Long-term care insurance not for all

Posted: Thursday, April 12, 2001

Q: My employer recently started offering long-term care insurance through a group program. Should I buy a policy?

'The tragedy with long-term care insurance is that ... as the rates get steeper and steeper, many people give up the coverage right before they need it.'

--Richard Alexander,


A: Although protection from long-term care costs sounds tempting, it's not for everyone because the premiums can be prohibitively expensive, depending on your age and where you live.

The price of long-term care is certainly daunting. The average daily rate for nursing home care is $153 for a private room and $133 for a semi-private room, according to a survey by MetLife Mature Market Institute in Westport, Conn. The average hourly rate for home care is nearly $31 for a licensed practical nurse and $16 for a home health aide.

Medicare, the federal medical insurance program for the elderly, and regular health insurance don't cover long-term care. Medicaid, the federal program for the poor, covers nursing home costs, but to qualify, many people need to exhaust their savings.

''That's quite an extraordinary deductible,'' said Elizabeth Clemmer, associate director of the Public Policy Institute at the AARP, the advocacy organization for older Americans.

The advantage of long-term care insurance is that most policies cover nursing home care, home health care, assisted living facility care and care services provided through hospice and adult day care facilities.

However, once they sign up, consumers must pay premiums for the rest of their lives or until they need the benefits. And the older they are, the costlier the premiums, which range from $2,000 to $10,000 a year for people over the age of 65.

Another pitfall is that premiums can rise to the point where policy holders can no longer afford them and are forced to drop their plans without recovering the money they put into them.

''The tragedy with long-term care insurance is that ... as the rates get steeper and steeper, many people give up the coverage right before they need it,'' said Richard Alexander, a San Francisco-based attorney and editor of theconsumerlawpage.com.

Therefore, it's crucial for consumers to figure out whether they can can continue to pay the premiums and carefully read the policies -- not a brochure -- when deciding whether to buy a policy.

Anne Werner, president of the United Seniors Health Cooperative in Washington, D.C., said in a report that consumers who invest in long-term care insurance should have at least $75,000 in assets and an annual retirement income of between $25,000 and $35,000.

People without means may still be eligible for coverage if a relative agrees to pay the premiums. But those who have pre-existing medical conditions might not qualify at all.

Experts also suggest that consumers buy policies that include automatic inflation protection of at least 5 percent annually and be mindful that coverage kicks in only when certain physical criteria are met, such as the inability feed and dress yourself.

And consumers need to know whether the company that issues the policy is financially sound. They should only buy policies from companies with a history of stable rates and solid reputations.

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