Long Term Care Insurance with Jill McNeill

Join us as we explore the ins and outs of long-term care insurance with our special guest, Jill McNeill, a seasoned expert with over 14 years of experience in the field.

In this episode, she takes Dr. Jay through the world of long-term care insurance, breaking down the complexities and providing valuable insights. From standalone policies to hybrid options like life insurance and annuities, Jill guides us through the differences and helps demystify the jargon.

Discover why planning for long-term care early on can be crucial, and learn about the various triggers that affect your insurability. Whether you're considering long-term care for yourself or your aging parents, this episode offers practical advice and strategies to secure your financial future.

Resources:

+ Long Term Care Insurance

+ LLiS Long Term Care Insurance Quote

The Childfree Wealth Podcast, hosted by Bri Conn and Dr. Jay Zigmont, CFP®, is a financial and lifestyle podcast that explores the unique perspectives and concerns of childfree individuals and couples.

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Transcript

Dr. Jay

Our witness today, we're going to be doing a deep dive into long term care insurance. Now, some of you may not enjoy that, but I do like I really enjoy talking about this. And the person that taught me is actually here: Jill McNeill. Jill has been doing long term care for LLiS for about 14 years. I happened to email this week like, hey, I'd love to have you on the podcast.

She's like, yeah, I'm retiring tomorrow. We got her last day. 14 years of experience. We’re going to like, talk to who I think is the expert on this or the best I've found to dive into it. So. Hi Jill. Welcome to the podcast.

Jill

Hi, Jay. Thank you. Happy to be here and thank you for that nice introduction. Happy you caught me before.

Dr. Jay

I tell you that long term care is one of those like I hunted for people to actually give me a lot of answers. And Jill was nice enough to spend hours with me on the phone working through this and giving example policies. And we're going to not spend that long today, but we're going to go into the basics of long term care.

In the show notes, we have a link to an article that actually has real quotes for long term care, options for it all that. Jill helped me build that a couple of years ago. Now we've updated it so you can dive in there. Before we dive into like specifics on this. Jill, I think long term care of having like three options for insurance.

You got the standalone policy, the life insurance policy and the annuity policy. And I don't recommend the life insurance policy because we don't usually need life insurance as childfree folks. But can you talk about the difference between those three policies or three types of long term care insurance?

Jill

Sure. So the first one, the basic long term care provides a benefit that can be used in, for home care, assisted living, nursing home and actually all three products provide that same type of coverage. But with the traditional long term care, there is no death benefit, there's no cash value. But the policy does provide a benefit that can be used in those settings.

And so it's a good, solid policy if the main goal is providing long term care that typically premiums are lifetime. There is one company that does offer a ten pay or single pay, but usually we think of traditional long term care as lifetime premiums. Premiums are waived when you do go on claim. Usually premiums are the lowest of the three because you're paying it off in your lifetime.

So it starts out the lowest and may remain the lowest. But depending on when you go on claim, if you go on claim early in life, you probably spend less money on traditional long term care than the other two options. But if you go on claim later in life, which most people do, let's say around mid-eighties, you may have spent more on the traditional long term care because you paid for so long.

The second type of policy, the hybrid life, is a permanent life insurance policy with the long term care rider. It provides the same type of coverage for long term care that I mentioned earlier, but it also has a death benefit. So if you never need long term care benefits, your beneficiaries would receive the death benefit upon your death.

Some of them have some cash value. So if you change your mind and decide you want to get some money back, you can get a portion of the premiums that you paid in. The nice thing about the hybrid is it does provide those guarantee, of something for your money, and it also provides guaranteed premium. So once the premiums have been set by the insurance company, they cannot be increased.

I forgot to mention on that first type of policy, traditional long term care, the insurance, they can increase the premiums by going to your state and asking for a rate increase for everybody in the state that has the same policy series. So they don't do it very often, and insurance companies don't like to do it because it's bad press and it costs some money to file that with the state, but they can do it. On the hybrid life policies they can’t.

The hybrid lives are designed to be paid, short pay, meaning like a single premium, five year or ten year premium or maybe 20. So you pay the premium, say, for ten years after ten years you have a paid up policy, no more premiums. And then the third policy, the hybrid annuity, is very similar to the hybrid life, but it's, the base product is a fixed deferred annuity and it has a long term care rider.

So again, it provides long term care benefits. If you change your mind and want to cash it in, you can receive the annuity value. Upon death if, let's say you haven't received any long term care benefit, your beneficiaries would receive the annuity value. With both the hybrid life and the hybrid annuity, as you receive long term care benefits, death benefit on hybrid life is reduced dollar for dollar. On the hybrid annuity, annuity value is reduced dollar for dollar.

The hybrid life, many of them have a small guaranteed death benefit. So even upon death, you have some type of benefit. The hybrid annuity, the only way to pay that is with a single premium. So a lump sum premium upfront. For a couple, I would say, that’d be at least 100,000. And it has to be nonqualified money.  

