Free Long Term Care Insurance Quotes

Free Long Term Care Insurance Quotes

Long Term Care University - Question of the Month

Long Term Care University - 12/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: We may wait to purchase long term care insurance. What should be our most important considerations?

The Problem – Determining Whether to Buy Long Term Care Insurance Now or Later
Waiting to purchase technology gadgets can often be advantageous. For example, the fancy computer that costs $1,000 today is likely to drop in price to $800 in a year or two. Delaying the purchase of long term care insurance, on the other hand, can often be disadvantageous – as outlined below. While any one item on the list below can increase the price of your policy, the combination of two or more items can have a multiplier effect on the price – possibly doubling the price of your policy.

1. If you already need long term care, insurance companies will consider you uninsurable and prohibit you from purchasing a policy.

2. If your health deteriorates, insurance companies will charge you 15%-75% more for the same level of coverage.

3. If long term care costs continue rising at the same pace, you will need to buy 5% more coverage each year you delay your purchase.

4. As you grow older insurance companies charge more for the same level of coverage.

5. Some states have minimum purchase requirements for their Partnership Programs (long term care insurance polices that protect assets away from Medicaid). Some states (e.g.: California, Connecticut and New York) increase their minimum purchase requirements by 5% each year, increasing the price by 5%.

6. Insurance companies regularly raise rates for new applicants, oftentimes 10%-30%.

Insurance Companies’ Cost of Waiting Tables are Dangerously Misleading. Many insurance companies’ quotations include a table entitled Cost of Waiting. Although the tables portray the price of policies and the cost of waiting, they rarely disclose the regular rate increases companies implement for new applicants of the same age. The table entitled Cost of Waiting Before Price Increase represents the price for $200 per day of care for 5 years, with 5% compound inflation protection, and a 90 day elimination period, for a 50-year-old husband and wife, per person. The table entitled Cost of Waiting After Price Increase represents the same benefits after the same insurance company raised rates for new applicants.

While the table entitled Cost of Waiting After Price Increase obviously reflects the higher prices, what is less obvious is the percentage change for various ages. For example, the new price for a 50-year-old is 17% higher than the old price. The new price for a 55-year-old is 25% higher than the old price. Lest we forget, the second table entitled Cost of Waiting After Price Increase dangerously assumes no further price increases – the same way the first table falsely assumed (in retrospect).

The Solution – Purchase Your Long Term Care Insurance Now and Assure You Pay the Lowest Price
Any of the six items listed above can lead to your paying significantly more for your policy. There is only one item that is certain on the list of six items; in one year’s time you will be one year older. Unfortunately, Mother Nature takes her toll on all of us; adding another item from the list of six that will add to the price of your policy. It is critical to know all six items on the list when purchasing a long term care insurance policy.

Action Step – Purchase Your Long Term Care Insurance Policy When You are Young and Healthy
Purchase your long term care insurance policy when you are young and healthy, assuring you will pay the lowest price possible.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 11/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: What is an elimination period? Are there different types of elimination periods?

The Problem – Determining What Elimination Period to Select
Most long term care insurance policies offer you the option to add an elimination period to your policy when applying. An elimination period is the waiting period from the time your care begins until the time the policy begins paying for your care. Fortunately, many consumers purchase an adequate amount of care per day (daily benefit) and an adequate amount of care over the life of their policy (total pool of money). Unfortunately, many consumers who do not select the appropriate elimination period are not prepared for their out-of-pocket costs during the elimination period they select – which can easily cost tens of thousands of dollars.

The Solution – Selecting the Appropriate Elimination Period
Specifically, an elimination period is the number of days you are responsible for paying for your long term care costs out of your own pocket. Most insurance companies count each day of service towards the elimination period. If you were well enough to skip a day of service, the number of days needed to meet your elimination period would be extended. Most insurance companies require you to meet the elimination period only once over the lifetime of the policy; even if you need benefits for two years, then need another three years of benefits 10 years later. When selecting an elimination period for your long term care insurance policy, understand how your policy defines ‘elimination period’. Let’s look at a number of definitions below.

Days of Service Elimination Period. This is the number of days that you must receive care before reimbursement begins. For each day you receive covered services (the type of care the policy would cover after the elimination period) the insurance company will credit one day towards satisfaction of the elimination period.

Days of Service Elimination Period with Enhanced Elimination Period Rider. This rider advances you through the elimination period quicker. If you receive care at least once during any seven calendar day period, seven days will be counted toward satisfying the elimination period.

Calendar Day Elimination Period. This is the number of days you must wait before the policy will begin paying for your care. Once you certify you need care, each day counts towards satisfying the elimination period, whether or not you receive care.

The Solution – Selecting the Appropriate Elimination Period
Like a deductible on an automobile or homeowners insurance policy, an elimination period on a long tem care insurance policy shifts the initial cost of a claim to you and away from the insurance company. Specifically, an elimination period is the number of days you are responsible for paying for your long term care costs out of your own pocket. Like an automobile or homeowners insurance policy the more risk the policyholder is willing to assume the lower the price of the insurance. With a long elimination period, you gain one big advantage – lower premiums.

Based on a 90-day elimination period, you should clearly understand what your out-of-pocket costs may be. Let’s look at what your out-of-pocket costs may be based on receiving four days per week of care at a cost of $200 per day (increasing at 5% per year); with the elimination periods described above.

Action Step – Choose the Right Type of Elimination Period
Choose an elimination period based on what your can afford to pay on an out-of-pocket basis during the elimination period. Clearly understand what type of elimination period is written in your policy to avoid a costly surprise in the future.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 10/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Has the Community Living Assistance Services and Support (CLASS) Act you published about on July 15, 2011 been canceled?

