“Costs for health insurance and other employee benefit programs increased dramatically last year so it’s not surprising that employees were older and more cost-conscious when it came to long-term care coverage,” says Jesse Slome, executive director of AALTCI, the long-term care insurance industry organization. 

According to the annual study, over a third (37.2%) of new group buyers were age 55 or older compared to 28 percent for the prior year (2008).   “Younger employees likely decided they could postpone the decision,” Slome suggests.

Nearly half (45.4%) of new enrollees selected daily benefit levels of $149 or less about an eight percent increase compared to the prior year.  “While there was an increase among those selecting less costly options, there was a slight increase in those selecting more costly plans offering daily benefits of $200 or more,” Slome adds.  “In addition, there was a slight increase in the number of new enrollees selecting longer benefit periods, which are more costly.”

According to the Association study, the most common benefit period selected remains five years.  Some 66.1 percent of buyers selected coverage designed to pay benefits for at least five years (up from 61.0% the prior year).  Unlike individual long-term care insurance policies where nearly half  of buyers (64.5%) purchased a five percent annual inflation growth option, only 15,4 percent selected this option with the vast majority (83.6%) selecting an option enabling them to increase benefit levels periodically in future years.  

The Association study also examined new claims beginning during the year.  Some 6.4 percent of new claims were initiated by individuals age 59 or younger.  Only 1.8 percent of claims made against individual LTC insurance policies were by individuals age 59 or less. Nearly half (49%) of benefit dollars paid for new group policy claimants were for home care with only 30 percent for nursing home care.

The complete findings of the survey are contained in the 2010 Long-Term Care Insurance Sourcebook published by the American Association for Long-Term Care Insurance.  For more information visit the organization’s Website:  http://www.aaltci.org/2010sb/.

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While the typical injured motorcyclist has long been thought of as a young, otherwise healthy victim of sudden injury, a study from the University of Rochester Medical Center suggests otherwise. Between 1996 and 2005, researchers found the average age of motorcyclists involved in crashes increased from approximately 34 to 39 years, and the proportion of injured riders above the age of 40 increased from around 28 percent to close to 50 percent. 

Of all injured riders included in the study, 50- to 59-year-olds represented the fastest growing group, while 20- to 29-year-olds were the most rapidly declining.   Accidents are a leading reason people require long-term care according to the American Association for Long-Term Care Insurance.  “A small but significant porportion of claims are made by people in their 40s and 50s mostly as a result of accidents,” explains Jesse Slome, director.

For riders above the age of 40, injury severity, length of stay in the hospital or intensive care unit, and mortality were higher compared to riders below the age of 40. The risk of dying was one-and-a-half to two times more likely in riders over 40, based on the severity of the original injury. The study also found that older riders are more likely to die from less severe injuries than younger riders, to spend at least 24 hours in the intensive care unit, and to have more pre-existing co-morbidities and complications that contribute to longer hospital stays.

The increase in injury severity for older riders may be related to the reduced capacity to withstand injury as the body ages. Age-related changes, such as decreases in bone strength and brain size, may make older riders more susceptible to injury. Other factors associated with aging, such as impaired vision, delayed reaction time, and altered balance contribute to motorcycle crashes in this population, explaining in part the researchers’ finding that older riders crashed more often as a result of loss of control than younger riders.

Researchers using the National Trauma Databank reviewed the records of 61,689 motorcyclists aged 17 to 89 years involved in a motorcycle crash between 1996 and 2005. The average age of motorcyclists involved in crashes steadily increased over the study period, which is consistent with published statistics from the Motorcycle Industry Council which report that the average age of motorcycle ownership rose from 33 years in 1998 to 40 years in 2003.

Motorcycle crashes are a significant cause of injury and death on our nation’s roadways, despite the fact that motorcycles are responsible for only a small fraction of the total miles traveled annually in the United States. The authors say that the study provides justification for expanding the scope of motorcycle safety research, education and training initiatives to specifically target the older motorcyclist.

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“For the first time, the maximum deductible limit for an individual exceeds $4,000,” explains Jesse Slome, Executive Director of the American Association for Long-Term Care Insurance , the national trade organization.

“The federal government and an increasing number of states are sending a clear signal that individuals need to plan for long-term care and tax deductibility and tax credits certainly make long-term care insurance more attractive to millions,” Slome adds.  “It is a positive sign to see limits for long-term care insurance deductibility increase especially when pension contribution limits for 2010 were not increased.”

The end of the year provides a double tax-saving incentive for consumers. There is still time to take advantage of tax deductions in 2009 and also benefit from the increased deductible limits next year.
The 2010 deductible limits under Section 213(d)(10) for eligible long-term care premiums includable in the term ‘medical care’ are as follows:

Attained Age Before Close of Taxable Year
Age 40 or less:  $ 330
More than 40 but not more than 50: $ 620
More than 50 but not more than 60: $1,230
More than 60 but not more than 70: $3,290
More than 70: $4,110
Source: IRS Revenue Procedure 2009-50 (2010 limits)

The American Association for Long-Term Care Insurance is the national association serving insurance and financial professionals who provide long-term care financing solutions. A complete explanation of tax – deductible rules for individuals and business owners can be found on the Association’s website.  Click on this link for 2010 tax deductible information.

