Planning for the Future – An Exploration of Long Term Care Insurance

Our daughter frequently reminds us of one significant fact we should never, never, forget. When we get old and cannot take care of ourselves, it is she who will pick the home we will go into. The odds that we will need long term care are good. Forbes did a report on the costs and incidents regarding long term care, and noted that a 2005 report that provided forward-looking estimates for long-term care needs for the cohort of individuals turning 65 in 2005 estimated that 58% of men and 79% of women aged 65 and older would need long-term care at some point, and that average lengths for care were 2.2 years for men and 3.7 years for women. They also estimated that 38% of men and 63% of women will require care for one year or longer, while 11% of men and 28% of women will need care for at least 5 years.

In my family, we’re currently dealing with long term care issues. Luckily I didn’t have to deal with it for my father, who died of injuries sustained in a car accident after being hospitialized for a month, or my wife’s dad, who died on the way to the hospital after complaining he wasn’t feeling well. However, my wife’s mom is in a long term care situation, dealing with deteriorating memory and capabilities. She’s lucky that she had long term care insurance.

I understand the concept of insurance well. I’m a cybersecurity guy, and dealing with and assessing risk is my game. Insurance is just a form of dealing with risk: you transfer the cost of the risk from you to the insurance company, who accepts the risk… for a price. In that price, and the conditions, are the game.  Insurance is a bet with the insurance company. If you get really sick, you win, because they pay you out more than you paid in (and thus, you get money from other people). If you are healthy, you lose. Same thing with life insurance: if you die, you win (so to speak, because your family gets money). Art Buchwald has a great piece about this issue, and how the insurance company felt when he finally won and wanted to collect his money. You should read it.

I had dragged my feet on getting Long Term Care insurance. It is expensive, and that can slow me down. But I arranged for one of my insurance agents to speak to our Temple men’s group on the subject a few months ago. He pointed out a significant fact: When insurance companies went into the long term care market place, they misjudged it and had policies that were too generous — but were stuck because they can’t cancel a policy if the premiums are paid. So over the years they have been understanding the risk better, pricing the policies more in line with the risk, and adjusting the policies to reduce their exposure. For us consumers that means: if you wait to buy your policy, you will likely be buying a weaker policy. This got me off my duff, and I began our investigation.

This blog post summarizes what I have found. I’ll present my findings, and my conclusions. I want you to shoot holes in it — find things I didn’t think of or that I missed. By that way, I’ll get a better product, and you might even learn something that helps you. I’ll note that I didn’t just blindly take what my agent, Robert, sent me. My training in DOD acquisitions led me to try to get additional bids. I posted a call for recommendations on Facebook, which lead me to the fact that both the UCLA and CSUN Alumni association work with a company called Mercer for a long term care benefit for their members. Mercer, it turns out, is just a broker. I was on the verge of investigating that when a former camp counselor of mine, who does employee insurance plans, connected me with his insurance agent, Stan. Stan reps a different company from Robert, and got me an additional bid. Lastly, in reponse to my FB post, another fellow — Scott — chimed in. Scott is a co-owner at LTCShop.Com, a broker in Washington, who helped me look at the proposals I got and provided some additional information.  It is also very useful to read the AHIP Guide to Long Term Care. The National Association of Insurance Commissioners has also published A Shopper’s Guide to Long Term Care Insurance, which is also well worth reading for background.

My investigation focused on products from two primary companies: Mass Mutual (MM) and Mutual of Omaha (MO). The number of insurers providing long-term care is steadily shrinking, and these were the two companies that got the highest ratings when I did a web search. There are other companies out there, however. If you think yours is better, let me know. However, giving the shrinking pool of providers, you want a company that will remain in the business, and that will have the needed stability. This gives our first comparison. In terms of ratings, Mass Mutual looks stronger:

Rating Agency Mass Mutual Mutual of Omaha
A. M. Best Company (Best’s Rating, 15 ratings) A++ (1) A+ (2)
Standard and Poor’s (Financial Strength, 20 ratings) AA+ (2) AA- (4)
Moody’s (Financial Strength, 21 ratings) Aa2 (3) A1 (5)
Fitch Ratings (Financial Strength, 21 ratings) AA+ (2)
Weiss (Safety Rating, 16 ratings) A- (3) B+ (4)
Comdex Ranking (Percentile in Rated Companies) 98 93