The Problem – The Holy Grail with Lots of Holes
The Community Living Assistance Services and Support (CLASS) Act was designed by the late Senator Edward Kennedy as a voluntary insurance program to help adults age 18 and over with disabilities pay for long term services and supports. In March 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act, establishing the CLASS program. According to a report by the U.S. Department of Health and Human Services, entitled “A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program”: “Almost seven out of ten people turning age 65 today will experience, at some point in their lives, functional disability and will need some paid or unpaid help with basic daily living activities. While most people who need long-term care are in their 70s and 80s, young people also can require care, with 40 percent of long-term care users today between the ages of 18 and 64.” “Medicare does not cover long-term care services.”

Like many group long term care insurance policies offered through businesses and the Federal Long Term Care Insurance Program, the CLASS Act would allow for participation without full underwriting (the process of reviewing medical and health related information to determine if an applicant presents an acceptable level of risk). According to my July 15, 2011 article:

“The CLASS program will be available on a guaranteed-issue basis to all actively working individuals who are at least 18 years old and not already receiving care in a facility. Since there are no underwriting requirements there be will be a significant number of high risk and/or disabled enrollees. This presents a good opportunity for enrollees with poor health and a tremendous liability for enrollees with average or good health. Healthy enrollees will likely need to subsidize enrollees with poor health, as premiums are likely to rise when those with poor health require long term care.”

The lack of full underwriting would have been a disaster to the CLASS Act. Without full underwriting the groups of people being insured are like a ticking time bomb. Sooner or later, the lack of underwriting will rear its ugly head in the form of higher than expected claims and blow up like a time bomb.

On October 14, 2011, Kathleen G. Sebelius, Secretary of the U.S. Department of Health and Human Services, said: “But despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time.” Kathy J. Greenlee, Assistant Secretary for Aging at the U.S. Department of Health and Human Services and the Administrator of the CLASS Act, said: “We do not have a viable path forward. We will not be working further to implement the CLASS Act.” Maybe Ms. Sebelius and Ms. Greenlee read my article?

The Solution – Finding a Viable Alternative to the Canceled CLASS Act
As evidenced above, there are no free lunches when it comes to long term care insurance. Unlike many group long term care insurance policies, individual polices require an application and full underwriting by the insurance company. Although full underwriting may require the completion of a health release form or interview, it is a sound way of eliminating high risk policyholders. Those issued a policy by the insurance company know they are joining a pool of generally healthy people. A healthy group of people will likely have reasonable claims when they need long term care in the future, assuring the viability of the insurance.

Many individual long term care insurance policies are certified under Long Term Care Insurance Partnership Programs. Most states’ Long Term Care Partnership Programs allow long term care insurance policyholders to protect their assets from Medicaid on a Dollar for Dollar basis - for every dollar your policy pays in benefits, a dollar of assets is ignored by Medicaid. Some states, including New York, offer 100% Medicaid asset protection through Total Asset Protection – an unlimited amount of assets are ignored by Medicaid.

Action Step – Purchase Long Term Care Insurance from a Viable Source
You will probably pass out from a lack of oxygen if you wait for the U.S. government to introduce a viable long term care insurance program. Avoid the risks associated with group polices and their lax underwriting requirements. Instead, purchase an individual long term care insurance policy with full underwriting. You will pay full price for your lunch, but at least it will be there at lunchtime.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 09/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: What is an elimination period? What are the advantages and disadvantages of a short versus long elimination period?

The Problem – Determining What Elimination Period to Select
Most long term care insurance policies offer you the option to add an elimination period to your policy when applying. An elimination period is the waiting period from the time your care begins until the time the policy begins paying for your care. Fortunately, many consumers purchase an adequate amount of care per day (daily benefit) and an adequate amount of care over the life of their policy (total pool of money). Unfortunately, many consumers who do not select the appropriate elimination period are not prepared for their out-of-pocket costs during the elimination period they select – which can easily cost tens of thousands of dollars.

Medicare Only Pays for Long Term Care under Limited Circumstances and for a Limited Number of Days
Many consumers incorrectly assume Medicare will always pay for the first 100 days of their long term care. According to the U.S. Department of Health and Human Services (U.S.D.H.H.S.), “Generally, Medicare doesn’t pay for long-term care.” Among the seven criteria Medicare requires that you meet to qualify for benefits, one clearly stands out. That one is a qualifying hospital stay. “This means an inpatient hospital stay of 3 consecutive days or more, starting with the day the hospital admits you as an inpatient, but not including the day you leave the hospital.” – U.S.D.H.H.S.

If you meet all of Medicare’s requirements, they will pay 100% of your first 20 days of care. Starting on day 21, you will pay $141.50 per day (increased each year based on inflation) through day 100. Medicare will not pay for your care after day 100. For those lucky enough (or unlucky enough, for that matter) to qualify for Medicare payments, Medicare pays for an average of 28 days.

The Solution – Selecting the Appropriate Elimination Period
Like a deductible on an automobile or homeowners insurance policy, an elimination period on a long tem care insurance policy shifts the initial cost of a claim to you and away from the insurance company. Specifically, an elimination period is the number of days you are responsible for paying for your long term care costs out of your own pocket. Like an automobile or homeowners insurance policy the more risk the policyholder is willing to assume the lower the price of the insurance. With a long elimination period, you gain one big advantage – lower premiums.

With a zero or short elimination period, you gain three advantages: 1) Zero or low out-of-pocket costs when you care begins, 2) Higher probability the insurance company will pay all of your long term care costs (money in your pocket today versus some future date, when you may not need it) and 3) Zero or low probability you will need to liquidate assets (and have to pay the commissions, taxes and penalties associated with those liquidations) to pay for your care during your elimination period.