The annuity, the premiums cannot be increased on that. So once you pay that single premium, you are locked in for your lifetime. I think that, oh, one more thing. The hybrid annuity, the underwriting on the hybrid annuity is very minimal. We've had clients that could not qualify medically for traditional or a hybrid life, and could qualify for the hybrid annuity.

There is some medical underwriting, but very basic.

Dr. Jay

Yeah, and I should have given a disclaimer, by the way, I don't sell insurance. I don't get anything for if you sign up with LLiS insurers, we'll give links in there. But what I try to do is find the right coverage for you no more and no and no less. And that's why the life insurance I'm not a huge fan of it because the death benefit’s, not usually a benefit.

So you're buying something you don't need. The annuity, what I tend to do is say, hey, if I can't get the standalone right, what I call standalone, or the Standard Long-Term Care Policy, they can't get through. Then we’ll go with the annuity route. But the reality check is with the annuity, I mean, you got to put up the money upfront. And essentially, Jill, like going like if I put them on a 100 grand, I essentially get like 200 grand worth of long term care coverage.

Is that, essentially, it's almost double?

Jill

Yes, double or, 2 to 3 times the annuity value in long term care benefits.

Dr. Jay

Yes, so you get that. What I find with people that have the long term care life combo is they feel like they have a lot of coverage, but they don't. Oh, like $125,000 in long term care coverage. I'm like, yep, that covers one year right now. And you know, it feels like I've made coverage, but I haven't. Does that make any sense, Jill?

Jill

I see what you're saying, but with the hybrid life, there's two types of hybrid life. And I didn't get into that, what I call a true hybrid life. The focus is on the long term care benefits, not the death benefit. So you may have a $100,000 death benefit, but 250,000 long term care benefits because it may start off low, but we usually add a 3% compound inflation rider.

So it increases. And we usually, for people that are interested in the hybrid life, typically I design a hybrid life to mirror a traditional long term care policy. So the life, or the long term care benefits are the same, but you have that small death benefit.

Dr. Jay

My thing is I’m just trying to like, minimize what I'm buying that I'm not getting a benefit from. So it’s a balancing act. And use some terms in there about going unclaimed. So that means, you know, hey, I've got some reason I'm, you know, getting the money out. Can you talk about what that means to go on claim and like, we're using insurance speak.

So we’ve got to translate it a little bit.

Jill

Okay. So when I say go on claim, if somebody becomes sick, so let's say you have a stroke and you can no longer dress yourself or bathe yourself, then you need assistance. So in order to go on claim with all of these three products, they have the same trigger. There's two triggers and you have to meet one of them to go on claim and receive benefits.

For, one is diagnosed with a cognitive disorder such as Alzheimer's or dementia. And you need 24 hour supervision. With this type of trigger, you may still be able to dress yourself or feed yourself or whatever, but you may wander away. You're a danger to yourself, or maybe you're going to leave the stove on, or you're a danger to others. So that's one way to go on claim. 

The other trigger is if you need assistance, completing two out of six activities of daily living. And those activities are eating, bathing, dressing, toileting, transferring or continence. So again, let's say you had the stroke and you can't do two of those. And it’s expected, you're going to need assistance for at least 100 days.

Then you can go on claim. Let's say you have the stroke, you go on claim, and after a year of physical therapy or whatever, you're better and you no longer need assistance, you can go off claim. And then a couple of years down the road, let's say you have another stroke, you can go back on claim again. You only have to satisfy the elimination period once in your lifetime.

Second time you go on claim you don't have to satisfy it. And typically these policies have a 90 day elimination period.

Dr. Jay

Yeah, and the 90 elimination period means you're paying for it yourself for that first 90 days and or maybe your insurance covers a little above it. Not a lot. Because remember, Medicare does not cover long term care. Okay? It’lll do rehab for a little bit of time. But that's about it. And even then, it’s limited. So, we’re talking about, Okay, we get 90 days, we go in there, and, just for a technicality, any of these long term care policies cover in-home assisted living or private room like it doesn't matter which one of those, correct?

Jill

Yes. All, in, policies today that are on the market today. Some of the older policies might have had some scaled down coverage for home care or assisted living. But products on the market today have 100%. You can choose to dial it down for home care or assisted living, but we usually show 100% of coverage for all those three types of care.

Dr. Jay

Yeah, and I'm not sure I'm a fan of dialing it down for, you know, I'd rather stay in home if I can get my care there as long as I can.

Jill

Exactly. Right. Right.

Dr. Jay

And these are reimbursement policies, is that correct? Is that kind of how that works? Or like, do they cover upfront, how does that work like, you, I know how health insurance works, but long term care.

Jill

Okay. So the traditional long term care, are reimbursement, the majority of them today are reimbursement. So that means once you go on claim you file paperwork with the company, they say, yes, you qualify to go on claim. And then if you have a 90 day elimination period, the first 90 days, you pay for your care out of your own pocket.