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 Approved changes to the Pension Protection Act included some key provisions that take effect January 1, 2010.  The changes provide significant enhancements to nonqualified annuities that are coupled with tax-qualified long-term care riders.   Starting with the new year, benefits paid out of these plans are received income tax-free. 

This is unprecedented according to financial industry experts and is expected to make long-term care planning highly attractive for an increased number of individuals.   Prior to the new law, payments of tax-deferred gains within an annuity were taxed when paid to the individual.  

Some 8.25 million Americans currently own long-term care insurance purchased on either an individual basis from an insurance professional or through an employer-offered plan.  Financial planners anticipate heightened interest by consumers intrigued by the concept of an insurance vehicle that can provide protection against the risk of long-term care, but that can also provide cash values even in the event that no long-term care services are ever needed. This overcomes one of the major concerns of consumers regarding standalone long-term care insurance; the fear of a “use-it-or-lose-it” proposition.

In addition, the law also allows for 1035 exchanges into combination plans. This is noteworthy in light of the many trillions of dollars deposited in existing annuities.  The Association reports that given the new tax advantage and the compelling need for long-term care planning, there will be a significant number of insurance companies who will be introducing combination annuities on or after Jan. 1, 2010. 

Annuities that provide the tax-free long-term care benefit will generally allow the individual to withdraw a limited percentage of the account on a periodic basis.  For example, withdrawing two percent month from a plan with $250,000 of value would provide roughly a $5,000 monthly benefit.  

As a result, financial planning professionals believe the new combination annuity products will be suitable for those with substantial assets already deposited in annuity contracts or those with liquid funds available for transfer.  For millions of others, traditional long-term care insurance remains the most cost-effective and affordable planning strategy.

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REPORTERS AND OTHER MEDIA WHO WOULD LIKE THE FULL PRICE INDEX FINDINGS SHOULD CALL THE ASSOCIATION AT (818) 597-3227 or E-mail Jesse Slome, Executive Director at: jslome @ aaltci.org.

The index published annually measures costs for top-selling long-term care insurance policies that offer consumers approximately $115,000 in current benefits, with protection increasing yearly as the individual ages.  “A solid base plan of protection will grow in value to over $305,000 of protection 20 years from now,” explains Jesse Slome, Executive Director of the national trade organization that conducted the research.

The study compares costs for different levels of plans that provide long-term care benefits for
3-years or longer with a compound inflation option that increases the available insurance benefits by five percent compounded each year.

“For some age bands the cost of long-term care insurance actually declined,” Slome notes.  “What we did see is a far wider range of prices between insurers offering basically the same coverage.”  According to the Association study, costs can vary by as much as 100 percent.  “This could reflect different benefits or simply the individual insurer’s pricing assumptions,” Slome explains.  “Consumers should compare policies or work with a knowledgeable insurance professional who can analyze for them.”

Lower Interest Rates Impact Costs For Insurance Policies

The cost for long-term care insurance is closely related to interest rates that have significantly declined in recent years.  “Investment income comprises between 40 and 60 percent of the dollars used to pay eventual long-term care claims,” Slome explains.  “Premiums paid by policyholders make up the other portion and as interest rates have declined, insurers have found it necessary to raise premiums for protection.”  The industry paid out $8.5 billion in claims in 2008 to some 180,000 policyholders.

“The cost of long-term care insurance is directly related to how much protection you purchase, the age you first apply and your health at the time of application,” explains Slome.  “Over half of all individual applicants are between ages 55 and 64, and one third purchase a daily benefit of between $100 and $149.”  The daily benefit amount actually equals either a cash benefit or a pool of money that the policyholder can access.   Most insurers offer significant discounts when both spouses apply for coverage.

The survey compared costs for individuals age 55 with those age 65.   “A married individual purchasing $172,000 in current protection will pay about $20 a week ($1,084-per-year) by qualifying for available good health discounts,” Slome explains.  “By waiting until they are age 65, they’ll likely pay $63-a-week because they will need to buy more coverage to keep pace with inflation and will likely no longer qualify for the good health savings.”

LTC Association Study Illustrates Reasons “Waiting Doesn’t Pay”

Let’s say you want to plan for equal long-term care protection at age 75.    A 55-year-old who qualifies for preferred health and spousal discounts pays $1,084 for a “standard” plan based on a current benefit of $150-per-day ($54,750 per-year).   At age 75, the available benefit would be $457,957 because the yearly benefit grows 5% compounded annually.  If you wait to buy at age 65, you need to start with a higher-level of initial protection ($150 grows to $240 at 5% compounded) to have equal protection.  Today, that level of protection ($240) costs $3,275 yearly (assumes standard health).  But, no one can predict future increases for new coverage.  Plus, for that 10-year period of time (age 55-65), the individual has no long-term care insurance coverage.