Based on the limited coverage Medicare provides to a select few, you should clearly understand what your out-of-pocket costs may be. Let’s look at what your out-of-pocket costs may be based on $200 per day of care (increasing at 5% per year); if you do not qualify for Medicare and need the care today, or in 15 years or in 30 years.

Action Step – Establish Savings for Your Elimination Period
Action Step – Establish Savings for Your Elimination Period Based on Medicare’s myriad of requirements to gain benefits, assume you will pay for your own care during your elimination period. Select an elimination period you are comfortable with and establish a savings account equal to your anticipated out-of-pocket costs.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 08/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some of the long term care insurance policies I am researching allow for a shared care benefit. Can you explain what that means, what advantages it may provide and how the benefit differs between insurance companies?

The Problem – You or Your Partner Need More Care than Your Individual Policy Covers
Most long term care insurance policies are designed as individual policies that insure one person. Unfortunately, you may need more care than your individual policy covers.

For example, you and your spouse or partner each have a long term care (LTC) insurance policy with a $300 daily benefit and a five year benefit period, obligating the insurance company to pay $300 per day for five years, for a total of $547,500 per person. If you need the full $300 worth of care, or the full daily benefit, you will exhaust the policy benefits (pool of money) in five years. Unfortunately, you may need more than five years of care. In the event you need an additional two years of care at $300 per day, it will cost you $219,000 out of pocket. This example ignores the income taxes and early withdrawal penalties associated with the withdrawal of many retirement assets. It also ignores the devastating effects of inflation, which can wreak havoc on a lifetime of savings if your LTC insurance policy does not have inflation protection.

The Solution – Shared Care Benefit Policy
The shared care benefit policy provides you the ability to utilize your spouse’s or partner’s benefits when your own policy benefits have been exhausted or establishes a third pool of money either of you can access. In the example above, you can use the benefits of your spouse’s or partner’s policy or utilize the third pool of money and avoid $219,000 in long term care expenditures. The mere avoidance of this expenditure can mean the difference between a secure and an insecure retirement. All those assumptions are based on current dollars. If this example was 28 years in the future and the cost of care (along with your policy’s inflation protection) rose at 5% per year, the shared benefit policy would save you over $876,000 in expenditures.

Shared Care Benefit Policy
Some policies have a provision to protect the surviving spouse or partner. If one of you die, the survivor’s benefits will increase by the deceased spouse’s or partner’s remaining benefit. If you each have a policy covering $300 per day for five years and one of you die, the survivor will be left with a policy that covers $300 per day for 10 years – doubling the benefit period. If each of you maximized the benefits of your policy you would receive a combined $1,095,000 of care.

Shared Care Benefit Policy with a Third Pool of Money
Some policies establish a third pool of money either spouse or partner can use if either of you exhaust your individual pool of money. If you each have a policy covering $300 per day for five years or $547,500 and either of you exhaust your individual pool, either of you can utilize the third pool of money that would cover $300 per day for 2.5 years of care or $273,750. If each of you maximized the benefits of your policy you would receive a combined $1,368,750 of care.

Shared Care Benefit Policy with a Guarantee
Some polices have a provision to protect the spouse or partner whose policy has been depleted by the person receiving care. This protection is provided through a guarantee of additional benefits. If you each have a policy covering $300 per day for five years or $547,500 and either of you exhaust almost the entire $1,095,000 in combined care, the other person will have a guarantee of at least 50% of their original pool of money or $273,750. If each of you maximized the benefits of your policy you would receive approximately a combined $1,368,750 of care.

Action Step – Protect Yourself with a Shared Care Benefit Policy
Your benefits expire when you die, with an individual policy. Purchase a shared care benefit policy and gain the flexibility to pay for significantly more care than the amount of care provided by individual policies.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 07/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Can you explain what the Community Living Assistance Services and Support (CLASS) Act is, as well as the advantages and disadvantages of the program?

The Problem – The Holy Grail with Lots of Holes
The Community Living Assistance Services and Support (CLASS) Act was designed by the late Senator Edward Kennedy as a voluntary insurance program to help adults age 18 and over with disabilities pay for long term services and supports. In March 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act, establishing the CLASS program. Unfortunately, the CLASS Act’s 2013 expected implementation presents as many problems as it does solutions.

The Solution – Looking Before Leaping Into the CLASS Act
According to an April 29, 2011 article in The New York Times:

 “In recent months, Kathleen Sebelius, the secretary of health and human services, has said that it will be difficult to make the offering both affordable and actuarially sound without some alterations.”

 “Also, Ms. Sebelius or her successor could decide to shut down the program before it pays a dollar of claims and return any premium money to participants.”

 “Plenty of politicians are furious about the fact that something like this became law without the long-term numbers adding up.”

The CLASS program will be available on a guaranteed-issue basis to all actively working individuals who are at least 18 years old and not already receiving care in a facility. Since there are no underwriting requirements there be will be a significant number of high risk and/or disabled enrollees. This presents a good opportunity for enrollees with poor health and a tremendous liability for enrollees with average or good health. Healthy enrollees will likely need to subsidize enrollees with poor health, as premiums are likely to rise when those with poor health require long term care.

Before participants can even apply for benefits, they need to pay premiums into the program for five years and must earn wages for at least three of those five years. Thus, participants may need to pay for care out-of-pocket until the five-year vesting period is satisfied. Obviously, retirees and those close to retirement cannot even participate in the CLASS program. Employers can choose whether or not to offer the voluntary program.