So it has to be care that would normally be covered with the policy. Those 90 days you can't be having a family member take care of you. You have to be paying a care provider a licensed or certified. After 90 days you can start to receive benefits from the policy. Okay, but you have to continue to pay for your care out of your own pocket.

At the end of the month, you submit your invoices to the insurance company. They would reimburse you up to your daily benefit or your monthly benefit. All care again has to be provided by a licensed or certified caregivers with reimbursement policies. The hybrid life policies, some of those are indemnity policies. So with an indemnity policy, again you have a 90 day elimination period, but after 90 days every month, the insurance company will send you a check for your full benefit.

You don't have to submit invoices or to show how you use that money. And care with an indemnity policy can be provided by a family member, friend, neighbor, whoever. The hybrid annuity is a reimbursement policy.

Dr. Jay

Okay. And by the way, if it sounds like we're talking a lot of insurance speak, it kind of is like this is where like when I do these things, I'll send people the information. Get a quote from Jill, they'll get a quote and then we'll spend about half an hour to an hour reviewing what's in the quote and how it works and where it goes, because it really is confusing.

I just, I don't know if there's a way to simplify it. I'm just being honest on that because like, for example, like I called Jill one day and like Jill, so I got a client who wants to move out of the country at some point. What coverage do they have when they move internationally? Well, one policy covers it one way, one covers another way and someone like, and that’s the, like, the weird stuff that happens that we need to dive in. Is that fair?

Jill

It is, yeah. I recently started looking for health insurance on my own, and now I can appreciate what my clients go through when they're looking at long term care. It's very confusing. But we're, we're here to help.

Dr. Jay

Yeah. And by the way, one of those that you want to have, you want to start working on it earlier, but it takes time. And you mentioned like if people can't qualify, so talk to you kind of like what are the like the triggers? Say, nope, you can't get long term care insurance, the standard policy, what does that mean? Because what was surprising to me Jill, is you said, your parent's health impacts your ability to get care, for you to qualify also.

So how about like my parents versus me and how I qualify?

Jill

Okay. A lot of claims for long term care are because of dementia or cognitive issues, Alzheimer's, dementia. If your parents have been diagnosed with one of these issues, strong likelihood that you will also. I'm sorry, I can't remember that percentage, but it's surprisingly high. The insurance companies, we use two long term care companies, traditional long term care: Mutual of Omaha and NGL. With Mutual of Omaha if two immediate family members have been diagnosed with a cognitive issue, you're uninsurable with them because it's such a high likelihood. With Mutual of Omaha if you've had one immediate family member, so I mean by immediate parents or siblings, not grandparents or aunts and uncles. With Mutual of Omaha, with one immediate family member, they're going to limit you to a monthly benefit of $5,000 so you can still get coverage, you're just limited. NGL, the other company, if you had two immediate family members, they may consider you. We would be, they would want to know the age your parents or your immediate family member was diagnosed and what it was. With one family member, NGL’s okay with that.

The, you also asked what other conditions can make you uninsurable. So the long term care underwriters are looking for preexisting conditions that may cause you to need care earlier than somebody without that condition. If you have arthritis, let's say you have arthritis in your knees and you've been told, well, you're likely going to need a knee replacement. So that's going to make you uninsurable until you have that surgery.

Once you had the surgery, it's successful and you're able to do the regular activities of living after three months, then you're insurable. Let's say you have some ongoing pain and the doctors just can't determine where that's coming from or what's causing it. That would make you uninsurable until it's been diagnosed. And again, it depends on what the diagnosis was.

So a lot of muscular and skeletal issues. If you're having physical therapy, ongoing physical therapy, obviously that means there's something going on that you need this continuous care, so that person could go on claim much earlier than somebody. They're not concerned about issues that are going to cause you to die prematurely like cancer or heart attacks. If you've had cancer and it's been a year or two and you're in remission, then you're probably going to be insurable.

Dr. Jay

That's interesting. And I know there's some other oddness, like I had somebody had that the, he couldn't get, couldn't get policy because he has a history of having AIDS. And there were some specific diseases, cancers like I've had some weird ones with cancer, like, yeah, we're not sure where it is, you know, where it is in the process we got, you know, like, can do that.

It's, there's kind of like these like you got to fill the form and go, well, let's see where this goes. But I think what's interesting to me is, your parents, one of the things that I diagnose. So Jill and I kind of poked around with quotes a while back and I came up with a solution. And I don't know if I'm right, but I like the ideal time.

I like to find long term care for people in their mid-forties, because usually that's when they like, they don't have huge problems and their parents haven't had a diagnosis yet and the rates are reasonable, but like it's not a magic thing and like what I’ve taken it as, once your parents get that checkbox of a dementia or cognitive decline, it just got so much harder or impossible or pricey or whatever it was.

And you have to figure out your long term care solution well before, you know, your parents are in that case. I mean, ideally, are you with me on, kind of mid-forties is a great time to shop for this or, I mean, I know get people coming later but.

