A Definition of Long-Term Health Insurance
Long-term health insurance, or long-term care insurance, refers to the type of policy people purchase to cover care for chronic illnesses, disabilities, or other health conditions on a daily basis for an extended period. The majority of employer-based health insurance does not pay for these extended care services, and Medicare covers just short stays in a nursing home or a short period of at-home care, so people choose to purchase long-term health insurance to cover this specialized care.
Long-Term Health Insurance Options
As with any health insurance policy, there are many long-term care insurance policy options. It is best to check with insurance companies to see which options are available to you and which fit your needs and budget best. But, it is challenging to predict future long-term care needs, so you should purchase a policy with flexible options if possible.
Some long-term health insurance policies help patients pay for necessary care either in an assisted living facility, a nursing home, or their own home. You will find long-term insurance policies that covers adult day care expenses, care coordination, and other care services. Still other policies help seniors modify their homes when they choose to age in place.
Disadvantages of Long-Term Care Insurance
On one hand, long-term care insurance itself is expensive, and seniors making the purchase at an earlier age have to predict the level of care they will need in the future. If seniors wait until they are older to purchase long-term health insurance, they often find they cannot afford the premiums. Even though people live longer and require more care today than in years past, the odds of needing a long stay in a nursing home are low: 66% of men and 33% of women age 65 and older will not spend a day in a nursing facility, and only 10% of nursing facility resident stay longer than three years.
The long-term health insurance policy may be an expense seniors don’t need to incur at all. Medicaid laws essentially protect them from being removed from a nursing home if they cannot pay for the care they need. As for people who have assets totaling $300,000 to $500,000 above the value of their homes, long-term care insurance provides a financial safety net and is a good idea if the policy includes in-home care or care at assisted living facilities.
Advantages of Long-Term Care Insurance
Long-term care becomes incredibly expensive for people, and many people opt for long-term care insurance in the hopes that it offsets the costs of care. In fact, peace of mind is one of the benefits most seniors point to when they choose to purchase a long-term care insurance policy. They want to be sure they will have care for themselves, but they also want to ensure their long-term care needs will not impact their children.
One study shows that 72% of Americans fall into poverty after a year of nursing home care, and Medicaid covers nursing home bills only after a patient loses all of his assets. The sheer cost of nursing home care is one of the reasons Americans lose their savings and assets to long-term care costs: in 2012, the average annual cost for a private room in a nursing home was $83,950, and 40 hours of in-home care for one year cost $56,717. The majority of long-term care insurance policies protect seniors against astronomical out-of-pocket expenses associated with extended care.
Fortunately, long-term care insurance policies have improved in recent years. The policies have more explicit terms and conditions so seniors and their families have a better idea of what they are getting for their premium costs. Policies now typically offer extended coverage for assisted living facilities and traditional nursing home facilities. And, several policies allow seniors to draw from a pool of benefits from home care or long-term residential care rather than only for one type of care or the other.
The fact that many long-term care insurance policies now cover the cost of in-home care is one reason more seniors are opting to purchase them. Seniors who want to age in place maintain their independence longer and are more comfortable in their own home. They also have peace of mind knowing their insurance provides for someone to help with daily living activities. Qualifying for in-home benefits also is a little easier, as most policies now require seniors to need assistance with only two of the six activities of daily living for their benefits to take effect.
Long-Term Health Insurance Considerations
If you are considering purchasing long-term health insurance, you should know that premiums are much more affordable the earlier you purchase. It’s also easier to qualify when you are younger. The American Association for Long-Term Care Insurance (AALTCI), reports that more than 80% of policies are purchased by individuals ages 45 – 64. AALTCI also reports 14% of long-term health insurance applicants under the age of 50 are denied, but 44% of people ages 70-79 are denied coverage. And, according to a recent America’s Health Insurance Plans report, annual premiums for people ages 55 – 64 are $2,624, but annual premiums for people over 65 are $5,241.
Long-term health insurance may be the safety net you or a loved one needs if you are concerned about the costs of assisted living facilities or in-home care. Keep in mind that there are several policy options and that you should carefully weigh the advantages and disadvantages of paying the premiums. But, don’t wait too long to make a decision because premiums are more affordable and your chances of qualifying are better when you purchase sooner, rather than later.