Thinking Long Term

When workers are asked to choose among employer-sponsored benefits this fall, they’re more likely than ever to be offered policies for long-term-care insurance.

Long-term-care policies, which generally cover the costs of nursing home and home health-care services for people who suffer debilitating ailments such as Alzheimer’s disease or stroke, have become one of the hottest offerings in employee benefit packages.

Whereas fewer than 100 companies offered workers the ability to buy long-term-care policies through work in 1990, more than 1,000 companies provide this option today.

The number of policies sold through group plans has soared to more than 440,000 from roughly 20,000 in 1988, according to the Health Insurance Assn. of America in Washington, D.C.

Industry experts are predicting even faster growth over the next few years because the recently enacted health insurance portability law provides tax breaks to those providing--and collecting--long-term-care benefits.

To be specific, the law makes most benefits paid from a federally qualified long-term-care policy nontaxable, says Robert W. Dawson, director of consumer affairs for GE Capital Assurance, a long-term-care insurer headquartered in San Rafael, Calif. Companies are able to deduct their share of the premiums as a business expense. And the new law also allows individuals to include the premiums as part of medical expenses for purposes of an income tax deduction. In other words, if your adjusted gross income for the year was $30,000 and your medical expenses, including premiums for long-term-care insurance, exceeded 7.5% of that, or $2,250, the expenses beyond the $2,250 would be deductible.

But that threshold is high enough that it’s unlikely to provide a deduction for those buying policies through work.

The bulk of long-term-care policies are still purchased by older folks, however, often after they’ve retired and have begun to worry about gaps in their Medicare coverage, experts note. At that age, though, the cost of a policy soars. But it may be that the taxpayer’s medical expenses overall are such that he or she is eligible to take a tax deduction.

In any event, experts believe that individuals and company benefits departments will be looking more seriously at long-term-care policies.

“This market could really take off,” says Richard Coorsh, spokesman for the Health Insurance Assn. of America.

Naturally, the first question you will ask about such policies is whether you need one at all. Many analysts agree that coverage usually does not make sense for the poor--who easily qualify for Medicaid and cannot afford coverage anyway--and the rich, who can essentially self-insure.

But for those in between, such insurance can be a form of estate planning or reassurance that the buyer will not be dependent on Medicaid of the future. On the other hand, limitations--especially on the maximum years you can collect benefits--and the uncertainty that the insurance company will still be around to pay can argue against such coverage.

Overall, consider the odds as well: Today, 1% of the population between 65 and 74 is in a nursing home. The figure rises to 3% by age 84, but after age 85, about 25% of the population spends at least some time in such a facility.

If you decide to buy, look over the policies carefully.

There is nothing you can call a standard policy in this area. Policyholders are often able to stipulate how much of a daily benefit they want to buy, whether that benefit should be indexed for inflation and which types of care the policy should cover--from nursing home to home health care. They can choose from among a host of other options as well.

If you’re thinking of buying a policy, consider your family circumstances, medical history and your ability to tolerate risk, and then structure the policy so that it addresses your needs specifically.

Some long-term-care policies, particularly those purchased through work, even give you flexibility when determining who will be covered. Some group insurance plans give workers the ability to cover parents and grandparents as well as themselves, says Susan Van Gelder, vice president of the Health Insurance Assn.

Generally, she adds, if you’re working and intend to cover only yourself, no medical examination will be necessary. If you want to insure a relative who is retired, though, the insurer is likely to require additional information and possibly also a medical examination, she says.

Another important factor to consider: The earlier you buy a policy, the less expensive it’s likely to be. And if you buy through a group plan, premiums will often be level throughout the life of the policy.

For instance, the average cost of a basic four-year long-term-care policy that pays $100 a day in nursing care benefits or $50 a day in home health-care benefits would be $397 a year for an individual who purchased that policy at age 50. Wait until age 79, though, and the annual cost soars more than tenfold to $4,512. Most group policies guarantee a level premium as long as you don’t let the policy lapse, Van Gelder says.

If the policy you’re offered at work doesn’t suit your needs--or if you’re not offered one but think you’d like to buy one on your own--you should find an insurance agent who specializes in long-term care and discuss your options.

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Average Premiums Long-term-care premiums can vary widely, but here is the average annual cost for a policy providing $100 daily for nursing care and $50 daily for home health care.

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Age Basic w/inflation w/inflation plan protection protection & nonforfeiture* 50 $397 $809 $1,118 65 $1,058 $1,950 $2,607 79 $4,512 $6,314 $8,492

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* Nonforfeiture allows return of some premiums if policy is canceled. Source: Health Insurance Assn. of America, 1994 data