Colorado Long Term Care Insurance
If you are over 50 years old and you live in Colorado, you may be considering a long term care insurance policy.
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Here are some important things to know.
What Long Term Care Is
Long term care is care that you need, not because of a specific medical condition, but because you are no longer able to care for yourself in some ways. In most cases, long term care is required when you can no longer perform at least two of six so-called activities of daily living, or ADLs.
ADLs are dressing, bathing, toileting, continence, eating and transferring from the bed to a chair or vice versa. It may also be required if you have a significant cognitive impairment like dementia or Alzheimer’s disease. In-home care or assistance may be indicated if everyday tasks such as managing money, taking medication or meal preparation, cannot be accomplished alone.
Who needs long term care?
According to the US Department of Health and Human Services, almost 10 million people needed some form of long term care in the United States in 2000. Almost 70% of people who are now age 65 will need long term care sometime in their lives.
The average length of time that women need long term car is 3.7 years; for me, the average is 2.2 years.
Long term care includes in-home services like home health aides and housekeeping services; assisted living facilities; and skilled nursing care provided in nursing homes.
Long Term Care Insurance
Long term care insurance is an insurance policy that will, partially or entirely, pay for long term care provided in the home, in an assisted living facility, or in a nursing home. When selecting a long term care insurance policy in Colorado, it’s important to understand what you are buying.
A long term care insurance policy will pay a daily or monthly amount to a person or facility that provides you with long term care, provided that you meet the insurance company’s criteria for requiring long term care.
Here are some terms you will hear as you compare long term care insurance policies.
Daily benefit – This is the amount of money the policy will pay out per day to a nursing home. You can choose the daily benefit you want. The higher the daily benefit, the costlier the policy.
Benefit period – This is the amount of time your benefit will be paid. Most insurance companies offer a 3-, 4- or 5-year benefit period, or a lifetime benefit. By multiplying the daily benefit times 365 times the benefit period, you will see the maximum amount the policy will pay for your care.
Note that if the facility you are in does not charge the full daily benefit, your benefit period may extend beyond the stated period, until the total amount of your benefit is exhausted. If, for example, you are in an assisted living facility that charges half of your daily benefit, your policy will continue to pay for twice as long as your benefit period.
Elimination period – This is the amount of time you have to wait before your policy starts to pay for your care. Think of it like a deductible on your car insurance. You pay for the first 30, 60 or 100 days of care, and after that, your policy pays. The longer your elimination period, the less expensive your premium will be.
Inflation protection – The cost of long term care is going up every year. Some policies include protection against inflation, in the form of an optional rider that increases your daily benefit each year. There are two kinds of inflation protection: simple and compound. Simple inflation protection raises your benefit by the same amount each year. Compound inflation raises your benefit by a percentage over the previous year's benefit, compounding the increase.
Shared care – This is another optional rider that allows a couple to share their long term care coverage. Both policies must have the same benefit amounts and features. If one spouse exhausts their coverage, and the other spouse hasn’t used theirs at all, the policy will continue to pay for the first spouse’s care until the second spouse’s benefit has also been used up.
Other riders – There are other optional riders available for long term care insurance policies, such as a nonforfeiture rider, which provides a benefit equal to your premiums paid if your policy lapses, and a return of premium rider, which pays back your premiums to your heirs if you die without using your benefit.
When comparing policies, it’s very important to make sure that you understand all of the available riders, and that you are comparing policies with the exact same terms.
The Cost of Long Term Care
In Colorado, the average cost for a private room in a nursing home in 2012 was $222 per day, or $81,030 per year. A semi-private room averaged $202 per day. The average monthly rate for assisted living was $3,288. The average hourly rate was $21 for a home health aide and $20 for homemaker services.
Long-term care generally is not covered by Medicare. Medicaid will provide long term care, but there are income and asset requirements to qualify for Medicaid. Generally, a person must have $2,000 or less in assets to qualify for Medicaid. This means that you must ‘spend down’ all but $2,000 of your assets in order to qualify. You cannot have given away any assets in the past five years in order to meet this threshold.
Paying for Long Term Care
Many people think that Medicare will pay for long term care, but in most circumstances it will not. Medicaid may pay for long term care, but there are strict income and asset requirements to qualify. Many people end up spending most or all of their personal assets to pay for long term care.
Colorado has the Long Term Care (LTC) Partnership, an alliance between the government of the state of Colorado and private insurers who provide long-term care insurance. This partnership was formed to help Colorado residents prepare for the possibility of needing long term care, and to avoid having to spend down all of their assets to pay for long term care.
In Colorado, policies issued after January 1, 2008 that meet certain criteria are considered to be qualified for the Partnership. In order to be qualified, long term care insurance policies must include protection from inflation if you are under age 76 when you take out the policy.
If you are under 61 years old, your policy must include inflation protection that is compounded annually. If you are between 61 and 75 years old, your policy must include some level of inflation protection. If you are 76 or older, inflation protection is optional.
If you buy a Partnership-qualified long term care insurance policy in Colorado, one dollar of your assets will be protected for each dollar your policy pays out in benefits. An asset that is protected is not considered during the eligibility review and estate recovery process. This means that these assets will be available to your heirs after your death and will not be required to be spent down prior to qualifying for Medicaid.
By carefully comparing long term care insurance policies, you can find the best insurance to meet your needs. This will give you and your family the peace of mind of knowing that your long term care needs will be provided for if necessary.
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