The CLASS program’s benefits, which can be as low as $50 day per day, are inadequate for most long term care settings. The median cost of long term care in the U.S. in 2010 ranged from $152 per day at home to $206 per day in a nursing home. The median cost of long term care in New York State in 2010 ranged from $170 per day at home to $320 per day in a nursing home.

Unlike many traditional long term care insurance policies, the CLASS program is not approved under Long Term Care Insurance Partnership Programs. Most states’ Long Term Care Partnership Programs allow long term care insurance policyholders to protect their assets from Medicaid on a Dollar for Dollar basis - for every dollar your policy pays in benefits, a dollar of assets is ignored by Medicaid. Some states, including New York, offer 100% Medicaid asset protection through Total Asset Protection – an unlimited amount of assets are ignored by Medicaid.

You can apply for private long term care insurance, whether or not you have earned income. Unlike with the CLASS program, you may be eligible for benefits the day after you purchase your long term care insurance policy - depending upon the elimination period you selected. Since individual long term care insurance policies are underwritten (allowing insurers to deny applicants), most insurers offer spousal/partner discounts and/or good health discounts. These combined discounts can reduce premiums as much as 50%.

Action Step – Do Your Homework before Purchasing Long Term Care Insurance
Understand the advantages and disadvantages of a federal long term care program that has yet to be implemented and could be shut down after it has already been implemented. Remember, you must be working and contributing (not unemployed, retired, disabled, etc.) while you contribute to the federal program. A private long term care insurance policy used in conjunction with or separate from the federal program avoids many of the problems of the federal program.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 06/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: We are considering removing the inflation protection feature before buying our long term care insurance policy. What are the advantages and disadvantages of purchasing polices with inflation protection?

The Problem – Determining Whether or Not to Purchase Inflation Protection
Most long term care insurance policies offer you the option to remove the inflation protection option from your policy when applying. Many consumers purchase an adequate amount of care per day (daily benefit) and an adequate amount of care over the life of their policy (total pool of money). Unfortunately, many consumers shortchange themselves when they either forgo the purchase of inflation protection or they purchase an inadequate level of inflation protection. A policy with adequate coverage today, which has inadequate or no inflation protection, simply cannot keep pace with the 5% compound price increases long term care service providers have been implementing.

The Solution – Purchasing Inflation Protection
Purchasing a policy with inflation protection reduces the risk that an adequate level of coverage today will become inadequate in the future.

Disadvantages of Inflation Protection
Higher cost is really the only disadvantage to purchasing a policy with inflation protection. This should come as no surprise to most consumers. If the insurance company has a growing responsibility they must charge more than a policy without a growing responsibility.

Advantages of Inflation Protection
If long term care expenses continue to grow at the same 5% compound rate and you purchase a policy with no inflation protection and you need long term care, your benefits are very likely to be inadequate. If you purchase a policy with Consumer Price Index (CPI) compound inflation protection and you need long care, your benefits are likely to be inadequate. If you purchase a policy with 3% compound inflation protection and you need long term care, your benefits are likely to be inadequate. If you purchase a policy with 5% compound inflation protection and you need long term care, your benefits are very likely to be adequate.

Let’s look at an example of four policies with the same initial daily benefit and the same initial pool of money: one policy has no inflation protection, another has CPI compound inflation protection (with a 2% estimated growth rate), another has 3% compound inflation protection and another has 5% compound inflation protection. Although they all begin with the same adequate level of coverage, only the 5% compound inflation protection policy grows at the same pace as the actual cost of care, as seen below.

Often Overlooked – Partnership Program and CPI Inflation
Most consumers must purchase a long term care insurance policy with inflation protection or the policy cannot be certified under the Partnership Program – the program that allows you to protect your assets away from Medicaid. Although the table above assumes a 2% compound growth rate as an estimate of CPI, actual CPI could be negative (as it has been in the recent past), zero, 1%, 2% or more than 2%. Some insurance companies that offer CPI inflation protection will not reduce your benefits even if CPI is actually negative. With CPI inflation protection, your benefits may not keep up with the rising costs of long term care.

Action Step – Protect Yourself with Inflation Protection
When you purchase a long term care insurance policy with inflation protection you protect yourself from the rising cost of long term care. Be sure your policy benefits increase as the cost of long term care increases or be prepared to spend significantly more out of your own pocket.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 05/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Once my benefits begin, will they run out at the end of the number of years or benefit multiplier I choose for my long term care insurance policy?

The Problem – Benefits Limited to a Set Number of Years or Benefit Period
Most long term care insurance policies require you to purchase a set number of benefit years. An incorrect assumption is that your benefits run out after that set number of years – even if there is still money left in your benefit pool.

The Solution – Benefits Limited to the Money in Your Benefit Pool, Not Necessarily to a Set Number of Years
Long term care insurance policy benefits are based on the value of your policy’s benefit pool (sometimes called a personal benefit account). The benefit pool can be calculated by multiplying the daily or monthly benefit amount by the number of years (sometimes called a benefit period or benefit multiplier). For example, if you chose a $200 daily benefit or a $6,000 monthly benefit and a five year benefit period (benefit multiplier) your benefit pool (personal benefit account) would equal $365,000.

Daily or Monthly Benefit Amount Benefit Period or Benefit Multiplier Benefit Pool or Personal Benefit Account

$200 Per Day or $6,000 Per Month X 5 Years = $365,000

The Benefit Pool is Similar to a Savings Account, Available until You Deplete the Balance
Your benefit pool is similar to a savings account that is accessible through an A.T.M. machine. Like an A.T.M. machine, your long term care insurance policy has a daily or monthly withdrawal (reimbursement) limit. Like your savings account, your benefit pool is available to you until you deplete all the money.