Jill

I agree. A saying is, the earlier you apply, the better. For several reasons. Premiums are lower and usually your health is better. So once we get in our 50’s, 60’s, people start taking more medications, joints start to wear out and it’s just harder to get the coverage. And again, as you mentioned, when you're in your forties, your parents are younger, too.

Then if you wait till you're in your 50’s or 60's, so, the younger the parents are, less likelihood that they will have those diagnoses that we talked about. Yeah. If they wait, if your clients wait until they're in their fifties, even sixties, it's not the end of the world. We can still get coverage a lot of times, but again, you're going to pay more for it.

So the earlier you apply, the less you're going to pay and you're locking your insurability.

Dr. Jay

Yeah, and I've done the math on this. And Mutual of Omaha’ll actually give you a quote at 30 and NGL won’t. Is there, 35 their minimum, or 40?

Jill

Forty.

Dr. Jay

Forty. So I had actually had somebody who, in their twenties wanted to get a quote and I said, they had to wait a year till they got to 30. And we got quote and looked at it, and it was like, well, but you're paying for ten extra years and like, there’s this weird math in there that, this is where I came to this mid-forties.

Like, I've run these numbers four or five times and like, what I will go with is I have some people in their thirties like really, really worried about long term care. Well then, get the policy. So you can check the box and have it done. I think it's, there's no perfect answer. The older you get, the harder it gets.

But one of the ones, Jill, that we've been talking to clients about lately is we have a step, we call No Baby Step seven, which is planning for your parents or planning for mom and dad. And it asks the question of, can they take out a policy for their parents for long term care, that way they don't have to pay for out of pocket.

Jill

Yes, they can. So what we like to say is the insurance companies don't care where the money comes from on these policies. So, yes, we've had several clients that have purchased a policy. I mean, the parents have to be willing and able to have the policy because they're the ones that have to go through the application process. They're the ones that have to release their medical records.

But if their children are willing to pay the premiums, that's not an issue that's easy, easily done.

Dr. Jay

And let me give you a case on this. So one of the other ones, Jill has done some reviews for people of like, you got old policies and how does it look versus the new and I’ve looked at some of these old policies. I ran into one, it was an old CalPERS policy that had the option of six year coverage or unlimited coverage which I can't believe unlimited coverage ever existed. Like that, the math of that doesn't make any sense. But we've been having a discussion about, if your parent has one of those old policies, you may be better off just paying it or getting listed as a contact. If they don't pay it, that way it doesn’t lapse. Does that make sense? Yeah.

Jill

It does. The insurance companies usually have like, third party option. They, you can list your children or a friend or somebody so they will also receive premium notices so that policies get, those premiums get paid.

Dr. Jay

One of my colleagues ran into this. They had somebody, early nineties went in the hospital for over a month and, policy came in and out during that time and then they went to go to long term care and they didn't pay it. And the insurance company’s like, yup, it's gone. And, I mean.

And they're like, what can we do? And the answer was like, nothing, because the insurance company like, you missed your payment by a day, they're like, gone. Is that fair?

Jill

So you have usually a 30 day grace period. If you don't pay your premium, you have a 30 day grace period. And unfortunately, we've had clients that have let that happen also. They let it slip. The parents didn't pay it. And you really, they will not let you reinstate it. Generally. With life insurance, you can sometimes reinstate it, but you may have to go back through underwriting.

But with long term care, I recommend, don't let that happen. That's why after this incident, LLiS instituted a whole new program for premium notice. So we send out a notice 30 days before the insurance company sends out a notice just to help prevent this from happening.

Dr. Jay

By the way, that to me is a nightmare. Like, you're in the hospital getting care, you miss the bill and, you know, 30 days in the hospital, plus one day, you know, like, yeah, we're past that one window. So I'm a fan of what you mentioned quick, like the ten pay or the single pay. Like you pay it up over ten payments and it's done or single pay, pay it up front.

You save a little bit on the premiums because depends on how will it go up over time. But the bonus is locked in. It's set and forget. Is that fair?

Jill

Yeah. It is. So NGL still offers a ten pay. As you said, you pay the premium for ten years and that premium is guaranteed during the ten years, whereas the NGL premium that you pay lifetime is not guaranteed, but that ten pay is very nice. To be honest, if you have clients looking at a ten pay, they might as well look at a ten pay on a hybrid life. Because if anything happens they can get some money back.

Like if they change their mind or whatever. Because of interest rates going so high, the premiums on the hybrids have come down somewhat. So the difference between a ten pay on traditional long term care and a hybrid are not that much difference.

Dr. Jay

One of the things I got, I got to get through my head on that one. If we don't really care how much money goes to the estate in the end or whatever, we're buying something that really is not a value to us. But you're saying it's still worth looking at because it may work.

Jill

It is because I mean, during those ten years, if they decide I don't need this anymore, I want to stop paying it, they could at least get some money back with the hybrid life. 

Dr. Jay

Okay.

Jill

Because of the cash value. 