 

In my comparison, I attempted to compare apples to apples. I’m 57 (turn 58 in January); my wife is 60 (she turned in July). We looked at policies with comparable benefit amounts ($328,500 for MM; $325,000 for MO), with comparable benefit periods (6 years) and  comparable elimination periods (90 days) for reimbursement. Both were quoted with an inflation protection benefit (3% compound inflation protection), and waiver of premium for covered partner (meaning thus: when you are collecting, you don’t need to pay premiums, and the waiver means that you don’t have to pay premiums for your spouse as well).  Both covered home care as well.  So, for the apples to apples comparison, the “quoted” premium for both my wife and I was, after discounts, $6,272.19 for the first year from MM, and $6,604.71 for the first year from MO. For some reason, I thought there was a fixed premium period, but Robert clarified that premiums are payable for the life of the policy or until one spouse needs care. Note that premiums can be adjusted during that time. I don’t think either carrier has increased premiums in California, but MO has in other states.

I put “quoted” in quotes because of an interesting tidbit about that quote I discovered when I passed them by Scott. Both were quoted at “Preferred” rates — so you would think they are the same. They aren’t.  Each company has different underwriting classes.  Mutual of Omaha has four: (1) Preferred (15% less premium than ‘Select’); (2) Select (which is what most people get); (3) Class 1 (25% more than ‘Select’); (4) Class 2 (50% more than ‘Select’). This means that Preferred is the best, least expensive rate. Mass Mutual has three rate classes: (1) Ultra Preferred (10% less than ‘Select Preferred’); (2) Select Preferred (which is what most people get); (3) Preferred (25% more than ‘Select Preferred’). For MM, Preferred is the most expensive rate. You’ll get whatever rate class the underwriter chooses based upon your medical records regardless of what the agent quotes you.  This means that the quote from MM was the worst case, and the quotes from MO was the best case. Given that the MM amount was better than the MO amount, that makes MM look even better.

What about policy characteristics? I asked both my agents about what was unique about their policies. Most policies are very very similar, but there are a few distinguishing things.

Stan pointed out that, for MO, a Shared Care rider is available, and there is a buy up option for their inflation protection. The shared care rider allows you to draw from your spouse’s maximum care benefit when yours is exhausted, and if your spouse dies, their unused benefit is added to yours (and vice-versa). The buy-up option automatically increases the monthly benefit a set amount for inflation (but it looks like MM has something similar). Stan noted, regarding the buy-up option, that because the cost of care services will likely increase the client may elect to increase the inflation protection percentage which increase the monthly benefit and coverage maximum.

Robert pointed out that, for MM, they have unisex rates where women are not rated differently from men (although Stan counter-pointed that most LTCI carriers have gone to gender specific rates because women live longer than men and are more than likely to use their polices — and so it all depends on whom the unisex rates are based). This may effect future price increases on the MM policies.). He also pointed out that the MM policy has a home care monthly benefit rider, which changes the benefit from a daily amount to a 31-day monthly amount (every month is considered to have 31 days under this rider).  This gives you greater flexibility in arranging and paying for care.  The second is the joint spouse waiver of premium, which says that if either spouse is receiving benefits the premiums for both spouses are waived (although it looks like MO has that as well).

Stan also provided me with a comparison table of the two policies. Here are some of the relevant details. One thing you’ll see in the table is a strong distinction between monthly and daily rates. Stan pointed out that, in his opinion, monthly benefits are substantially better than daily benefits especially when receiving home care, as there may be days where the cost of care exceeds the benefit. If so, with a daily benefit, that amount will be out of pocket. Example; The clients purchases $200 per day vs. $6,000 per month. If billed for $250, on a daily benefit, $50 is out of pocket. MM, looking at the table, is primarily monthly, so the daily rider might be required, and would cost something extra:

