Now That Met Life Will No Longer Sell LTC Plans…..

As reported over a week ago, Met Life has decided to suspend sales of their Long Term Care policies.

So what does this mean for consumers?

It is said in the industry that the more likely an event is to occur, the harder this is to insure.  In plain english (as my Mother used to say), this means that Met Life stopped selling the plans because of the high likelyhood that consumers will need to have long term care assistance.  This also means that us baby boomers will face the probablility that we will need to have either an LTC plan or a great deal of money in reserve for expenses related to aging. 

According to government figures, at least 70% of people over age 65 will eventually require some form of help with personal care such as dressing or using the bathroom and 40% will need a nursing home. Nursing homes now cost $80,000 a year on average. It is estimated that future costs vary widely, but may be around $250,000 for a 65-year old couple retiring today. Charles Farrell, an investment adviser with Northstar Investment Advisors in Denver, Colorado, calculates that a 55-year old couple should plan on a million for insurance costs and two years in a nursing home for two.

Given that one insurer has already “retired” (pun intended) from selling LTC care, we anticpate others may follow suit.  They cannot rescind policies already in effect. 

So what does this mean for you and I?     My daughter always tells me that she will put me in a nice nursing home when I am old(er).  She is, of course, kidding me, I hope.  If you dont have $250,000 or more in savings dedicated to future health needs it is in your best interests to contact your financial advisor to discuss LTC coverage.

United Healthcare Small Business Rate Action – Effective February 1, 2011

Effective February 1, 2011 the average statewide rates for new business will increase by approximately 2% for PPO. There is no measurable rate change for the HMO product. See following averages by area:  

Los Angeles County: no rate increase for HMO; 1.2% for PPO/HSA

Orange County: no rate increase for HMO; 1% for PPO/HSA

San Diego County: no rate increase for HMO; 3% for PPO/HSA

For renewing customers, the average statewide rate increase is approximately 7% for HMO and 13% for PPO

UHC introduced a new plan, Choice Plus Balanced Value 40/5000/70% (Plan Code J3-U) which comes with per-occurrence deductibles of $500 for outpatient surgery and $1,000 for inpatient hospital services. In addition, UHC are providing Substance Use Disorder supplemental coverage, offered with our HMO plans through an arrangement with U.S. Behavioral Health Plan.

See the Small Business 2-50 Product Catalog and Rate Guide for more details.

Government Amends PPACA Rule on Grandfathered Plans

 Effective November 15, 2010 the Department of Health and Hunman Services, in response to public concerns, issued an amendment to the Grandfathering Rules for Health Plans under the Patient Protection and Affordable Care Act (PPACA). 

Prior to this ruling, any health plan that changed carriers after March 23, 2010 lost their Grandfathered status, meaning that provisions of the PPACA must be applied to the new plan.  This could result in greater premium charges due to benefits that must be impletmented under the law.   Under the new ruling, plans that retained similar benefits under a new carrier for premium savings would not lose their grandfathering status solely as a result of the change in carriers.

For complete information please refer to the Department of Labor website at http://www.hhs.gov/ociio/regulations/grandfather/factsheet.html

Ignore Long Term Care Coverage Now, Pay Later

Long-term care insurance should be an easy choice for people with aging parents and younger children. 

Parents can buy it for themselves to cover the costs for a lengthy nursing home stay, for assisted living or for a health aide at home a few hours each day.  Adult children of parents whose income is limited could buy policies for their parents in order to cover the expense of their parents future care.

Should be easy, but consumers aren’t purchasing the coverage.  According to the New York Times, there were fewer new individual buyers of the insurance in 2009 than in any year since Limra, a market research firm, began tracking the data in 1988. It was also the first year that the number of existing policies did not increase.

Why aren’t more people buying Long Term Care Policies?  Some of the rationales are outlined below.  It involves a lack of trust in the insurance industry, and some of it is based on “wishful thinking” about our futures and mortality: 

1. Medicare will cover your expenses.  According to a 2009 Prudential survey, 37 percent of people think that Medicare will cover their long-term care costs.  Not true. Medicare may pay for a nursing home stay under certain circumstances, but it won’t cover long-term care there. The same thing is true with at-home care.

2. You won’t need Long Term Care.  “Hey, I am healthy now, what are the odds I will need care?”    Milliman, a consulting firm for the  long-term care insurance industry, thinks your odds are higher than you think. For people age 65 and older who have long-term care insurance, there is a 45 percent chance of making a claim, though it ranges from 30 to 56 percent depending on gender and marital status.  They also estimate that once you have made a claim, the chances that you will continue needing care for more than three years is at least 13.9 percent. There is a 4.3 percent chance of it exceeding five years.

