Baby boomer couples cutting health care costs by pooling resources to reduce the cost of long term care premiums. Instead of buying for one, advisers and analysts say you can sometimes slash premium costs by approaching long term care insurance as a couple.
For those willing to shop around the following three strategies are worth exploring:
1.Shared care plans
In general, sharing long-term policies doesn’t eliminate the need for both partners to buy separate plans. But unlike traditional policies, a special rider is tacked on to each to allow one spouse to dip into another’s benefits.
The main advantage of shared coverage is that if you need more than your current plan allows. But what happens if both eventually go over their allotted amounts?
If you’ve bought a contract with plenty of flexibility and terms that stretch over long periods, experts say that won’t necessarily be a problem. They point out that some providers offer policies that can cover an entire lifetime. A longer time frame usually means greater premiums. A lifetime policy can translate into extra costs when compared with short-term plans covering three- to five-years of long-term care.
“That can defeat the whole purpose of buying a policy that allows you to share benefits,” says Neil Gholson, President of LTC Finical Solutions, inc..
To make sure you don’t run out of benefits, Neil suggests at least four years of coverage. The Consumers Union senior policy analyst says that’s based on data showing nursing-home use averages around 2.5 years in long-term policies.
“Very few people spend more than five years in a nursing home,” Gholson said. “So if you’re going to get a long-term plan that shares care between spouses, look at a four-year term. Fewer years could be a little shy, especially considering that policies can cover home as well as nursing home care.”
Best suited for shared care policies might be couples that want to buy shorter-term plans but still want some flexibility to reach into their spouse’s pool of benefits, he added.
2. Long term care partnership deals
Two years ago, Congress expanded to most of the country a program that had been running for years in less than a handful of states. It allows the total value of long-term-care policies to be counted against Medicaid requirements for drawing on personal assets to pay health bills.
But different states have different contingencies. For example, in New York consumers must purchase a long-term-care policy that covers at least three years in a nursing home and six years of home-based care. In return, the state pledges not to go after any personal assets once someone exhausts the benefits in their private policy, says Gholson.
“So Medicaid care becomes a free benefit without any strings attached,” he added.
States such as California and Connecticut use what’s termed dollar-for-dollar protection. In those cases, authorities count the value of a private insurance policy to determine the amount of assets that are protected against pay-down requirements in Medicaid.
It saves the states money because they’re shifting costs of long-term care to insurance companies. And it puts fewer burdens than we currently have on the entire Medicaid system.
For individuals, such partnerships can limit the size of policies they’ve got to buy. The trade-off is that if you buy less coverage than a state’s threshold to qualify for Medicaid, you’ll still wind up dipping into your savings.
“If you live in a dollar-for-dollar state, you might want to buy enough insurance to protect your entire portfolio in a partnership program,” Gholson said.
3. Ask insurance agents about discounts on bundled purchases
This could be the simplest way to savings.
Some carriers now offer promotional rates for two people that buy a long term care package at the same time.
Those are marketed as spousal discounts and can range between 15% and 25% off regular premiums. And if you qualify as extremely fit and healthy candidates, some carriers will even add another 10% discount on top.
Some things to consider:
Each of the three options presents different caveats. “People need to remember that the shared-care marketplace is a fairly new phenomenon,” said Cheryl Matheis, a health strategist at AARP. “They need to ask a lot of questions and carefully examine all of the details in each policy.”
1. Check the insurers’ history of changing prices and policy conditions. Only a few carriers haven’t hiked premiums.
2. Shared long term care benefits likely will cost you slightly more than traditional long-term-care policies of a similar term.
The alternative is that if two people aren’t sharing long-term-care insurance, they’ll probably need to buy more extensive individual policies to get the same level of coverage. The big advantage to shared care is that you reduce the term of policies.
3. If you’ve got enough money, the best option is always to buy separate longer-term plans.
4. If you’re looking at a more affordable alternative, then shared care is an option to at least consider.
5. If you choose a state partnership programs need to note any loopholes may exist, Gholson says. Even buying enough private care insurance to match asset levels isn’t a guaranteed solution.
“Depending on where you live or move, the different Medicaid eligibility and income requirements in each state, the government might still be able to come after your assets in certain cases,” Gholson said.
Spouses cutting health care costs can produce significant benefits with the right amount of research. Contact a Long Term Care Professional that represents several carriers to see what your options are.