Using the example above, if you use the full $200 daily benefit or $6,000 monthly benefit every day or every month your $365,000 benefit pool will be depleted in five years. If you only use 50% of your available benefit ($100 per day or $3,000 per month) your $365,000 benefit pool will be depleted in 10 years. If you only use 25% of your available benefit ($50 per day or $1,500 per month) your $365,000 benefit pool will be depleted in 20 years.

Long Term care Insurance Benefits Do Not Expire at the End of the Benefit Period, They Expire When the Benefits are Depleted

Using Benefits at $200 Per Day or $6,000 Per Month Benefit Pool Lasts 5 Years

Using Benefits at $100 Per Day or $3,000 Per Month Benefit Pool Lasts 10 Years

Using Benefits at $50 Per Day or $1,500 Per Month Benefit Pool Lasts 20 Years

The Benefit Pool is Similar to a Savings Account, Growing Even as You Deplete the Balance
In the example above, the long term care insurance policy did not include inflation protection. If the policy had 5% compound inflation protection the remaining balance of the benefit pool would continue to grow even as the benefit pool is being depleted. While using the benefits of your policy reduces the benefit pool, the 5% compound inflation protection simultaneously replenishes some of those benefits. Like a savings account, you continue to earn interest on the balance of the account even as your make withdrawals – until you deplete the entire balance.

Action Step –Think of Your Long Term Care Insurance Benefit Pool Like a Savings Account
Treat your long term care insurance benefit pool like a savings account. Rather than worrying about your benefits expiring at the end of your policy’s benefit period (five years, for example), know the benefits will last as long as you have a balance in your benefit pool. Like a savings account, your benefit pool does not have an expiration date.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 04/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Can we pay for our long term care insurance polices on a tax free basis?

The Problem - Paying for Long Term Care Insurance with After Tax Dollars
The Internal Revenue Code is loaded with tax benefits to encourage you to save for retirement through vehicles like 401(k) plans and Individual Retirement Accounts (IRAs). Unfortunately, paying for long term care insurance on a tax free basis is much less understood.

The Solution – Paying for Long Term Care Insurance on a Tax Free Basis
While companies have many ways to pay for long term care insurance on a tax free basis, individuals have fewer choices. Let’s look at the tax benefits of paying on an after tax versus tax free basis, then two solutions to pay on a tax free basis.

Paying for Long Term Care Insurance with After Tax Dollars Paying for Long Term Care Insurance on a Tax Free Basis

Income__________________________________________$1,200 Income________________________________________$1,200

Less 35% Federal Income Tax_____________________($420) _____________________________________________________

Available to Pay Long Term Care Insurance_________$780 Available to Pay Long Term Care Insurance_________$1,200

Health Savings Account (HSA) Allows You to Pay Your Long Term Care Insurance on a Tax Free Basis
An HSA is a tax-advantaged savings account tied to a high deductible health insurance plan that is increasingly becoming more common with employers. Contributions to your HSA are made on a pre-tax basis, while withdrawals for qualified medical expenses are made tax free. Just as importantly, any growth (interest, dividends, capital gains, etc.) inside an HSA is tax free if withdrawals are used for qualified medical expenses. Tax-qualified long term care insurance premiums are a qualified medical expense. The maximum amount of premium you can pay on a tax free basis is indicated in the table below.

Age at End of Taxable Year Premium Limit Amount for 2011

40 or less_____________________________________$340

41 through 50_________________________________$640

51 through 60_________________________________$1,270

61 through 70_________________________________$3,390

71 and older___________________________________$4,240

Certain Withdrawals from Retirement Plans Allow You to Pay Your Long Term Care Insurance on a Tax Free Basis
Qualified public safety employee pension distributions from an eligible retirement plan used to pay for qualified health insurance premiums are tax free, up to a maximum exclusion of $3,000 annually. A qualified public safety employee is an employee of a State or political subdivision of a State if the employee provides police protection, firefighting services, or emergency medical services for any area within the jurisdiction of such State or political subdivision.

An eligible retirement plan includes a governmental qualified retirement or annuity plan, 403(b) annuity, or 457 plan. The tax free exclusion applies with respect to eligible retired public safety officers who make an election to have qualified health insurance premiums (including long term care insurance) deducted from amounts distributed from an eligible retirement plan and paid directly to the insurer.

Action Step –Pay for Your Long Term Care Insurance Policies on a Tax Free Basis
Instead of the government taking advantage of you, take advantage of the government. Follow the guidelines above and force the government to effectively pay up to 35% of your long term care insurance policy. If federal income tax rates increase on January 1, 2013 (as expected), the benefits of paying for your long term care insurance policy on a tax free basis will become even more valuable.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 03/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: We are concerned about the exorbitant costs for long term care. Should we invest or insure for our long term care costs?

The Problem – Paying for Long Term Care
According to the U.S. Department of Health and Human Services, 7 in 10 people over the age of 65 will require long term care. This compares to a 1 in 340 chance of a major auto accident and a 1 in 1,200 chance of a total loss from a fire. About half the people reaching the age of 65 are expected to enter a nursing home at least once in their lifetime.

If you are a 55-year-old New Jersey (and many other states around the country) resident today, expect to pay over $300,000 for one year of nursing home care when you are likely to need it 25 years from now at the age of 80. Based on the average nursing home stay, total costs are expected to reach $1.3 million per person — easily wiping out a lifetime of savings for many families.

The Solution – Invest or Insure for Your Future Long Term Care Costs
When preparing for your long term care costs, you should understand the advantages and disadvantages of investing versus insuring for your long term care costs. Let’s compare two 55-year-old couples: the Millers choose to invest for their long term care costs, while the Smiths choose to insure. Unfortunately, each couple will likely need long term care for 5 years in a combination of locations; including their own home and an assisted living facility. The only saving grace is that their costs may only run at $200 per day (in current dollars).