Comparison Parameter MM Signature Care 500 MM-500-P MO MutualCare Custom Solution LTC13
Plan Description Tax Qualified Reimbursement Indemnity with Rider Tax Qualified Reimbursement with Cash Benefit Option
Daily/Monthly Maximums Daily Benefit of $50 – $400. A rider is available to change this to monthly. Monthly Benefit of $1,500 – $10,000 in $50 increments.
Elimination Period (one in a lifetime — may be accumulated over several claims) Service Days Calendar Days. Stan pointed out that this means that if service isn’t needed on a day during the period, it doesn’t count.
Inflation Protection 5% and 3% Compound available Inflation percentage: 1%-5% compound in 0.25% increments. Duration: 10, 15, 20, or Lifetime. Inflation protection option: Inflation applied to policy benefits (not to exceed 5%) on or before each anniversary date. Increase is effective on the policy anniversary following the election, with benefit increases occurring the following anniversary. Only available prior to the lesser of 20 years or age 75.
Nursing Facility Up to 100% of daily maximum. A rider is available to change this to monthly. Up to 100% of monthly maximum
Home and Community Care Up to 100% of daily maximum. A rider is available to change this to monthly. Up to 50%, 75% or 100% of monthly maximum
Assisted Living Facility Up to 100% of daily maximum.  A rider is available to change this to monthly. Up to 50%, 75% or 100% of monthly maximum
Shared Option Available Yes. Available with optional rider  on policies with a two or three year benefit period. Rider offers a third pool of money equal to the maximum benefit amount. If a covered partner dies, the shared total benefit amount will remain available. Shared pool not available with lifetime benefit. Dual waiver of premium is available under a separate rider. Upon death of one spouse, the survivor must continue to pay the rider to retain the benefit. The way it works with MassMutual is — let’s say you have a two year benefit period for each spouse — the policy will have an additional two year benefit period that can be used by either spouse. Yes. Available with optional rider. Shared Rider allows partner to access partners lifetime maximum if benefits are depleted. Coverage must be identical and applied for at the same time in order to purchase rider. There is a residual benefit until a minimum of 12 times the current maximum benefit remains. Not available with Security Benefit, Return of Premium at Death, Return of Premium at Death – Three Times Initial Maximum Monthly Benefit, and Partner Premium Allowance.
Hospice Care Up to 100% of the daily maximum.  A rider is available to change this to monthly. Up to 100% of the monthly maximum, no elimination period applies.
Home Assistance Benefit Equipment may be considered under the Alternate Plan of Care; Caregiver training is covered up to 5x the daily maximum (lifetime maximum) Equipment, Home Modification, Medical Alert System and Caregiver Training are payable under the Stay at Home Benefit which pays 2x maximum monthly benefit.
Unlicensed/Uncertified Providers Outside of California, No. All caregivers must be certified or licensed.  However, that provision is not applicable in California, because California law says that you can use anyone who is not an immediate family member. Payable under Cash Benefit provision
Homemaker Services Incidental? No, Homemaker services do not have to be received in conjunction with personal care services. No, Homemaker services do not have to be received in conjunction with personal care services.
Care Coordination Unlimited care coordination services; does not reduce lifetime benefit amount. Optional. Not required; however, some policy benefits are only available when care coordinator is used.
Waiver of Premium Begins with receiving benefits after satisfying EP Begins when benefits begin. For HC, must receive care at least 8 days per month in any continuous 30 day period.
Respite care Up to 30 days per year. Up to one month per calendar year.
Bed Reservation Up to 60 days per year, for any reason. This means that if you are in a facility and need to be hospitalized, MassMutual will pay the facility up to 60 days to hold your bed.  That can be important if you have an extended hospital stay, because otherwise the facility — which you probably researched and chose because of its quality, location, etc — will sell your bed to the next person who comes along who needs it and you will therefore have to move to a different facility upon being released from the hospital. Up to 30 days per year, for any reason.
Cash Benefit Options Optional Indemnity Benefit Rider 40% of home health care benefit up to initial maximum of $2,400 per month.
Other Features and Options Indemnity Rider: Pays daily maximum regardless of expenses incurred.

HCSB Waiver of Elimination Rider: Permits days used for HCSB to apply towards elimination period for other benefits under the policy.

HCSB Monthly Benefit Rider: Changes HCSB from daily to monthly

Enhanced Elimination Rider: 1 day of service per week = 7 days

Share Care Rider: Limited to 2 year and 3 year benefit only.

Covered Partner Waiver of Premium rider

Survivorship Rider: 10 years; claims restriction.

Restoration of Benefit rider.

Nonforfeiture rider.

Waiver of Elimination Period for Home Health Care

Nonforfeiture – Shortened Benefit period

Return of Premium – Three Times Initial Maximum Monthly Benefit

Return of Premium (less claims paid)

Return of Premium – If death occurs before age 65

Joint waiver of premium

Survivorship Benefit

Shared Care Rider.

