Time May be Running Out

• First, a significant percentage of our members will be retiring in the next 5-7 years (see accompanying chart).
• Second, how to pay for LTC was listed as one of the biggest concerns for retirement.

As you might expect, these two points are closely linked. Unfortunately, we have found that most members don’t start thinking of LTC until they are close to retirement or are retired. However, once retired, they become individuals as far as LTC insurance is concerned. That is, they are no longer part of the school group and, therefore, will not be eligible to participate in any group plan that the school might adopt after they retire. That leaves them at the mercy of individual LTC policies.

“What’s wrong with that? After all, many companies, including our own WEAC Member Benefit Trust, offer comprehensive individual LTC policies,” you might say.

The problem is one of access and cost. Unlike group LTC plans, individual LTC plans look at your health condition before issuing coverage. Once retired, you may find that either you or your spouse may not be able to get LTC coverage at any price because of health problems. If you do qualify for coverage, you’ll find that it’s expensive. Consider the numbers in the tables below.

In this illustration, we’ve used premium rates for the individual policy that is offered by our own WEAC Member Benefit Trust. As you can see, even though the Trust’s rates are very competitive for individual policies, these rates are much more costly than group rates. It was precisely because of these concerns about accessibility and affordability that we developed a group LTC plan.

However, as with any other group insurance plan, the benefit must be bargained. For members who are in the 45-64 age group, this may be the best time to put group LTC on the table because they have only a few more bargaining cycles left before they retire.

Is it really necessary?
Not everyone is likely to need LTC services. But the fact is that a person’s chances of needing some form of LTC increase as he or she gets older. Of those age 65, for example, 77% will need some type of long term care services, and 43% will enter a nursing home in their lifetime. Of those, half will stay in the nursing home for an average of 2½ years.

The cost of LTC – currently estimated to be $35,000 to $80,000 a year, depending on where you live in the U.S. – will be significantly higher in the future. There is a rule of thumb about who should purchase LTC insurance: if your assets (not including your home) are less than $100,000, you probably don’t need LTC insurance because LTC expenses will very quickly eat up those assets and you will then qualify for government help. On the other hand, if your assets are worth more than $1 million, you can afford to pay for LTC expenses and don’t need insurance coverage.

Like every generalization, this rule oversimplifies things. For example, if you have $100,000 in savings, you may want to pass it on to your children instead of using it to pay for LTC expenses. Similarly, you may not want to depend on the government’s help for LTC, because that means you have no say in where and how you receive your care.

Posted February 5, 1999