Author Archives: Katie

THE WASHINGTON STATE LONG TERM CARE TRUST ACT: HOW YOU CAN OPT OUT OF THE TAX?

The newly enacted Washington State Long Term Care Trust Act is a mandatory program which imposes a .58% payroll tax for all adult W-2 employees in Washington State beginning on January 1, 2022.  It will pay for long-term care services for a short period but lacks the following benefits when compared to private long-term care insurance:

  • No portability outside Washington
  • No inflation protection greater or less than the Consumer Price Index
  • No premium discounts for partners and spouses
  • No cash benefits
  • No shared care benefits
  • No Partnership protection

There is only one way to permanently opt-out of the Long Term Care Trust Act and its new payroll tax:  you must have other long-term care insurance in force before November 1st.

The Trust Act program could be less attractive to many when compared to the Washington Partnership for Long Term Care, a public/private plan.  This plan is also endorsed by the State and contains many features and benefits not included in the Trust Act.  You may want to compare the two programs, especially if your income and asset levels are above average.

For many, this Act will motivate you to create a long-term care plan now.  Learn about your options so that you can make an intelligent decision.  Contact us through this website or call 1-800-303-1527

Life Events That Trigger the Long Term Care Planning Decision

We wanted to know why people purchased long-term care
insurance when they did. What was going on in their lives
at the time? Was there an event that triggered a buying
decision? We discovered two important reasons people
bought their policies when they did – they were either
getting ready to retire or they knew someone who had
experienced a long-term care situation.
Retirement – We found that either planning for retirement
or entering retirement was a primary motivator for most
people. Those nearing retirement seemed to know it was
time to start planning for the future.
“I was retiring and I felt it was time to do it.” per policyholder
First-hand Experience – We also discovered that many
people were influenced by a loved one who needed longterm care services. This first-hand experience with a longterm care situation made many people say, “I don’t want
that to happen to me.”
“I’m going through it with my mother right
now – trying to pay her bills and make sure her
money lasts as long as possible. It just gives me
peace of mind to know my kids won’t have to
take care of me.” per policyholder

COVID-19 AND LONG-TERM CARE SOLUTIONS

The Covid-19 virus entered the United States as early as December and created consternation by mid-March.  We did a poorer job by far in responding to this deadly virus than any developed country.  We are still lacking robust testing and contact tracing, and many Americans refuse to wear masks. By the time you read this, 500,000 Americans will have died due to Covid-19.

We faced a second wave of Covid-19 during the winter.  Even if a vaccine is proven to be effective, it could be many months before most Americans can be vaccinated, even if they want to be.  We will defeat this virus, but it may take a while longer.

The effects of the virus on us have been huge and have caused panic and uncertainty.  We have had to shelter in place.  In addition, we mentally have frozen in place.  In our efforts in trying to cope with the present threat of this virus, we tend not to think of our future.  Most of our financial planning, including long-term care planning, has been effectively placed on hold.

Now that a few months have passed we have learned a great deal, and we still don’t know a great deal.  But maybe enough of the fog has cleared that we can predict the future with at least some modest degree of accuracy.  This article will attempt to foresee the future of long-term care solutions as reflected in the eyes of government, insurance carriers and prospects.  We will only know years from now how accurate these predictions are.

GOVERNMENT:

Enormous deficit spending and lower tax receipts will create major challenges for local, state and federal governments.  They will have to cut back and eliminate many programs that its citizens want them to provide.  It is likely that we will be in a very low interest rate environment for many years.  Government debt will become dangerously high.  The Federal Reserve Board has reduced interest rates to almost zero in order to stimulate borrowing, and Congress has responded.  The Federal Reserve Board has many levers to control the rate of inflation, and it will utilize all of them to keep interest rates low and to stimulate the economy.

As President, Biden will be compelled to raise income taxes for the very rich in order to reduce deficit spending.  Even so, he will initially be limited in proposing spending for social causes, just because the money isn’t there.  His actions may be further limited if the Republicans still control the Senate.

He campaigned on health care as a major issue and will advocate a government health care option, not Medicare for all.  It’s questionable whether such an option would include long-term care benefits, due to the high cost of coverage.  My sense is that if long-term care benefits become a part of a government health care plan, it will either be a minimal benefit and/or it will be a rider and not be a part of the base policy.

Health care is such a complex subject that it will be fiercely debated and it could take years before a new government plan could become law.  Such a law would have to overcome the objections of insurance carriers, medical providers, hospitals and the device makers.  The public would have to overwhelmingly support such a plan for it to gain traction and succeed.  The Affordable Care Act took years to enact, and I foresee similar conditions now.