 

Based on all the above: strength, premium, and policy features, I’m inclined to go with the MM policy.  The costs still causes hesitation: that’s about 1.3x of a single property tax payment. Ouch! But I guess the cost will be a lot more if we need the care, and the likelihood of that is good, given society today. Each policy appears to have some slight strengths and weaknesses over the other. It all depends on what resonates with you, where you anticipate your care being and who will be giving it. Remember, it’s all legalized gambling, and sometimes you win the bet.

One additional notes: Both of the agents I worked with were very professional, and I recommend them depending on which policy you need — you might have needed different than mine and get different quotes based on your age. The agents were Robert Smith (who reps MM, among others) and Stan Israel (who reps MO, among others). Scott Olsen of LTCshop.com also provided information.

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Essay Prompts: Correlation is not Causation

Here’s an interesting fact: Humans are stupid. I don’t mean to imply we don’t have intelligence (although some who claim to have a high IQ, well, let’s just say they get elected to public office on other qualities). Rather, we put our trust in things we shouldn’t (and not just politicians). We are horrible at judging risk. We often see things that just are not there. We often believe the most ridiculous nonsense about cooking, such as fresh ground salt is better.  Worst of all, we often confuse correlation with causation.

  • Correlation: a mutual relationship or connection between two or more things
  • Causation: the relationship between cause and effect; causality.

Here are two examples of this confusion I’ve seen in my news feeds and on FB:

One fellow wrote about a friend of his that got a good report from the doctor in a followup visit, stating: “He’s definitely living proof that God answers prayers.” No, he isn’t. It is wonderful that the friend is doing better, but there is no causality here. You can pray to God or a Saint and get better, but that is not proof that God or the Saint was *why* you got better, no matter what the Pope says. There is no proven or provable, testable, repeatable method of showing that one action causes the other.

Another fellow wrote about high tax states, citing a article that he believed said that “high state taxes cause people to leave those states, making it very difficult to actually increase tax revenue, no matter how high their tax rates get.” Again, there’s no causality here. Yes people leave high tax states, but they leave low tax states as well, for many many reasons. Taxes may be a reason, but typically it isn’t the precipitating reason. And in the absence of clear evidence that whereever taxes are higher, people leave, this is just correlation. There are many high tax states where people don’t leave (witness property values in California) and high tax countries where people don’t leave. Further, “people” is far too nebulous a category, for all people are not the same. Are you talking those with wealth? Those on fixed incomes? Retirees? People in particular industries? The issue is just too nebulous to attribute to causality.

Always remember storks and babies. I had a statistics professor explain it this way: You may think there is a causality between storks and babies, because whereever there are more babies, there are more storks. But that’s a spurious correlation: there are more babies where there are more storks because there are more babies in big cities, and big cities often have zoos, which have more storks. No causality there.

Keep this in mind as you read your papers.

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Things Come and Things Go

Today’s collection of news chum addresses two areas of interest to me: origin stories, and reports of things disappearing. Origin stories are interesting because we don’t often know where some popular things come from; many come from new or emerging trends. Disappearance stories, on the other hand, are often reflective or indicative — again — of trends in society.

 

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Let Them No More

Reading about today’s shooting in Texas got me thinking — a dangerous thing.

For the longest time, what has been our answer as to why some man (and, yes, they are typically almost always all men — and often white men) has done something that has injured or killed one or more people?

Because they can.

Why did this shooter shoot up that place? Because he can.

Why did this man sexually harass that woman? Because he can.

Why did this man rape, that man abuse, that other man cheat, that still other man steal? Because he can.

But you know, that’s the wrong answer. The correct answer is: Because we let them.

We let weapons of destruction get into the hands of people that abuse them (be they guns or cars — they were in the hands of a man who used them for bad). We look the other way when that off-color joke or remark is made. We look the other way when women and minorities are paid less and treated badly. We let our leaders not pass laws or create restrictions or programs that might stop these actions.

Because we let them.

But you know what? That must change. We must say: Let them no more.

People with mental illness buying and owning guns? Let them no more.

People using positions of power to abuse and harass people? Let them no more.

People treating others as inferior? Let them no more.

It’s a simple movement: Let them no more.

