The long-term care insurance market has been ruffled by recent developments that may impact the availability of this type of insurance, causing older adults to look for other ways to plan for their care as they age. Long-term care insurance is a form of private insurance that provides benefits to cover the cost of services that may be needed if the policyholder develops a long-term illness or cognitive impairment. These policies may include benefits for care at a nursing home, assisted living community, or home. Benefits are typically subject to both daily and lifetime maximum limits. Terms vary considerably depending on the insurance company and individual policy.
Unfortunately, long-term care insurance is becoming more difficult to obtain and those with existing policies are finding them more difficult to afford. Rates continue to increase due to insurers misjudging the market, pricing policies too low in early years when they began issuing policies, and, underestimating life expectancies and the amount of care that policyholders would need as they age. Many insurance companies also expected to earn higher returns on the premiums they invested to pay future claims than has proven to be the case.
Earlier this year, the Massachusetts Division of Insurance approved a rate hike on long-term care insurance of forty percent, phased in over the next four years. As steep as this increase sounds, some insurance companies had sought as much as a 300 percent increase. However, the Division of Insurance attempted to balance the interests of the consumer with the needs of the insurers.
Some insurance companies were not happy. Genworth Financial, Inc., one of the largest long-term care insurers in Massachusetts with more than 30,000 policyholders in the state, reacted by filing a lawsuit against the Division of Insurance. A number of insurers, including John Hancock, which had requested up to a 194 percent rate increase, have stopped issuing new long-term care insurance policies altogether in Massachusetts.
While long-term care insurance may be more difficult to purchase and premiums are likely to continue to increase, in the right circumstances it can be a useful planning tool. Long-term care insurance can help a person avoid exhausting his or her savings to pay for long-term care. In addition, if a long-term care insurance policy meets certain minimum requirements, i.e., (1) covers care in a skilled nursing facility, (2) provides a daily benefit of at least $125 a day for two years, and, (3) includes an elimination period (days on which services are provided to an insured before the policy begins to pay benefits) of 365 days or less, then the primary residence of the insured who receives MassHealth benefits cannot be subject to a Medicaid lien.
It is never too early to discuss with a qualified insurance adviser and elder law attorney whether long-term care insurance could be a useful addition to your estate plan. If you or a family member has questions about long-term care insurance or estate planning, please contact me at firstname.lastname@example.org.
Michael Stankavish is a lawyer and owner of North Shore Elder Law and Estate Planning. He can be reached through www.nselep.com