Low Interest Rates Force Long-Term Care Insurance Prices Up

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Prices for long-term care insurance policies jumped between 6 and 17 percent in the past year, according to an industry survey.    

A 55-year-old couple purchasing long-term care insurance protection can expect to pay $2,700 a year (combined) for about $340,000 of current benefits, according to the 2012 Long-Term Care Insurance Price Index, an annual report from the American Association for Long-Term Care Insurance.  The same coverage would have cost the couple $2,350 in 2011.

The steep price rise is primarily due to historic low interest rates and yields on fixed-income investments, explained Jesse Slome, the Association’s executive director, in a press release. Between 40 and 60 percent of the dollars an insurer accumulates to pay future claims comes from investment returns, Slome said, noting that for every one-half percent drop in interest rates an insurer needs about a 15 percent premium increase to maintain the projected net profit.

The Association annually analyzes what consumers will pay for the most popular policies offered by ten leading long-term care insurance carriers. The study found that the average cost for a 55-year-old single individual who qualified for preferred health discounts is $1,720 for between $165,000 and $200,000 of current coverage. In 2011, the same coverage would have cost an average of $1,480 annually. 
 
The policies the Association priced all include a 3 percent compound inflation growth factor, meaning that a 60-year-old couple buying $340,000 of current coverage today would see their benefit pool grow to $610,000 when they reach age 80.  According to the report, the couple could expect to pay about $3,335 a year if both spouses qualified for preferred health discounts.

The study suggests that it’s more important than ever to shop around for coverage because the range between the lowest-cost and the highest-cost policy has increased compared to the prior year. "For the 55-year-old single policy applicant the highest-priced policy cost almost 80 percent more than the lowest-priced policy," Slome noted. "For some categories, the difference was as much as 132 percent and no single company always had the lowest nor the highest rate, which is why we stress the importance of comparison shopping."  Nearly three-quarters of buyers opt for a 3- to 5-year benefit period, the Association reports.

Policyholders can experience rate rises after they purchase, although long-term care insurers are allowed to raise prices only on a class of policyholders, not on individuals ones, and they must receive state approval for the rate hike.

The complete 2012 Price Index will be published in the Association's 2012 Long-Term Care Insurance Sourcebook. For more information, visit the American Association for Long-Term Care Insurance's Web site.

For an article on how to cope with long-term care insurance rate hikes, click here.

For more on how to reduce long-term care insurance costs, click here.

For more on long-term care insurance, click here.

(This article is reprinted with the permission of ElderLawAnswers.com)

Son Liable for Mom's $93,000 Nursing Home Bill Under 'Filial Responsibility' Law

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Some 30 states currently have laws making adult children responsible for their parents if their parents can't afford to take care of themselves.  These “filial responsibility” laws have rarely been enforced, but six years ago when federal rules made it more difficult to qualify for Medicaid long-term care coverage, some elder law attorneys predicted that nursing homes would start using the laws as a way to get care paid for. 

It looks like this is starting to happen.  This week, a Pennsylvania appeals court found a son liable for his mother's $93,000 nursing home bill under the state's filial responsibility law. Health Care & Retirement Corporation of America v. Pittas (Pa. Super. Ct., No. 536 EDA 2011, May 7, 2012).

Facts of the Case
John Pittas' mother entered a nursing home for rehabilitation following a car crash. She later left the nursing home and moved to Greece, and a large portion of her bill at the nursing home went unpaid. Mr. Pittas' mother applied to Medicaid to cover her care, but that application is still pending.

Meanwhile, the nursing home sued Mr. Pittas for nearly $93,000 under the state's filial responsibility law, which requires a child to provide support for an indigent parent. The trial court ruled in favor of the nursing home, and Mr. Pittas appealed. Mr. Pittas argued in part that the court should have considered alternate forms of payment, such as Medicaid or going after his mother's husband and her two other adult children.

The Pennsylvania Superior Court, an appeals court, agreed with the trial court that Mr. Pittas is liable for his mother's nursing home debt.  The court held that the law does not require it to consider other sources of income or to wait until Mrs. Pittas’s Medicaid claim is resolved.  It also said that the nursing home had every right to choose which family members to pursue for the money owed.

First of a ‘Wave of Lawsuits’?
The Deficit Reduction Act of 2005 made it much more difficult for the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care. With enactment of the law, advocates for the elderly said that nursing homes would likely be flooded with residents who need care but have no way to pay for it, and that in states that have filial responsibility laws, the nursing homes might seek reimbursement from the residents' children.

After Pennsylvania re-enacted its filial support law in the mid-2000s, Williamsport ElderLawAnswers member attorney Jeffrey A. Marshall forecast that the new Medicaid law would trigger a wave of lawsuits involving adult children.

"Litigation between nursing homes and children is likely to flourish," Marshall wrote in the January 20, 2006, issue of his firm's Elder Care Law Alert.  (To read Marshall’s recent blog post on the Pittas ruling, click here.)