3. You can pay for your own care.  MetLife recently released new survey data suggesting that the average rate for a private room in a nursing home was now $229 a night, or $83,585 a year, on average, though it can range widely by geography. Average costs for home health aides are $21 an hour.  Assuming future increases in the cost of health care at 5% per year, the cost may exceed $1.5 million in 20 years.  If you have savings that could cover this expenses ( a big IF nowadays), what will be left for a surviving spouse?

4. You can count on Medicaid.  Medicaid will pay for nursing home costs, and depending on your state, some other types of long-term care, too. But first, you have to qualify, and that usually means spending most of the money you have.  If you qualify there may not be the same choices available to you for your care.  The best or closest nursing home facility may not take Medicaid patients,  or have room for any when you need it. Program restrictions will only grow over time, given the precarious state of the federal and state budgets that pay for it.

5. Your Children will take care of you.  This is of course, assuming that they do not have their own families, lives and jobs.  If your children can take care of you, it will be financially, emotionally and physically draining. 

6. Your Children will pay for your care.  See #5 above.

7.  The Government will take care of you. One part of the landmark health care bill earlier this year is something called the Class Act. In effect, it sets the government up in the long-term care insurance business.  The earliest you can enroll is  2012, and the plan may not pay much more than $75 or $100 a day for claims (and only after a five-year period of paying premiums first), though that will be indexed for inflation. Still, since it will be easier to qualify for this coverage than for private insurance, where a medical exam is often necessary, it may be tempting for people to wait and enroll in a couple of years.   Lets hope the program won’t be delayed or changed by a different administration or Congress.

8.  The Premiums are too expensive.   In the first half of 2010, individuals buying through an insurance agent or financial adviser paid a $2,180 annual premium for plans that pay claims that are not taxable to the policy holder. As many of us are struggling there may be higher priorities than long term care. See #9 below.
9. The Premiums will only increase.    John Hancock and MetLife have requested a 40% increase in their premiums.  Met Life will suspend selling the coverage as of 2011.  A MetLife spokeswoman said that the company actually had not anticipated the costs. “While we are sensitive to any rate increase that impacts our policyholders, assumptions used to initially price many long-term care insurance products have changed,” Karen Eldred said in a statement. She added that the company misjudged interest rates, life expectancy and the number of people who would drop their policies. 
Perhaps the increase was necessary in part because long-term care itself is so good. People are staying alive longer than companies predicted, and they’re continuing to pay their premiums for longer periods of time, too, in order to remain eligible for that care. 

The requested price increases from John Hancock and Met Life suggests that some companies had no idea how to set prices on many of their policies. If they have it wrong today too, you could sign up for a $2,500 premium at age 60 and end up paying two or three times as much for it when you’re 85 and on a fixed income.

It is easy to understand delaying a purchase of long term care coverage, especially in today’s rough economy.  But there is no sound reason to not make the purchase sooner rather than later.  What may be an easy choice today may become one of your difficult regrets later.

2011 Health Savings Account (HSA) changes

Health care reform changes to HSAs which go into effect January 1, 2011

  • Over-the-counter (OTC) medicines and drugs will no longer be eligible for tax-free reimbursement from an HSA without a doctor’s prescription. This includes pain relievers, sleep aides, and cough medicines.
  • Certain OTC purchases, such as insulin, bandages, and medical devices, continue to be eligible for tax-free purchase from an HSA without a prescription. Accountholders should always keep their receipts and save doctor’s prescriptions for OTC purchases with their tax records.
  • The tax penalty for non-qualified distributions from an HSA will increase from 10 percent to 20 percent (for accountholders under age 65 and not disabled).
  • Family insurance coverage may be extended to children up to age 26 but HSA distributions can only be made for qualified expenses incurred by tax dependents. If a tax dependent is listed on an accountholder’s federal income tax, typically their qualified expenses can be paid from the HSA.

2011 contribution limits

The Internal Revenue Service (IRS) 2011 annual contribution limits for HSAs are the same as the 2010 annual contribution limits. The 2011 minimum deductible and maximum out-of-pocket limits for HSA-compatible health plans also remain unchanged.

  Tax year 2011
HSA annual contribution limits Single – $3,050
Family – $6,150
HSA catch-up contributions $1,000 per individual age 55 or older
Minimum deductible Single – $1,200
Family – $2,400
Maximum out-of-pocket expenses Single – $5,950
Family – $11,900