Invest for Your Long Term Care Costs. If the Millers each invest $1,680 for one year and earn 7% (before taxes), they will immediately have a combined $3,360 available for long term care costs. If they each invest $1,680 for 25 years and earn 7% per year (before taxes), they will have a combined $212,517 available for long term care costs. Their estate would be protected by $212,517 (before taxes) if they need long term care. Unfortunately, investments provide a fraction of the leverage insurance provides. See the chart below.

Insure for Your Long Term Care Costs. The Smiths choose to purchase a long term care insurance policy with a $200 per day benefit; five year benefit multiplier and 5% compound inflation protection. After the Smiths each pay $1,680 for one year, they will immediately have a combined $730,000 (tax free) available for long term care costs. The Smiths gain over 217 times leverage (217.26 X $3,360 = $730,000), with leverage defined as long term care insurance benefits divided by premiums paid. If they each pay $1,680 for 25 years, they will have a combined $2.4 million (tax free) available for long term care costs. The Smiths still gain over 28 times leverage (28.03 X $3,360 X 25 = $2.4 million) after 25 years of payments. Their estate would be protected by $2.4 million (tax free) if they need long term care. See the chart below.

Partnership Programs. Through the New Jersey Long Term Care Partnership Program (and programs similar to it throughout the U.S.), long term care insurance policyholders can protect assets away from Medicaid on a Dollar for Dollar basis - for every dollar your policy pays in benefits, a dollar of your assets is ignored by Medicaid. With a Partnership policy, The Smiths double their estate protection ($2.4 million paid by the insurance company + $2.4 million protected away from Medicaid). Some states, including New York, offer 100% Medicaid asset protection through Total Asset Protection – an unlimited amount of assets are ignored by Medicaid.

Action Step – Insure Instead of Invest for Your Long Term Care Costs
Like automobile insurance or homeowners insurance, (which most people would never even consider going without), long term care insurance provides significantly more benefits for the same dollars when compared to an investment portfolio. Purchase a long term care insurance policy and protect your assets and your estate.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 02/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some of the long term care insurance policies I am researching provide a marital or partner discount and a couples discount. Can you explain what that means and what advantages it may provide?

The Problem – Foregoing Discounts
With so many purchase options to choose from, it is easy to overlook very valuable discounts when you apply for long term care insurance.

The Solution – Take Advantage of Every Discount Available
Marital or Partner Discount. Many long term care insurance companies will provide you a 10%-15% discount if you are married or have a partner and only one of you purchases a policy. While the definition of married is universal, the definition of a partner can vary by company. You may need to meet the following criteria to qualify for a partner discount: Two people who, at the time of application:

Two people who, at the time of application:

• Are named in a valid Certificate of License of Civil Union issued by your state; OR

• Are and have been living together for the past three consecutive years in a committed relationship as partners or family members; AND

- are committed to sharing basic living expenses; AND

- are not married to each other, or to anyone else; AND

- if related, must belong to the same generation of the same family (e.g.: brothers, sisters, cousins)

Marital or Partner Discount. Many long term care insurance companies will provide each spouse or partner a 25%-40% discount if you are married or have a partner and each of you purchases a policy. Let’s look at an example of a 50 year old husband and wife who each purchase a policy with benefits as follow: 1) $200 per day benefit, 2) 3 year benefit period, 3) 5% compound inflation protection and 4) 90 day elimination period. They were each able to obtain a 10% preferred health discount.

Often Overlooked. Most companies have modest minimum purchase requirements. If your spouse or partner already has a long term care insurance policy, consider purchasing a supplemental policy. The discounts you gain with the purchase of two policies may more than offset the price of a second policy.

Action Step – Take Advantage of Every Discount Available
Understand the discounts available to you if you are married or have a partner. You would still qualify for a marital discount, even if you have not spoken with an estranged spouse for 10 years. Consider purchasing two policies, even if the second policy is a nominal amount – the discounts you gain with the purchase of two policies may more than offset the price of a second policy.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 01/15/11
Research
By Aaron Skloff, AIF, CFA, MBA

Q: How do I qualify for benefits from my long term care insurance policy?

The Problem – Tall Tales of Insurance Companies Denying Benefits to Long Term Care Insurance Policyholders
Tall tales about long term care insurance companies denying their policyholders benefits seem to live on forever. Tales about policyholders who paid for 20 or 30 years without ever submitting a claim, but who are denied benefits when they finally submit their first claim float around the internet – oftentimes written by third parties who are not privy to all the facts.

The Solution – Facts about Qualifying for Long Term Care Insurance Benefits
Most long term care policies clearly state that you qualify for benefits if you need substantial assistance with two or more of the six activities of daily living (ADLs): 1) Bathing, 2) Continence, 3) Dressing, 4) Eating, 5) Toileting, 6) Transferring OR

You have a severe cognitive impairment, such as: dementia, Alzheimer’s disease, short or long term memory loss, poor orientation of people, places or time, poor deductive or abstract reasoning, or poor judgment of safe or unsafe situations AND

Your care is expected to last at least 90 days AND

Your physician, a nurse, licensed social worker or care coordinator certifies from time to time that you need regular assistance for the care described above. Most long term care insurance companies will require a plan of care to be developed consistent with your needs.

Before purchasing a long term care insurance policy verify the triggers (ADLs or severe cognitive impairment) are clearly defined. Some policies require three or more triggers, which is great…for the insurance company, not policyholders. Some polices require the insurance company’s physician to determine if you are eligible for benefits; which is again great for the insurance company, not policyholders.

