03 Dec New Coverage Options for Long Term Care

By:  Steve Kolker, Insurance Consultant, Employee Benefits, Hilb Group/Barrow Group

One of the most essential, but difficult to afford coverages is long-term care (LTC) insurance.  LTC insurance covers services like nursing home, assisted living, or in-home assistance that Medicare generally does not provide. The cost for eldercare as well as LTC insurance can be very high with costs increasing significantly with age.  This makes LTC coverage a major financial challenge for many individuals and families. However, with recent premium increases in health insurance, paying for eldercare down the road may be at the bottom of everyone’s worry list.

LTC insurance is a relatively new product offering with origins dating back to the 1970s. However, with high claims costs, many insurers exited the market. The good news is that several new hybrid products have emerged combining life insurance with LTC benefits. These plans offer more flexibility and guaranteed premiums.

Here’s a brief overview of the various types of LTC insurance and how they work:

1. Traditional Long-Term Care Insurance

• What it is: A standalone policy that reimburses for care in nursing homes, assisted living, or at home.
• How it helps: Provides a daily or monthly benefit for qualified care needs after a waiting period.
• Considerations: Premiums rise with age and health changes, so buying in your 50s or early 60s usually provides the best value.
• Tip: Look for “partnership” policies (available in many states) that protect some of your assets if you later need Medicaid.

2. NEW! Hybrid or “Linked-Benefit” Policies

• What it is: Combines life insurance or an annuity with long-term care benefits.
• How it helps: If you never use the LTC benefits, your heirs still receive a death benefit; if you do, that death benefit is reduced to cover care.
• Considerations: Higher upfront cost, but premiums are guaranteed and it avoids the “use-it-or-lose-it” issue of traditional LTC insurance.
• Tip: Ideal for people who have cash value life insurance they could convert.

3. Health Savings Accounts (HSAs)

• What it is: A tax-advantaged savings account tied to a high-deductible health plan.
• How it helps: HSA funds can be used to pay qualified LTC premiums (up to IRS limits) tax-free.
• While there is a limit on annual contributions, there is no limit on how much you can amass in the account over time.
• Tip: Building an HSA savings early can help cover LTC premiums later in life or pay for in-home care on a tax-free basis.

4. Long-Term Care Riders on Life Insurance or Annuities

• What it is: An optional rider added to certain permanent life or annuity products.
• How it helps: Lets you accelerate your death benefit (or annuity value) to pay for long-term care expenses.
• Considerations: Usually less comprehensive than a dedicated LTC plan, but useful if you already own these products.

5. Public or Asset-Based Options

• Examples include:
  • Medicaid, which covers LTC once you meet strict income and asset limits.
  • State partnership programs (mentioned above), which allow you to keep some assets while qualifying for Medicaid.
  • Veterans’ benefits, such as the Aid & Attendance program, which can help offset care costs.
• Tip: Early planning is key — you can’t qualify for Medicaid after transferring assets at the last minute due to look-back rules.

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Barrow Group recently introduced a new hybrid Group Long-Term Care and Life Insurance solution. It provides a death benefit to heirs, but includes the option to use the value to pay for LTC expenses if needed. Contact Steve Kolker at 678.429.6605 or skolker@hilbgroup.com to learn about how it works.