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More Reasons to Beware
L.T.C. Insurance
By Jane Gross
Few subjects have generated more interest here than long-term care
insurance. And I’ve found myself both alarmed and amazed at how many of
you think that such a policy is the all-purpose solution to exorbitantly
expensive nursing homes, assisted living facilities, home health aides
and other forms of “custodial care’’ for the frail, demented or
otherwise incapacitated elderly.
My mother had such a policy, a new product in the 1970s and one that
looked very different from the policies of today. Because of her age
when we bought it, the annual premium was $7,000. I can’t recall how
many years we paid for it and prefer not to check my records to find
out. What good would it do me now? Leaving aside the eye-glazing
technical details, nothing she needed was covered. The policy gave me
peace of mind but otherwise was an utter waste of money.
Still, I have my own policy now, one of eight million Americans who do,
most bought by people in their 50s and 60s, for an average cost of
$1,950 a year. My annual premium is $1,700, and the benefits include
many things my mother’s didn’t, including home modification, a small
portion of the costs of assisted living (although not the apartment
itself), greater flexibility in the choice of home health aides,
inflation protection and other bells and whistles I can’t recall.
But, often I think about canceling it, because my gut tells me once the
huge baby boom cohort starts filing claims, not even the biggest players
in the field will be able to cover the costs. Laziness stops me, and the
drumbeat of opinion from my financial advisor, my friends and
colleagues, many of the eldercare lawyers and geriatric care managers
I’ve interviewed over the years — and now, also, from you, dear readers.
The consensus seems to be that any of us fortunate enough to be able to
afford a policy will be just fine.
But some formidable journalists are warning us otherwise. Last year, in
The Times, my colleague Charles Duhigg reported that thousands of
policyholders, many with coverage from Conseco and Penn Treaty America,
two of the nation’s largest insurers, were finding it difficult, if not
impossible, to get their claims paid. A Congressional committee quickly
took up the issue.
And last week The Wall Street Journal’s Web site described a new problem
at Conseco, which, according to reporter M. P. McQueen, “dumped a chunk
of its long-term care policies into an independent trust, putting tens
of thousands of policyholders at risk of reduced benefits or big premium
increases.’’ Mr. McQueen writes that Conseco’s move came because the
policies were a “drag on earnings because they were underpriced and
required constant capital infusion to meet the long-term needs of
policyholders.’’
My repeated advice has been “buyer beware’’ when selecting a policy or
even deciding whether to buy one. Clearly, I’ve not been persuasive,
since comments come in almost every day from readers who consider these
policies a foolproof private sector solution to a growing public policy
crisis. So ignore my caveat emptors, which after all are based on little
more than my mother’s experience and my own neurosis. Instead, read the
stories by Mr. Duhigg and Mr. McQueen. They are way smarter than I am,
and their reporting is not based on a sample of two.
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