Human Resources
Long-term care
Plan now for the care you may need later.
By Todd Shryock
Smart Business Cleveland | August 2005
Planning for your long-term needs usually focuses on the financial needs to maintain your lifestyle requirements.
But have you fully thought through what your health care requirements might be? What if you needed to spend extended time in a nursing facility or required in-home care for a long period of time? Does your financial plan cover these contingencies?
One method of coping with the expense of long-term care is through insurance specifically designed to cover the burden of a lengthy health battle. Long-term care insurance policies help you pay for your health-related costs without causing an undue burden on your financial resources. With an aging population, interest in long-term care insurance is on the rise, both at home and in the workplace. According to the Society for Human Resource Management 2004 Benefits Survey, 38 percent of companies surveyed offered some sort of long-term care insurance, with another 4 percent planning to add it — but in most cases, it’s an optional, employee-paid benefit.
Expect to hear more about long-term care insurance in the future. According to Miami University, Ohio’s population of those over age 65 is expected to remain constant through 2010 at just under 1.5 million people. That population will grow dramatically between 2015 and 2050, increasing by 70 percent.
This will put unprecedented pressure on Ohio’s Medicaid budget, the predominant payer for nursing home-based care. Those with long-term care insurance won’t be at the mercy of the state. Long-term care insurance can be a difficult benefit to understand, and even professional HR managers can struggle with it.
“It is a complicated benefit to offer, as it requires educating employees on what the benefit is, having them figure out if it is an benefit they want, and then actually participating in the program,” says Jen Jorgensen, a spokesperson from SHRM.
Nationally, participation in plans offered by more than 2,500 employers has resulted in participation rates of 5 percent to 7 percent.
Most adults also have the misperception that they will never need long-term care. A Peter Hart Research Study found that just 15 percent think it is extremely or very likely that they will need assistance with day-to-day living as they get older. But in reality, most Americans over age 65 will eventually need some sort of long-term care.
The study further found that even among those who anticipate a need for professional care, 44 percent believe that long-term care costs will be covered by their insurance, Medicare or Medicaid. In addition, 42 percent of adults living independently believe that should it become necessary, long-term care assistance would be provided mainly by a family member, yet 23 percent admit their family members don’t have enough time or money to help them.
The key is to start thinking about long-term care sooner rather than later. Premiums increase sharply with age, and relatively few older Ohioans can afford adequate coverage; many of those will be screened out by underwriting practices.
If your company does offer coverage, it may require further research on your part. Also remember that like any aspect of financial planning, long-term care insurance is just one part of your overall solution.
There are a number of steps to consider when calculating how much long-term care insurance you may need to buy and what sources of insurance you may already have available.
The American Association for Long-Term Care Insurance recommends the following.
- Check if your company offers LTC insurance and what it covers.
- Review your life insurance policy to see if it covers any LTC expenses.
- Calculate how much you could afford to pay for LTC coverage without jeopardizing your lifestyle.
- Talk to your financial adviser to discuss any tax benefits of LTC insurance.
- Re-evaluate your investment strategy and plans for gift-giving once you have LTC coverage.
