For long-term care insurance, make sure to read the fine print

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A couple of years ago, a woman with dementia started attending the day programs at the Institute on Aging in San Francisco. Her family needed a respite and the woman needed a stimulating environment and an avenue for socialization, so the family paid out of pocket for the daily programs.

“It was only way later that the family found out that her long-term care insurance policy actually covered the day programs because they were a medical necessity,” recalled Tessa ten Tusscher, vice president of clinical services at the Institute on Aging and a geriatric psychologist. “The institute was then able to bill her insurance for the costs.”

This woman’s story is emblematic of a major problem for elders: lack of knowledge about long-term care insurance — when to get it, how to implement it, what different policies cover, even if it is necessary.

In some ways, it’s a jungle out there as elders and their families often sift through a complex tangle of information.

“Sometimes elders and their families don’t realize that their LTCI coverage is only for home health care,” said Susan Koster, executive director of Rhoda Goldman Plaza in San Francisco. “So people are disappointed when they come here and find out they’re not covered after they read the fine print of their older policies.

“People need to make sure that it’s written into their policies that it will pay for all or part of care at a licensed residential-care facility for the elderly in California,” she continued.

Details matter

Reading the fine print and being guided by knowledgeable insurance agents or informed friends and family means understanding the premium’s specifics — such as elimination periods, exemptions, deductibles and waiting periods for the coverage to commence, Koster said.

The reality for many elders is that they need to be taken care of to some degree as they reach their 80s and 90s. “Long-term care insurance can cover pieces of the care, from housekeeping to food preparation to transportation to socializing,” Koster said.

Fewer than 10 percent of residents at Rhoda Goldman Plaza — a joint project of Jewish Family and Children’s Services and the Mount Zion Health Fund that has 155 apartments, including 37 on the dementia unit — have long-term care insurance, said Iris Hudis, its director of communications. “We have a very thorough admissions process and make sure residents can shoulder the [financial] burden here for up to five years.”

Buy when healthy

Most experts agree that it’s better to have long-term care insurance before one is infirm and more susceptible to unsavory and less-than-reputable insurance companies.

As a result, Koster advises, plan ahead and do not wait until you have a health issue to start shopping for insurance. “If people already have a problem, they are not as rational and [choosing insurance] becomes too emotional.”

“The best time to prepare is when you’re setting up your estate planning and powers of attorney,” ten Tusscher added. “That’s when you should be gathering all your insurance papers and seeing what you’ve got.”

As health care costs have skyrocketed, seniors are especially vulnerable to fraud or inappropriate coverage. Often they are bombarded with nightmarish tales of what can happen regarding long-term care, individuals and their families rush into a policy that may not meet their needs.

Agencies can help

Fortunately there are agencies and resources available to help people navigate the minefield of recommendations.

One such agency is the nonprofit Health Insurance Counseling and Advocacy Program, known as HICAP.

Phil Epstein, the volunteer coordinator at HICAP’s Alameda County office and a certified long-term care counselor with the California Department of Aging, describes the “ideal candidate” for long-term care insurance as some who is 50 years old and “ready to pay $600 to $800 a year in premiums for a long time.”

“People should have $50,000 in resources before considering LTCI,” he added. “Why buy LTCI if you don’t have enough money to protect that investment? But the maximum allocation of one’s annual income for LTCI should be 7 percent.”

HICAP provides a “Personal Considerations for Purchasing Long-Term Care Insurance” worksheet to help people determine if LTCI is their best option, and a “Consumer’s Guide to Long-Term Care” booklet from the California Department of Aging.

Four California options

There are four types of LTCI policies in California, said Epstein: homecare only, facility care only, comprehensive — which covers both home and residential care — and the California Partnership Policy, a state-sponsored program that enables elders to protect a significant portion of their assets.

“Some policies even offer a return-on-premium option,” he said. “After 20 years, you can collect 100 percent of the amount you put in if the policy is unused. LTCI functions best when it gives some measure of protection to the individual and families and they allow for their other assets to grow.”

Do your homework

Ultimately, seniors and their families need to do their homework.

“Look for an extremely reputable insurance company and speak to an independent insurance broker who reps a number of companies,” said Norman Schlossberg, co-owner of Jaffe-Schlossberg Inc., and a broker with more than 35 years experience. “Go to an agent to understand the contracts. But you should be given enough information by the agent so you can review it thoroughly before meeting the agent.”

Don’t shop by price

Schlossberg cautions people to be wary of the cheapest policies and to search for companies “with high underwriting standards, which means they just don’t take anyone who applies.

“LTCI is not easy to get,” he said. “You have to be in relatively good health to get it and it’s a good product for people very comfortable with the premiums. LCTI policies should not get in the way of what people can afford with the rest of their lives.”

He said there are more than 150 companies, with about 10 of them doing most of the business. He sells most of his LTCI policies through reputable heavyweights like Genworth Financial and John Hancock.

Long-term care insurance can offer elders, as they age and often become infirm, a substantive safety net against depleting their financial resources, and a measure of relief and comfort. Combined with alleviating undue burdens on financially and emotionally strapped families, long-term care insurance will pay for a variety of critical care.

It all boils down to people needing help, said ten Tusscher, whose programs serve more than 200 people a day.

“People need an advocate,” she said, and the right long-term care policy can be a valuable option.

Steven Friedman

Steven Friedman is a freelance writer.