Elimination Period Could Delay Your Payments
Some long term care insurance policies include an elimination period. An elimination period operates like a deductible on your homeowners insurance policy – where you absorb some of the costs to keep the premiums down. The longer your elimination period, the longer you pay for your care on your own. With most insurers, if you submit a claim and your policy has a 90 day elimination period, the insurer will require you to submit proof that you received 90 days of care before paying your claim.

Long Term Care Insurance Companies Approve the Vast Majority of Claims They Receive
The two largest long term care insurance companies, Genworth and John Hancock, each have approximately 95% claims approval rates. In the case of John Hancock, the main reason for denials is that the policyholder is not yet eligible for benefits (e.g.: unable to perform one activity of daily living instead of the two required by the policy).

Action Step – Understand Your Long Term Care Insurance Payment Options
Understand your policy’s requirements to qualify for benefits before making a purchase. Avoid an elimination period or select one that you are comfortable with, as the longer you wait the more expenses you will pay from your own resources. Learn about your insurer’s claims approval rate before purchasing a policy.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 12/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Rather than paying for our long term care insurance premiums throughout the life of our policies, can we choose limited payment options? What advantages might we gain from limited payment options?

The Problem – Paying Long Term Care Insurance Premiums Throughout the Life Of Your Policy
Most policies are designed with a waiver of premium benefit that allows you to stop paying for your policy any month you receive benefits. But, that could mean 10, 25 or even 50 years of payments before you receive benefits and your premiums are waived. You will make many of those payments while you are retired, when your income is generally lower than before you retired.

The Solution – Paying Long Term Care Insurance Premiums Using Limited Pay Options
With a limited pay option, you pay your long term care insurance premiums over a limited period of time. Limited pay options mitigate two risks of polices you pay throughout the life of your policy.

1) Financial Strain of Premium Payments After Retirement. Your income is likely to decline when you retire. Without a well designed budget, your long term care insurance premium payments could cause a financial strain. That strain could be so great, you may consider dropping your policy and forfeiting the valuable benefits you paid for over the previous 10 or 20 years. With a limited pay option you can complete your payments before retirement, at the time you retire or shortly thereafter.

2) Premium Rate Increases. Most long term care insurance polices include provisions that allow the insurance company to increase the rates your pay if the insurance company receives an approval from the Insurance Commission (of the State where your policy was purchased) to do so. With a limited pay option your rates can not be increased after your final payment.

The following are the two most common limited pay options available from most long term care insurance companies.

1) 10-Pay. This option allows you to pay your premiums over a period of 10 years, at which time your policy is paid up. You may choose this option if you are concerned about either or both of the two risks discussed above.

2) Pay-To-65. This option allows you to pay your premiums until you reach the age of 65, at which time your policy is paid up. Again, you may choose this option if you are concerned about either or both of the two risks discussed above.

Numbers Speak Louder than Words – Projected Long Term Care Insurance Premiums
The following table provides an example of premiums that a healthy, 50-year old husband and wife would each pay for a Lifetime Payment Option, a Pay-To-65 Option and a 10-Pay Option. Each policy is based on benefits of: $200 per day of care, 5% compound inflation protection, a 90-day elimination period and a 1,095 (3 years) benefit multiplier.

Based on the example above, the projected annual premiums are highest with the 10-Pay Option, at $3,586.10. But, the 10-Pay Option has the lowest cumulative payments, at $35,861.00, for most married people (needing benefits after the age of 79). Note: for a 65-year-old married couple, there is a: 70% chance each spouse will need long term care, 92% chance at least one spouse will live to age 80, 57% chance one spouse will live to age 90 and an 11% chance one spouse will live to age 100.

Action Step – Understand Your Long Term Care Insurance Payment Options
Choose a limited pay option and mitigate the risks of financial strain and premium rate increases, while potentially saving money over the life of your policy.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 11/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Since purchasing long term care insurance is such an important financial decision for us, it is critical to understand the industry’s claims paying history. What important factors should we know about the industry’s claims paying history?

The Problem – Concerns About Long Term Care Insurance Claims Approvals
With virtually every type of insurance you are concerned about your claims being denied. Even with something as simple as life insurance, your claim can be denied if you commit suicide in the first two years of your policy. Every now and then reputable periodicals, like The New York Times, will run stories questioning the merits of insurance – I guess controversy sells.

On March 26, 2007, The New York Times published an article entitled, “Aged, Frail and Denied Care by Their Insurers”. The article stated, “In 2003, a subsidiary of Conseco, Bankers Life and Casualty, sent an 85-year-old woman suffering from dementia the wrong form to fill out, according to a lawsuit, then denied her claim because of improper paperwork. Last year, according to another pending suit, the insurer Penn Treaty American decided that a 92-year-old man had so improved that he should leave his nursing home despite his forgetfulness, anxiety and doctor’s orders to seek continued care.” It is enough to scare you away from purchasing long term care insurance, unless you continue reading this article.

The Solution – Facts About Long Term Care Insurance Approvals
In April 2010, the U.S. Department of Health and Human Services Assistant Secretary for Planning and Evaluation Office of Disability, Aging and Long-Term Care Policy completed a study entitled, “National Long-Term Care Insurance Claims Decision Study: An Empirical Analysis of the Appropriateness of Claims Adjudication Decisions and Payments”. The study was based on a significant number of claims for analysis from the seven largest long term care insurance carriers, comprising over 70% of in-force claims on tax qualified policies. Tax qualified polices have standard language and criteria used when adjudicating these types of policies -- criteria are more uniform and verifiable. The auditors in the study above concluded that they would have approved 5% fewer cases than the insurance carriers actually approved.