Dr. Jay

One of the questions I asked my staff and others to give me questions to stump Jill. And, one of the questions was, how do we know, kind of like, all right, so I put the I had somebody the other day and we were looking at their single pay was going to be $200,000 plus for the policy. So I buy this policy. And by the way, that number may sound crazy, but it's not.

We'll go through the numbers in a second. It'll make sense. But I buy this policy. How do I know, like, NGL is not going to like go out of business and never pay this claim or what do I do to trust that like 40 years from now, am going to be able to get my money out?

Jill

Okay. In order for an insurance company to do business in a state, they have to join the Guarantee Association. So every state has a guarantee association. So the insurance companies pay into this guarantee association. And if an insurance company gets into financial trouble, goes belly up, the guarantee association will step in and honor those policies in most states, the Guaranty Association will pay up to $300,000 in benefits.

So I don't know what it is. Like, you would have to look online for what the Guarantee Association is in your state to see the minimum. But that's kind of like the FDIC at the bank. So this guarantee association is a fail safe for the insurance companies or the policyholders. So it’s there.

Dr. Jay

And also I mean, let's be transparent. The reason why you recommend NGL and Mutual Omaha is their overall ratings and their structure. And you know, the company and there are some insurance companies where I'm like, yeah, don't get a quote from there. Well, you know, like I don't know that I trust they’re going to be there.

So part of it is the company you’re buying in. Is that, make sense?

Jill

Yeah. So we'll only work with companies that are at least in A with AM Best and a convex of 80 or above. So convex means the rating of companies in the business. So when I say a company has a convex rating of 80, that means their financials are better than 80% of the other companies in the business.

Dr. Jay

All right. So let's depress people with numbers. I mean, impress people. I don't know how we look at it. So Jill pulled some numbers. I'm just going to read some of these off. We're going to work, walk through. And today, so we are in we're recording this November of 2023. Actually, I went and updated the numbers of the article. Jill and I had done in February of 2022, and it had gone up just about what we expected, about 5% year over year for long term care, which is I mean, Jill told me to expect 5% in a year.

She was almost exact over the past 18 months. What we got is the positive based on daily amounts or monthly amounts, but it goes back to a daily benefit essentially. So the national median, daily cost of care for home health based on 44 hours per week is $179 a day, assisted living $157 and a private room in a nursing home is $315.

By the way, that $315 translates to just about $115,000 a year. Yes, it is cheaper to go on a cruise ship for a year round than it is at a skilled nursing facility. So there's been a lot of like articles on that. But that is absolutely the truth and that varies heavily by state. When we first did the article, we looked at it, you know, by state in Alaska was something crazy, like triple.

It's an issue. And when I have people quote, I usually have them quote a 90 day elimination period. So they pay the bill for the first 90 days, $250 daily benefit unless they’re in like, one of the crazy states that have like super high rates, which the hard part there is $250 benefit covers about 80% of that nursing home.

But even then it gets pricey. And what ends up happening is you really need to cover $115,000 a year. Men on, uh, and women on average, use 3.7 years care. Men, 2.2. If you want to cover our pocket, the math I do is I essentially multiply that today and actually need to put a set aside. Now we talk about investing, and there's some math on this.

Dr. Jay

We can we can go through. But the result is long term care insurance really becomes more affordable for people with at least half million dollars net worth, up to about 3 million. And by the way, there's, there's a number other half million to 2 million. It's a rough range. That's just what I've seen with clients. If you’ve got less than a half million dollars in net worth, you're going to end up on Medicaid because you're not going to be able to afford long term care.

That's my gut. I might be wrong, but that’s my gut. And if you have more than 3 million, you probably could pay for out of pocket. Does that range kind of make, sound reasonable to you, Jill?

Jill

It does. As you said, if you have less than 500,000, you can't afford the premiums on a long term care policy. And if you're up range to 3 million, maybe you can self-insure. But do you want to use all of your savings for that? That's a good range. And again, depending on where they live, I mean, if they're in a very rural area, maybe they don’t need 2 million or 3 million.

But if they're in New York or New England, yes, you definitely need that much money.

Dr. Jay

Yeah. And Bri is my co-host on this podcast and she's 25 right now. We did the math. If long term care keeps growing at 5% year over year by time she gets to 80’s, she’ll need $1,000,000 a year is what is going to cost, which is crazy. And I'm hoping they fix the system, but I've been hoping they fix the system forever.

They've done nothing. Is that fair, Jill?

Jill

Well, a lot of the states are trying, independently, the states are trying to implement some long term care public programs. Washington state is the first state to do that. And I don't know Jay, if you are going to talk about that later, so I don't want to take away the thunder if you were going to take it.

Dr. Jay

But don't start me on this, Jill. So here's my problem with Washington. Right. Washington charges 0.58% income tax for a $100 day benefit, which covers $36,500, which, by the way, you'll spend like overnight. Like, seriously, that's no coverage. It pretends like it fixes this problem, but it doesn't actually fix it. Am I wrong on that?