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Feeling Crafty

This collection has taken a while to ripen to fruition:

  • Knitting as a Patriotic Duty. Here’s an interesting article on how knitting helped us win the war. From knitting for the troops to encoding information in garments, knitting has been vital.
  • The Welcome Blanket. Here’s an interesting knitting project: The Welcome Blanket. The aim of the project is to use 2,000 miles of yarn to knit blankets. The significance of that staggering number? It’s the approximate length of President Donald Trump’s proposed border wall between the U.S. and Mexico. Those participating in the project are asked to knit (or crochet, or sew) a blanket that is 40 inches by 40 inches, which averages 1,200 yards. That means about 3,200 blankets will be needed to meet the goal. Participants are encouraged to make their blankets “something you would like to receive” and think of it as “a gift to a neighbor.”
  • Baby Hats. Don’t want to knit a blanket? How about baby hats? Oklahoma needs 5,000 of them, all in purple. Why? The campaign is part of an effort to raise awareness of Shaken Baby Syndrome, a form of abusive head trauma that’s a damaging parental response to excessive crying and can result in serious brain injury. The effort, dubbed “Click for Babies” after the sound knitting needles make, is intended to highlight the potential hazards of improper infant care. Why purple? Because the National Center for Shaken Baby Syndrome refers to an infant’s period of prolonged crying as the PURPLE period. The word is an acronym for reminders about the syndrome: L, for example, stands for Long-Lasting. Babies can cry for five hours a day, up to four months of age.

Don’t knit. Here’s a non-knitting item:

 

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Household Chum

Sometimes news chum is just useful information. Here’s a bunch of items, all related to your house or your household:

 

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Generations and Growing Up

This news chum post has coalesced around the theme of generations, generational changes, and growing up:

  • Dealing With The Stuff. Actually, the title of this article says it all: “Boomer parents: ‘One day, this will all be yours.’ Grown children: ‘Noooo!’“. Basically, dealing with our parent’s stuff. They collect it. It has meaning to them. They leave it to us. We have no idea what to do with it. We keep some, donate the rest, and accumulate stuff with meaning to us. Which we then leave to our children. Which they don’t want.
  • The Casserole. Quite likely, some of that stuff is Pyrex baking casseroles. Compared to modern kitchen items, vintage Pyrex — which is heavy, increasingly expensive and not dishwasher safe — doesn’t seem immediately practical. Yet people remain obsessed with the old Pyrex — not just to look at but to actually use. And they collect it. And this article is about their collecting it.
  • Working Online. For the younger generation, there is the belief that they can be the next “You Tube” star with their video log, or with their written fashion or makeup blogs. Think again. Most fail.
  • Man-Boys. No, I’m not talking about Peter Pan again. Rather, the spoiled white men who never seem to grow up. Here’s an interesting opinion piece on the subject (from the NY Times), exploring why society allows them to get away with it (cough, Trump, cough), and how that ability is denied to non-whites.
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Better Get Them To Sign It In The Next Coupla Days…

Every year I post this on the 4th of July. For all that certain groups purport to know what this country’s founders wanted, I think it is best expressed in the sentiment “life, liberty, and the purſuit of happineſſ”. We still have that, for all the complaints. At times we may not like our leadership, at times we may think that those running for (or elected to, or appointed to) political office are clowns or buffoons, and at times we may be frustrated at how our government is working (or not), but it is still the best system out there. Lastly, as much as I get annoyed at what those on the other side of the political spectrum say, I am still pleased to live somewhere where they have the right to say it. Happy Independence Day!

But first, however, we rise for the National Anthem:

Rumplemeyer’s Horseshoes
Are the best you can use
What so proudly he nailed
Onto all kinds of horses
Whose broad backs and bright eyes
As they smile in their stalls
Give proof through the night
That they wear Rumplemeyer’s
Ask the horse who owns one
He’ll say, “Son of a gun
Rumplemeyer’s Horseshoes
Are, by me, number one”
That’s Rumplemeyer’s Horseshoes
Spelled R-U-M-P-L-E-Meyer’s
Twenty-seven Chestnut Street
Ask for Harry or Dave

And now, on with our narrative:

Narrator: The trouble continued to brew. It was a time for action, a time for words. On a hot July night in 1776, Benjamin Franklin was aroused from his work by the call of destiny. Read More …

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