The Price Index information is available to insurance and financial professionals who are members of the American Association for Long-Term Care Insurance.  For more information on member benefits click on this link: Read Our Membership Benefits Guide.

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REPORTERS AND OTHER MEDIA WHO WOULD LIKE ADDITIONAL INFORMATION OR TO ARRANGE AN INTERVIEW WITH JESSE SLOME, PLEASE CALL THE ASSOCIATION OFFICES AT (818) 597-3227.

“As a result of increased longevity and medical advances, the need for long-term care is a new phenomenon for a generation of Americans,” said Jesse Slome, Executive Director of the industry trade group. “The pervasive concern about purchasing long-term care insurance is will I ever use it?”

According to Association data 180,000 Americans received benefits from their long-term care insurance policy and some $8.5 billion in claims was paid in 2008. “This is a significant increase in benefits paid compared to the prior year,” Slome explains. “Long-term care insurance is not the lottery. This is not something you really want to win; but having protection in place can certainly pay off and for thousands of people it increasingly is.”

The organization collected data on claims including the largest open claims (still being paid as of December 31, 2008) paid by six of the nation’s leading insurers. The second largest claim is by a woman who purchased her long-term care insurance policy at age 72, paying an annual premium of $12,766. Three years later her claim began and has continued for almost nine years ($1.02 million in benefits has already been paid for her nursing home care).

The largest claim being paid to a man exceeds $690,000. The individual purchased long-term care insurance protection through his employer at age 54, paying an annual premium of $2,560. The coverage was designed to pay benefits for five years. Two years later his claim began and has continued for almost seven years.
Nearly one in 10 (8.9%) of new individual claims initiated during 2008 prior to age 70 the study revealed. “While most long-term care insurance claims begin at older ages, typically in ones late 70s or 80s, accidents and illnesses are a common reason younger people need this care,” Slome notes.

The Association’s study revealed that 30.5% of claims start between ages 70 and 79; some 60.6% after age 80. “Almost two-thirds of claimants receiving benefits (65%) are women,” Slome reports, “and the largest percentage of benefit payments (42.0%) are for care in ones own home versus a nursing home (30.5%).”
The five most common reasons for a long-term care insurance claim, according to the Association, are Alzheimer’s Disease, stroke, arthritis, circulatory issues or injury. “One in eight persons age 65 and over has Alzheimer’s,” Slome says. “The number of new cases is expected to increase to 450,000 a year by 2010 and to 615,000 new cases a year by 2030. It’s time for individuals to start planning for care should they need it in the future.” The study shows that planning can certainly pay off.

The complete findings of the study are published in the 2009 LTCi Sourcebook and subsequent issues of the Association’s member magazine available from the American Association for Long-Term Care Insurance. Copies are available free of charge to Association members or may be purchased for $99. Call the Association’s offices at (818) 597-3227 or visit the organization’s website.

Insurance and financial professionals who are members of the American Association for Long-Term Care Insurance have access to the organization’s  Online Learning, Marketing and Sales Center.  To see all the benefits of membership click on this link: Read Our Membership Benefits Guide.

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Federal and a growing number of states now offer tax deductions and tax credits for the purchase of long-term care insurance.  The cost of coverage may be fully tax deductible to the business and a great deal of flexibility can be offered when initiating a plan.  In addition, corporate pricing breaks of 5 percent to 10 percent, in addition to substantial spousal or couples discounts, are the norm.

According to the 2009 edition of A Business Owner’s Guide To Long-Term Care Insurance, any form of business ownership can enjoy deductions for a long-term care insurance premium.  Benefits received are, as a rule, always tax-free. Premiums might be considered imputed income to an employee depending on how the company is held.

Insurers offer various forms of long-term care insurance plans designed specifically to meet the needs of either small or large employers.  Policies can be personally owned but company-paid, thus staying with the insured after he or she leaves a company or retires.

Long-term care insurance offers great design flexibility for employers.  For example, employers can pick and choose who participates in a plan. Properly done, there are no ERISA issues, unlike group health insurance, according to tax experts.  These plans are often called “carve-outs” which allow employers to be “selective” when determining who would be covered under a long-term care insurance benefit.

Policy design provisions enable employers to pay premiums for fixed periods of time, at which point the policy is paid up for life.  One of the significant benefits is that policy benefit amounts keep increasing under inflation protection options with no risk of future long-term care insurance rate hikes.

According to American Association for Long Term Care Insurance experts, policies available to employers may allow two spouses to share one benefit pool.  This has the potential to double the benefit any single insured might have and eliminates much of the problem as it pertains to the benefit period chosen. At the death of one spouse, the other typically inherits the other remaining benefits free of charge.

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