Jill

Well, so their thought is if everybody has a small policy, they would use that before they go on to Medicaid. The thought is, the, I can't remember the percentages, but the people that just need some home care for several months the last year of living that $36,000 would help with that. If they can have people use this before they get to Medicaid, it'll help with Medicaid.

But no, it's not going to solve the, the people that need three or four years of care.

Dr. Jay

Yeah, I saw a number. By the way, getting good data on this stuff is really hard. I'm just, the honest truth because the averages don't work out. There's actually a software package now trying to use AI to estimate how much you would need for long term care for like your parents, all the things like, and I'm like, cool. If they actually make that work, the insurance company will buy that software, too. But like, we don't have great data on individuals. 

Jill

Right.

Dr. Jay

And the number I saw was something like 30% or a third of people like die in their sleep will never need any care whatsoever. Like, you know, like just out and you won the game in my mind.

Like people say to me, what happens if I buy long term care insurance and I don't need it? I'm like, then you were healthy your entire life, you died. You didn't need long term care. I kind of think, like you won! Like, I hate to say it, but you won.

Jill

Well, then why do you buy homeowner's insurance, and, buy it thinking, I hope I have a fire. I hope I get to use this. Or your auto insurance? Buy it hoping you use it.

Dr. Jay

Go back to the state thing. So Washington, when they did it, they said, hey, if you have some coverage two years coverage ish, decent coverage we’ll opt you out of that insurance. I mean that, income tax, because you have insurance. But then like the day they said that, like the company stopped taking applications because they were overwhelmed or pretty close after. And then like there's other states copying. 

So California, I've been watching a lot because I have a lot of clients there and they're waiting for a report to come out the first of the year. But in the report, they're recommending like, hey, well, the opt out is you have to have insurance in place before the law exists, which I don't believe, like I don't think that should exist, but who knows?

They've done weirder things. New York was kind of the same thing anyway. I think with a year beforehand, something like that. Like states are starting to say this and California's ruled, they were actually going to get a little better coverage, but they're looking at like a 1% or more income tax that can go up based on your income and you’d be paying that for life.

That's where like all of a sudden getting a long term care policy might be cheaper than paying the, the interest. I mean the income tax. Does that make sense?

Jill

It does. So in Washington, they did pass that tax and they gave people, I think about six or seven months to purchase a long term care policy on their own. And if they did, then they could opt out of paying the tax and the taxes is 0.58% of your salary with no cap. I did not realize how many young, high earning people were in the state of Washington.

Washington's expected, I don't know, maybe 150,000 people to opt out. And the number was triple or quadruple that the people that opt out, they didn't want all those people will opt out because they wanted those high income earners to be paying the tax to fund the program. Yes. In California, we hear that they might be mirroring the same thing that Washington’s done or they may have their own.

We just don't know. They may have an opt out period, they may not. We have been advising California residents to consider purchasing a long term care policy now, especially if you're a high earner, and get it in force and then if they don't pass the tax, then you have a good policy. You know, you have something better. Yeah, it's better to be prepared than just sort of waiting to see what happens.

Dr. Jay

And how long does it take them? Like, I put an application in to like it's in force because it takes a while for that underwriting. I've been watching clients go through with this.

Jill

Say 2 to 3 months, because once the insurance company receives the application, they're going to set up a phone call with the client. And sometimes, you know, that can take a week or two to schedule and then they're going to order medical records. So depending on how efficient your doctor's office is, will determine how quickly you get underwritten.

A lot of offices nowadays, medical records are electronic, so it doesn't take as long. But not everybody is electronic or is efficient, so it can take weeks or months to get medical records. And that's what holds things up. We say 2 to 3 months on average.

Dr. Jay

Yeah. So you've got to be thinking ahead. And if California actually does this trick they're trying to do, where like you have to have it in place before the law is passed. By the way, I don't know how that's legal. I actually had a discussion with a lawyer on that. They're like, that’ll be challenged, but they can pass the law and see what happens in court.

I'm worried about that one. You know, we actually send a note to all our California clients, saying, okay, if you’ve been debating it, it's time to do something about it.

Jill

Really? Yeah, do something. I agree. Yes, yeah. Yeah.

Dr. Jay

So let's talk actual costs. So we got real numbers here. I'm going to use the NGL numbers just for fun. There's two different quotes we have here, but I want to take for the 40 year olds and here's one I want to show you. So for, Jill ran kind of just sample policies like, you know, random people. These are not actual people's policies, $250 daily benefit, which is about 80% of the cost for 40 year olds.

And NGL, 40 year old single male, was $2,275. But here's the thing. Single female was $4,394. Jill, you’ve got to help me understand why a single female is almost double the single male.

Jill

History has shown that females go on claim a lot more often and stay on claim a lot longer than males. I hate to say it, but what usually happens is, with a couple, the male becomes sick first, the female takes care of him, he passes away, and then when she gets sick, there's nobody to take care of her.

So she goes on claim. Until about ten years ago, premiums were what we call unisex. Premiums were the same for males or females. But the insurance companies realized that, oh, hey, females are going to claim a lot longer. Lot more often, we need to increase the rate. So they went to gender specific rates. So that's when the premiums became so expensive for females.

