for people to think about, but at Northwestern, we haven’t seen a drop in our sales.”

Viren says that buying long-term care insurance is still something he advises his clients to do. 

“It is something I recommend regularly,” he says. “It’s somewhat based on—and I think this is the cornerstone—the client’s experience with themselves or a family member having a long-term care experience.”

One example, he says, could be a client with a family history of Alzheimer’s or Parkinson’s disease. 

“That’s where it … could be a reality for them,” Viren says. “There’s also the economic part, which is whether the client can afford long-term care insurance.”

The potential for never using the money paid into the policy can also cause clients to decide against getting a policy, he says. 

“If those factors are not the case, and the client can’t stomach paying for something they may never use, that becomes part of the challenge as well,” Viren says. “…It’s the next frontier of aging America. They’re making policies to last until clients are 100.”

Don Moulton, a certified financial planner with Spokane Valley-based Moulton Wealth Management Inc., says he also recommends that clients seriously consider long-term care insurance. 

“The cost of care devastates too many families,” Moulton says. “But (the insurance) is not cheap, and there’s always a chance it won’t be used.”

He says that a married couple in their mid-50s, in good health, who are looking to have three years of care coverage at a 5 percent inflation protection rate could pay upwards of about $8,000 a year for the two of them. 

Viren says, however, that the cost of the policies increases with age. He says at age 50, a husband and wife may be looking at a minimum payment of $300 a month. At age 55, the same couple could be paying $500 a month, he says, and at age 60, in the range of $800 a month. 

In order to be able to afford long-term care insurance, clients might be able to shift assets around or use money from other sources, Viren says. 

“Long-term care insurance can come from eliminating disability, life insurance, or shifting the cost of risk premium to long-term care,” he says. “I’ve (also) found clients that inherit even modest sums from a parent will use the earnings off of that inherited pool of money to pay for the premiums.”

Stedman Brown says that another option for a client who may not be able to afford long-term care insurance is to look into getting a partial policy. 

“Even if someone doesn’t feel their budget allows for the full-meal deal, if they can put even a partial policy in place, they can open up their choices,” she says. 

Moulton says that another trend that has emerged in the long-term care market is that of seniors being too well-off for Medicaid to pay for their long-term care, but not well-off enough to afford long-term care insurance. In order to qualify for Medicaid, a senior or senior couple needs to be down to a certain amount of assets. 

“In Washington right now, a couple can keep one house of any value, one car of any value, their personal belongings, and one-half of everything else up to $120,000,” he says. “So if a couple has one house, one car, and $500,000 in assets, they can spend that down to $120,000. It doesn’t leave the (healthy) spouse with much to live on.”

The ill spouse can only have about $2,000 in his or her name to qualify for Medicaid, Moulton says. If the senior is single, they may keep a house, but it will have a lien put against it, and a car worth a certain amount, as well as $2,000 in their name, he says. 

Another way to possibly afford the insurance is to buy a hybrid policy, which can be a life insurance policy with a long-term care rider, Moulton says. 

“We like, if possible, to do a lump-sum deposit,” Moulton says. “You can decide to self-insure, or you can get a regular long-term care insurance policy. This policy sits in the middle … you don’t get as much bang for your buck, but you don’t run the risk of money being wasted either.”

Hybrid policies can be good for seniors who have more assets than cash, he says. The client can deposit a lump sum into the policy and not pay a monthly premium. If the client passes away without needing care, a death benefit is paid to the heirs. If the client does end up needing care, it functions as a normal long-term care policy. 

“We’ve been doing the hybrids more than anything,” Moulton says. 

Viren also says that he’s seeing the hybrid policies becoming more popular. 

“Hybrid means that we’re combining various types of assets to cover various types of needs,” he says. 

Stedman Brown says that hybrid policies are a good specialized option, for some.

“We see a few people getting those policies,” she says. “It’s a wonderful concept with a very specialized market. It doesn’t fit for a lot of people, but for some it does.”

Moulton says that those looking to purchase long-term care insurance will be evaluated by the insurance company to see what potential disabilities the client may have in the future.

“They’re mostly concerned with what might disable you,” he says. “Things like joint replacements, osteoporosis, or dementia.”

In order to qualify for long-term care in general, a person must need help with two of six activities of daily living, Moulton says. The activities are eating, bathing, toileting, transferring, or getting in and out of bed or a wheelchair, dressing, and continence. 

“Once you get to that point, you, your doctor, and the insurance company come up with a plan of care,” Moulton says. 

When thinking of buying the insurance, the client should ask themselves five questions, Moulton says. The first is the rate of coverage, or how much per day the policy will cover. Moulton says that according to the Washington state Department of Social and Health Services, the average cost for nursing home services is $270 a day. 

“So you can get coverage for all of that, or part of it,” he says. 

The second aspect is the term of coverage, Moulton says, or how long the client wants care to be covered. Most policies are either three or five years, he says. 

 “The average stay in a nursing home is five to eight years, and the average for in-home care is three years,” Moulton says.

The third decision the client needs to make is what the elimination period for the policy will be, or how many days the client wants to pay for care personally before the insurance kicks in. Elimination periods are usually 30, 60, or 90 days, Moulton says. 

The fourth choice is whether to purchase inflation protection, and for how much. Inflation protection means that a certain amount of inflation is covered if the cost of care goes up between when the policy is bought and when the client needs care. Five percent compound interest is typical, Moulton says. 

The final decision is whether to include in-home care in the insurance policy, Moulton says. 

“In my mind, that’s nonnegotiable,” he says. “Over 80 percent of these policies end up being used for home care.”

Viren says another question clients should ask themselves is whether they can afford the insurance without significantly disrupting their lifestyles. Many people may be fairly well-off financially, but still not make enough to warrant buying the insurance. 

“There’s a whole group of middle-class Americans who need long-term care insurance,” he says.

Viren says he typically recommends clients start looking at policies around age 50, or sometimes even younger. 

“Fifty-five is tough; 60 is impossible because the cost is so high to buy it,” he asserts. 

Moulton also recommends clients start looking at policies in their mid-50s.

“You think if you wait till 65, you can save 10 years of premiums, but you’ll end up paying just as much (because of the higher price),” Moulton says. 

Stedman Brown says she recommends clients start discussing long-term care insurance whenever it comes up in their minds.

 “We’re talking about these things all along, but it moves up the importance scale based on each person’s individual situation,” she says. “If someone else hasn’t brought it up, I seriously start talking about it at about age 45, so they can start to see where it fits in the big picture.” 

Northwestern usually sees clients buying policies around age 52, Stedman Brown says. 

Viren says that another issue with long-term care insurance is that the particulars of the policies or changes in premiums are often confusing, especially for seniors. 

“Clients need to be careful when they get communications from their insurance company, especially about premiums,” he says. “They need to make sure everything is clear.”

Many insurance companies have what’s known as lapse warning notices for elders with policies, Viren says. The notices get sent to a designated person if the policy is in danger of lapsing. 

“These things need maintenance. They need to be regularly reviewed and understood,” he says. “It goes into that overall elder planning conversation.”

Stedman Brown also says that planning for a long-term care event early is important.

“I think the important thing is for individuals and families to be prepared for what happens if, rather than having to take steps once it happens,” she says. “For many, long-term care insurance is a great thing, but it’s not right for everyone. There are multiple reasons why someone might choose to not, or can’t, get it, but they still need to plan for what happens if they end up in a care facility … I think it’s that conversation that is so important; the solutions will be different for everyone.”