One major wild card here.  The Republican Party will eventually have to reinvent itself in the face of increasingly unfavorable demographics.  In this process, it could reject the extreme right philosophy that it has adopted under President Trump and move towards the political center.  That could dramatically alter the future and make social changes more likely.

INSURANCE COMPANIES:

Despite the increasing need, sales of traditional long-term care insurance policies have been declining for years, some 85 % down from the early 2000’s, and this product is now recognized by insurance carriers as an unprofitable loser.  This is still true in spite of the fact the premiums are up to three times what they were decades ago.  With one or two exceptions, the insurance carriers have lost all economies of scale, and at today’s sales levels, they can’t make much money if any regardless of what they charge.

In addition, with the very low interest rate environment forthcoming, their interest rate assumptions, already low, will still be higher than projected future income from safe investments.  They will either have to make riskier investments or seek further rate increases, even on current products.  There may also be more pressure on their reserves.

We still don’t know the long-term effects from Covid-19 on people’s health, especially the health of the older population.  What are the implications for one’s kidneys, livers, lungs and heart?  Will insurance carriers have to factor in unknown potential claims resulting from the long-term effects of this disease?

These factors have led to the insurance carriers being for more comfortable selling hybrid life/long-term care and annuity/long-term care products.  There has also been a large growth of life insurance policies with accelerated benefit riders, usually for chronic illness.  The distinction of benefits between these chronic illness riders and traditional long-term care insurance has become very small.  Now some 40 % of life insurance sales include riders which cover long-term care costs.

The risks in life insurance and annuities are far better known than the risks associated with traditional long-term care products.  These riders have become the main vehicle to protect people against the largest threat to their retirement.

CONSUMERS:

The initial reaction of Americans to Covid-19 was to become, scared and threatened, and feel unsafe.  We retreated to our homes and ceased many of our normal activities.  We also had to learn to perform many routine functions differently and this required a significant mental adjustment.  Now was not a time to think about the future but to worry about the present and make sure that our changed lifestyle would provide for us the best chance of surviving the pandemic.

It’s obvious that the pandemic has resulted in horrible publicity for nursing homes, where many patients have become sick and died.  It’s even more difficult now to envision anyone interested in nursing home insurance, or even long-term care insurance with its history of caregiving in nursing homes and assisted living facilities.  Almost everyone will want to be cared for at home instead.  It’s actually a small mental difference from “sheltering in place” to “nursing care in place.”  Life insurance products which cover long-term care costs provide less of this nursing home stigma and will be more readily accepted.

This nursing home stigma may require a change in long-term care product marketing to become something like “home caregiving insurance,” rather than long-term care insurance, even if it includes benefits for care in nursing homes and assisted living facilities.  There will have to be a large increase in both the number of caregivers and in their compensation due to the rejection of nursing homes and the rising demand of folks to stay at home.

Now that a few months have passed, and the methods to fight this virus have become better understood, we have become less fearful and are beginning to resume some of our normal activities.  We can even envision a time when we will be able to adjust to whatever the new normal is and go on with our lives.  This may take a few months longer, but it will happen eventually.

This could cause a long-range change in our thinking from the immediate crisis to a longer view of our needs.  At that time, we will consider protection to be the basic need that it has always been.  Protection can take many forms, but we will mostly want to protect our families against loss of income due to death and expense due to bad health.

Therefore, I envision a slow but steady growth of hybrid/life long-term care insurance and life insurance with long-term care riders or chronic illness riders.  This could take up to ten years to occur, but many will recognize the need for this protection and take action to protect their families.

Our current system of health care is unsustainable and we all know it.  There will continue to be a great deal of talk and no action until a consensus emerges.  I foresee a completely different system in place by 2030 with some sort of health care for all.  It’s going to be interesting to see what form it takes.  Stay tuned.

By Louis H. Brownstone

Long-Term-Care Insurance: First, You Should Find an Agent: THE WALL STREET JOURNAL

Long-Term-Care Insurance: First, You Should Find an Agent

THE WALL STREET JOURNAL

By 

Glenn Ruffenach

Feb. 4, 2021 1:00 pm ET

I’m thinking about buying long-term-care insurance. Can you recommend a particular insurer or type of policy?

Actually, your best first step is not to shop for a carrier or policy. Rather, it’s to shop for a knowledgeable, independent agent.