In 2005, the National Center for Policy Analysis, a conservative policy group, released an issue brief proposing that states begin enforcing filial responsibility laws in order to reduce long-term care costs. 
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For the full text of the Pennsylvania court’s decision in the Pittas case, go to: http://www.pacourts.us/OpPosting/Superior/out/A36025_11.pdf
For more on filial responsibility laws. click here.
For more on the changes to Medicaid's transfer laws, click here.

Reprinted with the permission of ElderLawAnswers.com

Alzheimer's Facts and Figures

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Here is a link to a quick video about the facts and figures of Alzheimer's disease.

http://www.youtube.com/watch?v=In1IJocVor8

Quick facts

• 5.4 million Americans are living with Alzheimer's disease.
• One in eight older Americans has Alzheimer's disease.
• Alzheimer's disease is the sixth-leading cause of death in the United States and the only cause of death among the top 10 in the United States that cannot be prevented, cured or even slowed.
• More than 15 million Americans provide unpaid care valued at $210 billion for persons with Alzheimer's and other dementias. 
• Payments for care are estimated to be $200 billion in the United States in 2012.

What Is Asset Protection Planning?

Asset protection planning is about protecting your assets from creditors -- and it is not just for the super-wealthy. 

Anyone can get sued. Lawsuits can stem from car accidents, credit card debt, bank foreclosures, or unhappy customers, among many other things. If someone wins a monetary judgment against you, your family could become bankrupt trying to pay it off. 

To keep your assets away from creditors, you need to move them somewhere where creditors can't reach them. Asset protection techniques include maximizing contributions to IRAs, moving funds to an irrevocable trust, retitling various assets, or using limited liability companies or family limited partnerships. 

To develop an asset protection plan, you need to talk to your attorney. Your attorney can discuss your short- and long-term financial goals and help you create a plan that will work for you. 

It is important to note that asset protection planning only works if you act before you are sued. Under the law, you may not defraud current creditors. If you are already being sued or if you know you are going to be sued and you transfer assets so that creditors can't reach them, the court will reverse the transfer. That is why it is a good idea to put a plan into place now -- before it is too late. 

For more information on asset protection planning, click here.

When Should You Update Your Estate Plan?

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Once you've created an estate plan, it is important to keep it up to date. You will need to revisit your plan after certain key life events.

Marriage

Whether it is your first or a later marriage, you will need to update your estate plan after you get married. A spouse does not automatically become your heir once you get married. Depending on state law, your spouse may have to share your estate with other relatives. You need a will to spell out how much you wish your spouse to get.

Your estate plan will get more complicated if your marriage is not your first. You and your new spouse need to figure out where each of you wants your assets to go when you die. If you have children from a previous marriage, this can be a difficult discussion. There is no guarantee that if you leave your assets to your new spouse, he or she will provide for your children after you are gone. There are a number of options to ensure your children are provided for, including creating a trust for your children, making your children beneficiaries of life insurance policies, or giving your children joint ownership of property.

Even if you don't have children, there may be family heirlooms or mementos that you want to keep in your family. For more information on estate planning before remarrying, click here.

Children

Once you have children, it is important to name a guardian for your children in your will. If you don't name someone to act as guardian, the court will choose the guardian. Because the court doesn't know your kids like you do, the person they choose may not be ideal. In addition to naming a guardian, you may also want to set up a trust for your children so that your assets are set aside for your children when they get older.
Similarly, when your children reach adulthood, you will want to update your plan to reflect the changes. They will no longer need a guardian, and they may not need a trust. You may even want your children to act as executors or hold a power of attorney.

Divorce or Death of a Spouse

If you get divorced or your spouse dies, you will need to revisit your entire estate plan. It is likely that your spouse is named in some capacity in your estate plan -- for example, as beneficiary, executor, or power of attorney. If you have a trust, you will need to make sure your spouse is no longer a trustee or beneficiary of the trust. You will also need to change the beneficiary on your retirement plans and insurance policies.

Increase or Decrease in Assets

One part of estate planning is estate tax planning. When your estate is small, you don't usually have to worry about estate taxes because only estates over a certain amount, depending on current state and federal law, are subject to estate taxes. For example, the New Jersey estate tax is due on estates as small as $675,000.  As your estate grows, you may want to create a plan that minimizes your estate taxes. If you have a plan that focuses on tax planning, but you experience a decrease in assets, you may want to change your plan to focus on other things. For more information about estate taxes, click here.

Other

Other reasons to have your estate plan updated could include:

• You move to another state
• Federal or state estate tax laws have changed
• A guardian, executor, or trustee is no longer able to serve
• You wish to change your beneficiaries
• It has been more than 5 years since the plan has been reviewed by an attorney

Contact your estate planning and elder law attorney to update your plan.

Bankers Life Long-Term Care Insurance Policyholders Report Problems Getting Paid

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Buying long-term care insurance is supposed to be a good thing--it means you are prepared to meet your long-term care needs.  But the purchase can turn into a nightmare if the insurance company refuses to pay for your care. One long-term care insurance company in particular, Bankers Life and Casualty, is gaining a reputation for not paying claims.

