Buyer beware when shopping for long-term-care insurance
The high cost of long-term care can quickly wipe out a person’s life savings. And some consumers who tried to protect themselves by buying long-term-care insurance found out too late they didn’t understand what they bought.
Special to The Seattle Times
Key points to remember about long-term-care insurance
• Long-term-care-insurance policies cover a wide range of medical, personal and social services.
• Understand what must happen for a policy to begin paying benefits.
• Understand the elimination period.
• Understand daily benefits provided.
• Understand your coverage and exclusions.
• Match your need for long-term care with your need to protect assets and your ability to pay premiums.
• Understand how much your premium will be and how often it must be paid.
• Your premium may increase after your purchase.
Source: National Association of Insurance Commissioners, www.naic.org
Glossary of terms
(also called long-term-care facility or convalescent-care facility)
Licensed facility that provides general nursing care to those who are chronically ill or unable to take care of daily living needs.
Residential-living arrangement that provides individualized personal care, assistance with activities of daily living, help with medications and services such as laundry and housekeeping. Facilities may also provide health and medical care, but care is not as intensive as in a nursing home. Types and sizes of facilities vary, ranging from small homes to large apartment-style complexes. Levels of care and services also vary. Assisted living allows people to remain relatively independent.
Residential private home designed to provide housing, meals, housekeeping, personal care services, and supports to frail or disabled residents. At least one caregiver is on-site at all times. In many states, group homes are licensed or certified and must meet criteria for facility safety, types of services provided and the number and type of residents they can care for. Group homes are often owned and managed by an individual or family involved in their everyday operation.
It lists companies approved to sell long-term-care insurance in Washington state here: 1.usa.gov/NLog7w
• National Association of Insurance Commissioners at www.naic.org/ also has a page dedicated to information about long-term care at bit.ly/1dtDqrz
• American Association for Long-Term Care Insurance: www.aaltci.org/
Vera Gunnerson sat in her Green Lake home recently, poring through a neat file of long-term-care insurance papers. The oldest was signed in 1994, when Gunnerson was 61.
“I probably should have done more research,” the Seattle woman said. “I wonder if we really understood what we were doing.”
That is a question many older Americans must ask themselves as they consider whether to buy long-term-care insurance. The National Association of Insurance Commissioners estimates about 9 million Americans, now age 65 or older, will need care for physical or emotional needs required over an extended period of time.
Average annual costs for a private room in a nursing home in Washington is $95,995, according to a study by Genworth Life Insurance Company. Nationally the cost is $83,950, the study found.
But in the Seattle area, some nursing homes charge as much as $10,000 per month, or $120,000 per year. Assisted-living facilities, which operate under a different state license and don’t offer 24-hour skilled-nursing care, average about $41,000 per year nationally and $51,000 in Washington. In-home care averages about $19 per hour nationally and $22 per hour in the state.
With those high costs, long-term care can quickly wipe out the savings of elderly individuals, even those who have worked to save for retirement.
The insurance industry began selling long-term-care insurance in the early 1980s to help seniors pay those high costs at the end of their lives. Companies sold policies to people in their 60s and 70s who wanted the protection if they later needed such care.
Now many of those early buyers are filing insurance claims, and some are facing significant problems getting paid.
“When people buy the insurance, they are certainly different than when they have to make claims,” said Michael E. Quiat, a New York attorney who represents long-term-care policyholders. “When they have to make claims, they’re not in any position to take on the insurance company and make sure the insurance company pays what it’s obligated to pay under the policy.”
If a policyholder is too ill or disabled to fight the insurance company, and doesn’t have a relative or an advocate to take over the task, claims sometimes are never paid, Quiat said. “There’s no better way to make a profit than to collect premiums and don’t pay claims.”
Nineteen years ago, Vera Gunnerson and her husband, Dan, bought long-term-care insurance from Bankers United Life Assurance Co. to cover skilled-nursing-home care. Dan’s premiums cost $1,425 for the first year. Since then, the policy has changed hands two times — first to AIG, then to TransAmerica Life Insurance.
Today, Vera pays $4,800 a year for Dan’s coverage.
And Dan, 88, is at the point in his life where he needs long-term care. He has Parkinson’s disease and dementia, and Vera is unable to care for him in their home, purchased from his parents in 1947.
Vera moved Dan to a long-term-care facility in Edmonds after a psychotic episode landed him in the hospital psych ward in May.
She thought that since her husband needed long-term care, their insurance would pay for it. Unfortunately, she was wrong.
The policy the couple bought covers skilled nursing-home care. But Dan’s physician wrote to the insurance company stating Dan’s ailments are best served at a special dementia-care facility like the one where he is, rather than a more expensive skilled nursing home.
Vera called the insurance company and later had the director of the facility work on her behalf, but failed to get anywhere.
She ultimately hired elder-law attorney Janet Smith, who also couldn’t sway the company to cover Dan’s care. She even filed a complaint with the state insurance commissioner.
“(Dan) not only didn’t need a nursing home but would have suffered in a nursing home,” Smith said. “He has the type of dementia that needs a very secure facility.
“The company continued to deny, deny, deny. They rejected everything we tried, including a doctor’s letter saying he needs to be in this facility and not skilled nursing. ... We can’t sue them because under the terms of their policy, he doesn’t qualify for a nursing home,” Smith said.
Gregory Tucker, head of communications for TransAmerica confirmed that Dan Gunnerson has a long-term-care policy with the company. Tucker said he could not comment on the specifics of the case because of privacy reasons.
He said TransAmerica “provides all policyholders a full list of facilities that correspond to the coverage that they have with us so they’re not in a situation where they get into a place that aren’t covered. Moreover we pay in excess of $1 million a day in our long-term-care division to fulfill our commitments. We’re not in the business of trying to find ways not to adhere to the promises we make, but to fulfill them.”
Despite problems like the one faced by Gunnerson and others they represent, both Smith and Quiat said seniors should consider buying long-term-care insurance.
Find a reputable company, they said, and be very certain about what you’re buying. Also be aware that premiums may increase as you age.
“There are companies that bend over backward that are wonderful, and those are the companies that people have to buy their insurance from,” Smith said.
In 2012, the industry paid out $6 billion in claims, said Allison Payne, whose company EM-Power Services sells long-term-care policies to employers to offer to their employees.
Today’s policies, she said, are more likely to cover care in all types of settings, so people can stay in their own home and community safely and independently instead of going to a nursing home.
Under a tax-qualified plan, benefits are payable when a licensed health-care practitioner certifies that an individual cannot perform at least two “activities of daily living” without substantial help for a period expected to last at least 90 days, or if the person requires substantial supervision to stay safe due to a severe cognitive impairment, such as Alzheimer’s disease.
Payne encourages consumers to buy insurance when they are younger, when premiums are less expensive, before carriers come out with higher-priced, newer models, and when they won’t be denied a policy because of existing health conditions.
“The biggest challenge is getting people medically underwritten. Thirty percent of people who apply for coverage outside a workplace plan are declined due to pre-existing medical issues,” Payne said.
Gunnerson says she’s frustrated with her situation but continues to pay $1,200 per quarter for Dan’s insurance in case he ever needs a nursing home. But she’s dropped her own policy and plans to sell her home if she needs nursing-home care.
“It’s just so appalling,” she said. “At the worst time of your life you’re fighting for what you have paid for, and those people are fighting me tooth and nail.”
Information in this article, originally published Feb. 15, 2014, was corrected Feb. 24, 2014. A previous version of this story incorrectly stated the wrong name of the long-term insurance company.