Before we get to the particulars, let me pause and emphasize how important this topic is. One of the biggest financial mistakes that older Americans make is failing to plan for long-term care: what type of help they might need, how long they might need it, and how they are going to pay for it.

I have spoken with many retirees through the years who simply are in denial (“I won’t need long-term care”) or are playing a waiting game (“I’ll deal with it when the time comes”). Both attitudes can put you and your savings at risk.

 

As a parent, you’ve made a lifelong commitment to protect your children. As you age, how will you help protect them from the consequences of caring for you?

Should You Terminate Term Life Insurance for Long-Term Care Insurance?

Is it a good idea to terminate a term life insurance policy and use the money to buy Long-Term Care Insurance? This was the question a healthy individual, age 65, who is planning to work full-time until 70, and has a wife age 55, asked.

Term Life Insurance is one of the cheapest ways to ensure maximum financial protection for your dependents. It would not be ideal to terminate term life Insurance, as his goal is to provide financial protection to his wife in the event of death.

Long-Term Care Insurance would help in paying for assistance, if he becomes chronically ill or disabled, and requires assistance with activities of daily living. The premium will depend on various factors such as age, current health condition, the limits of benefits chosen, etc.

Long-Term Care Insurance should be bought considering the affordability to pay the premium even after retirement. If the premium payment becomes unaffordable and he stops paying the premium, the policy terminates, and all benefits accrued will be lost.

The decision to buy Long-Term Care Insurance should be based on his income, expenses and other finances before and after retirement. Also, family longevity and other health concerns are to be kept in mind.

Younger individuals have an alternative that is more flexible and can relatively be more affordable than Long-Term Care Insurance. That is buying a Whole Life Insurance Policy, with a Long-Term Care rider.

Whole life policies are costlier than the Term Life Insurance, but they have a savings element added to the insurance benefit. It builds cash value for as long as you pay the premiums. The Long-Term Care rider is a relatively cheap add-on when compared to a standalone Long-Term Care Insurance policy. It should be considered carefully, as the benefits available under the rider may be less restrictive.

Proper planning is needed when it comes to your future financial health. To get the facts and understand all the options available based on your own unique needs; fill out the form to the right to download your long-term care insurance planning guide today.

The information is free; the results could pay you hundreds of thousands of dollars when you need it most.

What are the Odds?

Long Term Care  is one of the most pressing issues and likely the greatest retirement expense facing Americans today– it will only get more urgent as the nation ages.

Consider this:

  • The number of persons aged 65 or older is expected to double in the next 20 years; there will be 110 percent more people 80 or older
  • At least 70% of people over age 65 will require some long term care services at some point; more than 40% will need care in a nursing home
  • The cost of long term care in the U.S. has steadily increased, and most of these increases are outpacing inflation
  • The national average median cost of one year in a private nursing home room is over $90,000.

what are the odds you'll need long term care?It’s important to consider care options while a person is healthy. That’s when the best rates and options are available and families are in much better emotional shape to discuss long term care-related planning. The simple truth is that during a crisis, situations can quickly escalate and cause tension or introduce issues that could have otherwise been avoided.

While there is much to gain by talking as soon as possible, there’s a staggering amount to lose if we miss the chance. The list is long, but here are just a few things you should know now, rather than discovering them the hard way later:

  • Health insurance and Medicare cover virtually none of the cost of nursing homes, assisted-living facilities or in-home care– the care many people require late in life. Many people pay out of pocket until they are practically destitute and then Medicaid kicks in. Many who thought they had saved adequately end up impoverished, getting substandard care.
  • Without a durable power of attorney (a simple document that is easy to obtain), you may have to go to court to gain guardianship over your parent so you can handle his or her affairs if he or she becomes incompetent. Guardianship is necessary so you can handle your parent’s affairs. Going to court is expensive, time-consuming and stressful.
  • A loved one’s health status can change overnight. It’s better to have long term care plans and insurance in place prior to their health taking a turn. At that point it may be cost-prohibitive or simply may no longer be an option due to the age or health of the person who will need care or coverage.
  • Many of the best care facilities have waiting lists, and some of them require that your parent be able to live independently in order to move in.
  • Sometimes it is not the big health problems that ruin the golden years, but the smaller annoyances– the inability to pursue a loved hobby, the difficulty hearing, or the fear of falling. When you talk, try to get at these less obvious issues too, as many of them can be resolved.

Being prepared will mean less work, less stress, less worry and fewer regrets. Talk. Talk now. Because we need to prepare for aging like we prepare for everything else in life

If you are ready to talk to a long-term care insurance expert call
us today at (800) 303-1527.