Dr. Jay

Yeah and, by the way, no way around this. Like, I'm just be honest of this. There's nothing. Here's what gets even more confusing. Couple, you can actually get a shared care rider so you can just share things back and there’s different ways. But if we keep the NGL, for a year single females $4,393 and for a couple is $5,865 like this, to add on the other person, it's like 20%, 25% more.

It's like the second person gets it for half off, essentially.

Jill

Right. NGL has a formula for calculating their rates for couples because they do give a discount. And I've asked how that formula works and I was told by the NGL representative that he doesn't even understand it. So he couldn't explain it to me. I know it's based on the age of the oldest person in the couple and I don't know if it's a unisex rate, but anyway it's they do receive a discount by applying together.

Dr. Jay

Yeah, yeah. And, I'm talking about a small thing, this is huge. Because the other thing is you get to share your care. So like if one person uses less than the other, we can, we get a shared pool, we can do some things with it, but we're not going to go too far into the specifics on that. But it's a much, much better product for couples.

Now, let me just question on couples. One, do you have to be married? And two, what happens if it's a same sex couple.

Jill

So you do not have to be married. In order to qualify for the discount and to have that shared care rider on your policy, you have to have lived together for three years, shared a home and expenses. Okay, they're not going to come checking. But, you know, they expect people to be honest and, you know, show that. Yeah, but just thingsIf it’s a same sex couple, the premiums are based on female rates so, same sex couple, yes. It's not, no, uh, difficulty with that. Same sex couple receives the same discount, same shared care rider, but the premiums are based on male or female. If it's two males, rates are less than two females.

Dr. Jay

Interesting. Now, by the way, I'm assuming they have nothing for like, if we're in like a group with three people or more. It's couples and, that's it.

Jill

Right. And I apologize, one of the companies will give a discount if it's three or more and I think it's a 5% discount. But I believe they have to be with the same employer or and I'm trying to get information about association discounts. I checked with my broker dealer and I haven't heard back from her. So again this morning I called Mutual of Omaha, received a new contact I've called them and sent him an email. So, I hope to have information about what qualifies as an association to receive that discount.

Dr. Jay

Yeah, the behind the scenes things. We're asking the question: what happens if we create like, an AARP for childfree folks, you know, like an association for childfree people as they age and can we get discounts? I don't know. I think the hard part of this is we're asking people to put a whole lot of money aside for this.

And I’ve had people go, well, the government will fix this before I need it. What do you feel, Jill? I mean, you've been in the business 14 years. You've seen the good, bad and ugly.

Jill

I wouldn't wait. Would you want to rely on them? I mean, the way our economy is right now and all the issues, I don't think I would wait for them to fix this long term care issue. I mean, the people that the last, how many years? Have been dependent on Medicaid. Medicaid will take care of you, but you have no control of your care if you become dependent on Medicaid, they can send you to a nursing home wherever there's a bed available.

So it may be in another city or town, not near the family. So again, once your dependent on Medicaid, you lose control. So, I know the government is talking about and the different states are trying come up with a solution, but I wouldn’t hedge my bets on it.

Dr. Jay

Yeah. And by the way, I get pushback from this from people. But I worked as a was a medic for years, and, you can know a medicaid facility when you walk in. There's a different level of care. You're not talking about private room now. You're talking about, yeah, I've seen four people to a room, you know And people go, Well, there are nice Medicaid facilities. There are. They do exist. But the odds of you finding the bed in it is like zero. Or, what'll happen is like you, you've been paying them cash out of pocket or only policy for three years. You go on to Medicaid, they’re like, I'll keep you around. They can choose to do that, but they don't have to. Some places I actually read a policy the other day for a facility and they were like, hey, when you can't pay us out of pocket, you are like, you know, out the door like 2 seconds later, you know, like, you know, it's a business.

Jill

Right. And I've heard the same thing. I've heard that, yes, once you’ve, if you're in a nursing home and have been paying and then you, run out of assets or a policy, they may, could keep you. But I've also heard they may say, no, you're gone. But and I've also heard that most nursing homes have some Medicaid beds, but not many. Again, you're susceptible if there's any available, when, when you need it.

Dr. Jay

Yeah, that's, it's tough. The other one I'm working on, and, Jill, I don't know the answer on this one and maybe you can figure this one out for me. So I've been working out. We just did a book club, Sarah Gerber's book on Solo Aging and she was talking a lot about continuing care, retirement communities (CCRC’s). And these are ones when you buy in, you know, usually like a 55 and older type community, you buy in, and then there's a certain amount per month in the future. When you buy in, and then you can stay in that facility for the rest of your life because they have these, these levels.. Does it matter? Like if I'm one of those facilities, can I still go on claim when I have t2 ADL’s here, or does that matter?

Jill

My understanding is you can. But again, just because you decide and move into one of those facilities and you decide, okay, I'm going to go into the assisted living section of it, doesn’t mean, you can go on claim. You still have to meet those triggers. You know, you meet those triggers, even if you've already paid for your care, at least you'd be reimbursed.