A recent report by CBS News highlighted some of the problems Bankers Life customers have been experiencing. The report recounts the story of 93-year-old Timber Harwood, who paid long-term care insurance premiums for years. When he needed home health care after a serious fall, the insurance company gave his family the runaround, repeatedly claiming for almost a year that hundreds of pages of paperwork were missing.

Consumer complaint message boards such as PissedConsumer.com, ConsumerAffairs.com, and ComplaintsBoard.com have lit up with complaints about Bankers Life either denying claims outright or using delaying tactics to wear down policyholders.

This is not news to Massachusetts elder law attorney and ElderLawAnswers president Harry S. Margolis, several of whose clients have experienced problems with Bankers Life. "After paying in premiums for years so that their eventual need for long-term care will be covered, they have received denials for a range of invalid reasons," Margolis reports. When Margolis's firm has gotten involved -- sometimes threatening litigation -- Bankers Life has ultimately paid the claims.  Although that is a great result, customers have to pay out of pocket while they wait for the claim to be paid, which is stressful.

Bankers Life's behavior is nothing new. In 2008, 40 states found Bankers Life's parent company Conseco, Inc. (now called CNO), committed a pattern of consumer harm in the long-term care insurance business. While not admitting any wrongdoing, the company agreed to pay $2.3 million in fines and $30 million for system improvements and restitution. A 2007 New York Times article described how Conseco and Bankers Life employees were prohibited from calling policyholders in order to make things so hard for policyholders that they would either give up or die.

In addition, a long-term care policyholder has initiated a class action lawsuit against Senior Health Insurance Co. of Pennsylvania, which was previously owned by Conseco before it was transferred into an independent trust. The lawsuit alleges the company tried to avoid reimbursing policyholders for long-term care by ignoring or taking an unreasonably long time to respond to claims and requiring unnecessary paperwork and medical examinations. For more information about the lawsuit, click here.

Bankers Life responded to our request for comment with this statement:

Bankers Life and Casualty is committed to the highest standards for ethics, fairness and accountability, and strives to pay all claims in accordance with policy contracts in a timely manner.  We take all complaints seriously, and work with all parties to resolve issues as soon as possible.  We fulfill our obligations to our policyholders based on specific policy language, state requirements and the claim information submitted.  In 2011, Bankers paid in excess of $400 million on long-term care claims and benefits to our more than 300,000 long-term care customers nationwide.

If you experience a problem with your long-term care insurance company, contact an elder law attorney.

This article is reprinted with the permission of Elder Law Answers.

Economists Say That Tightening Medicaid Rules Would Barely Increase Demand for Private Insurance

It is sometimes claimed that reducing the amount of assets an individual can keep while qualifying for Medicaid would increase the purchase of private long-term care insurance coverage.  

Now, two professors of economics have estimated that tightening Medicaid asset rules would do little to encourage the purchase of long-term care insurance policies.  

Although Medicaid recipients may keep only about $2,000 in assets in most states, their spouses may retain between $22,728 and $113,640, depending on their particular state.  The minimum and maximum are determined by federal law but individual states’ limits may set their own limits within these parameters.  

In an article published in the Fall 2011 issue of the Journal of Economic Perspectives, Jeffrey R. Brown of the University of Illinois and Amy Finkelstein of the Massachusetts Institute of Technology estimate that a $10,000 decrease in the level of assets an individual and their spouse can keep while qualifying for Medicaid would increase private long-term care insurance coverage by 1.1 percentage points.

“To put this in perspective,” they write, “if every state in the country moved from their current Medicaid asset eligibility requirements to the most stringent Medicaid eligibility requirements allowed by federal law, this would decrease average household assets protected from Medicaid by about $25,000. This, in turn, would increase the demand for private long-term care insurance by only 2.7 percentage points. While this represents a large increase in insurance coverage relative to the baseline ownership rate, the vast majority of households would still find it unattractive to purchase private insurance.”

Overall, Brown and Finkelstein are pessimistic about the prospects for encouraging more Americans to buy long-term care insurance unless Medicaid is completely restructured or done away with altogether.  They note that long-term care insurance is a poor deal, particularly for men, who get back only about 33 cents on the premium dollar they spend, and that for a 65-year-old man of average wealth, 60 percent of the private insurance benefits would have been paid by Medicaid.   

But the authors say that even if the implicit Medicaid “tax” on long-term care insurance were eliminated, “other factors could still prevent the market for long-term care insurance from developing.”  These factors include the availability of informal insurance provided by family members, the liquid assets in the home serving as a “buffer stock of assets,” and the difficulty many individuals have in “making decisions about long-term, probabilistic outcomes.”

To read the article, “Insuring Long-Term Care in the United States,” click here.
For a commentary on the article in Forbes magazine, click here.
For more on Medicaid's rules, click here.

This article was reprinted with the permission of ElderLawAnswers.com.