So you put that money back into your estate, or you'd have it. And I think if you're considering one of these facilities, contact them and see how they handle clients with long term care policies. My understanding is most of them are happy to know you have a policy because they know you have that money to pay.

Dr. Jay

Yeah. And the other you're going to find on those is, you know, whether or not it's a health expense or, there may be a component of like, hey, this part of it is housing. When you go into care, then this part is medical, and this part’s housing. There's like a, there's a weird math on that, especially when it comes to IRS and deductions of all that fun stuff.

All right, Jill, I've had you here for quite a while. You've got 14 years of experience. So if you had like, one thing you could tell people like, this is my one sage advice that I've learned after all these years experience. What's the one thing we should learn?

Jill

That's a great question. Look at the costs and look at your assets. And if you had a long term care event, maybe you have enough assets to pay for it. But, at least look at everything, If you get an idea what costs are, what Medicare will cover, what Medicaid will cover, and get a good picture of what you're facing. And then, make your decision.

I mean, not everybody needs a long term care policy because they may have assets, 3 million or plus, but look at everything and get a clear picture. And if you're borderline, I recommend getting a policy. And one other thing I want to say is couples that apply, if one of you gets declined, the other person, please take the policy.

Don't reject your policy just because your spouse couldn't get a policy. If one of you has a policy, at least you know, if that person becomes sick and goes through assets, then the healthy spouse has a policy that will be there to take care of them. So we have a number of couples that say, oh, she got rejected.

I'm not going to take my policy, rethink that. Please take the policy. So I think it’s just smart to look at your financials. What costs would be, and be prepared, even talk to family members, maybe any brothers or sisters or, you know, somebody that might be there and willing to take care of you, but have the, they may not be the lot to put on people, but at least have the discussion and be prepared.

Dr. Jay

Yeah. And what I see, some people go, well, I'll sell my house to go in a long term care. If you're single that might work. But like we got some issues there, but let's go with it. If you're a couple, it becomes an issue. What I see a lot is if you have any differences, which is common, you're expecting five, six, seven, eight years difference between when one person has to go to long term care and one person's not.

Dr. Jay

That can completely destroy the second person. If you don’t have a plan for it.

Jill

Right. So that's why I'm saying even if one of you has a policy, let's say the person that's healthy and got the policy does become sick. Well, they can use their policy and leave the assets for the person that doesn't have a policy. So yeah, it can really impact retirement. If one of you has a long term care event and you don't have anything in place to take care of it.

Dr. Jay

And one thing I want to ask one question because you said it earlier, and I just wanted to double check. When you go on claim you you stop paying. You don't have to pay the premium. Is that true for a couple like when one person with goes one claim, or?

Jill

No. So if you have a couple and they both have a long term care policy, and one person goes on claim, their portion of the premium is waived, the healthyvperson continues to pay their premium.

Dr. Jay

Yeah, I mean.

Jill

If they have a shared care policy and one person dies, the remaining spouse inherits all unused benefits and only has to pay their portion of the premium.

Dr. Jay

Yeah, by the way, that's why I love the shared care because like, you can get three years on each of you, three year pool or shared pool. There's different ways that policies do it. One option is you get three years for each of you, you get three years for the shared pool. If I need four years and you, you know, you get the rest or vice versa, it's beautiful for that because you, we don't know. There's no way to know. Like, do you have a crystal ball, and tell me how long it would be in care and where you’re going to die, well I could do the math very easily, but nobody can.

Jill

It’s the unknown. Yeah, we don't have the crystal ball. Yeah.

Dr. Jay

Where we go with this, I'm going to put the show notes, a link to LLiS. You can actually get a quote. Also, I'm going to put it to all the the quotes of the examples. There's a whole article in there, talks about the different options and Medicaid and Long-Term Care and the opt out and other things. The bottom line is, you’ve got to pick something.

I don't care what you have for your option for long term care, but you have to make a choice. To go on Medicaid, we will do a different financial plan for that. And I want you to go look at the Medicaid facility first before you decide it, like literally go look at one.

And if you're going with it, great. If you don't have the assets, you don't have a choice, but we need to make a conscious choice this is our plan. We also have a separate episode on estate planning so with all the paperwork there, and the powers of attorneys and all that. That's a separate thing. But you need an answer for the finances and a long term care policy.

Maybe the option I will tell you, you’ll get a little sticker shock when you look at it. But, you know, when you realize how much coverage you need, it gets there. I just, I wish we had a better answer, but, you know, I don't expect the government to fix this anytime soon. You know, they're bandaiding it right now is what they're doing, if that, but the honest truth is in the U.S. we do a terrible job, taking care of our elders, especially in the long term care.

So we need to figure out an answer. Your answer is, your financial plan and we'll help you build it. Thanks, Jill, for coming on to the podcast.

Jill

You're welcome, Jay, I enjoyed it. Take care.