Long term care insurance companies approve the vast majority of claims they receive. The two largest long term care insurance companies, Genworth and John Hancock, each have approximately 95% claims approval rates. In the case of John Hancock, the main reason for denials is that the policyholder is not yet eligible for benefits (e.g.: unable to perform one activity of daily living instead of the two required by the policy). According to the California State University Emeritus and Retired Faculty Association (CSU-ERFA), the CalPERS LTC Program approved approximately 91% of claims (from the Program inception through December 31, 2006). The ratio of complaints to policyholders is also important – the lower the ratio, the better. According to The New York Times article, Conseco received more than one complaint regarding long term care insurance for every 383 such policyholders, versus Genworth’s one complaint for every 12,434 policyholders (according to data from the insurance commissioners’ association).

Understand What Is Required to Have Your Claims Approved
Most long term care insurance policies require your inability to perform two or more of your six activities of daily living (bathing, dressing, eating, transferring, continence and toileting) or severe cognitive impairment to approve your claims. Unfortunately, many policies require your inability to perform three or more activities of daily living – making it more difficult to have your claims approved. Clearly understand what your policy covers. A “facilities plan" provides benefits only in nursing homes, assisted living facilities, and residential care facilities, while a "comprehensive plan" provides benefits in home and community care settings. Understand the benefits of your policy before purchasing it.

Action Step – Understand the Facts About Long Term Care Insurance Claims Approvals
Although the vast majority of claims across the industry are approved, choose a company with a good claims approval history before purchasing your long term care insurance policy.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 10/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some of the long term care insurance policies I am researching allow for a restoration of benefits. Can you explain what that means and what advantages it may provide?

The Problem – Your Long Term Care Insurance Claim Exhausts a Significant Portion of Your Policy’s Benefits, You Recover and Now Only Have a Modest Amount of Benefits Remaining for Future Long Term Care Insurance Claims
Most long term care insurance policies behave like a savings account that only permits withdrawals. When the insurance company pays your claim it reduces your pool of money (savings account), leaving less money available for future claims. One expensive claim can exhaust the majority of your benefits, leaving you with a fraction of the benefits you would have had otherwise.

The Solution – Restoration of Benefits
Some long term care insurance policies include or provide the option to add a restoration of benefits. If you receive benefits from your pool of money, and then recover and are no longer eligible for benefits for a period of time (180 days with many companies) while your policy is in force, your pool of money will be completely restored to the amount that would have applied if no benefits had been paid. That’s like a savings account that replenishes itself if you need to take money out for an emergency. Some companies do not even place a limit on the number of times your benefits can be restored to the full value, as illustrated below.

Action Step – Protect Yourself with a Policy that Covers Both Informal and Formal Home Care
When you purchase a long term care insurance policy with restoration of benefits you gain the right to have the benefits you exhaust restored if you no longer need them for a short period of time (often 180 days). As seen above, this feature can greatly increase the total amount of care for which your policy can pay.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 09/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q:Some of the long term care insurance policies I am researching cover informal and formal care in my home. Can you explain what that means and what advantages it may provide?

The Problem – Home Care Coverage Limited to High Priced Licensed or Certified Providers
Most long term care insurance policies place limitations on who can provide long term care in your home. Most require the provider to be a licensed: Registered Nurse, Licensed Practical Nurse, Licensed Vocational Nurse, Physical Therapist, Occupational Therapist, Speech Therapist, Respiratory Therapist, Medical Social Worker or Registered Dietician; or a licensed or certified Home Health Aide, Nurse Aide or equivalent.

Policies that require licensed or certified home health care providers limit which providers you can utilize for your home care. Licensed or certified providers can be much more expensive than unlicensed or uncertified providers. Licensed or certified providers can drain you policy’s pool of money much quicker than unlicensed or uncertified providers.

The Solution – Informal Home Care Coverage
Informal Home Care Coverage. Some long term care insurance policies cover home care from licensed or certified providers and informal caregivers, such as friends or neighbors. The informal caregiver may be member of your church or temple. The informal caregiver can prepare meals, clean house, make minor safety-related repairs, take out trash, complete household chores and other services that can help you maintain a better quality of life.

Let’s look at an example of two policies with the same pool of money; one that covers both informal care and formal care and another that only covers formal care – where the informal care costs half as much as the formal care. Because informal care costs half as much as formal care the policy that covers informal care allows your benefits to last twice as long, as seen below.

Policy Covering Only Formal Care________________________Policy Covering Informal and Formal Care

Pool of Money________________________$200,000___________Pool of Money__________________________$200,000_______

Divided by Monthly Cost of Formal Care_$5,000_____________Divided by Monthyl Cost of Informal Care_$2,500________

Benefits Last__________________________3 Years, 4 Months___Benefits Last___________________________6 Years, 8 Months_

Importance of Home Care Benefits
In a recent study conducted by one of the largest long term care insurance companies, 73% of its initial benefit claims were for home care. Nearly 70% of the people who began receiving home care under the company's policies stayed at home throughout the time they needed care. When purchasing long term care insurance verify that the policy covers home care.

Action Step – Protect Yourself with a Policy that Covers Both Informal and Formal Home Care
When you purchase a long term care insurance policy that covers both informal and formal care you gain the flexibility to use licensed or certified providers and informal caregivers, such as friends and neighbors. In addition to a wider number of care provider choices, a policy that covers both informal and formal care can make your benefits last much longer.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 08/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q: What are the Top 6 most Frequently Asked Questions (FAQs) about the New York State Partnership for Long Term Care ?

The Problem – Understanding the New York State Partnership for Long Term Care (NYSPLTC)
Most long term care (LTC) insurance policies provide a limited amount of benefits. Even lifetime benefit policies generally have a daily, monthly or annual limit. The cost of long term care after a policy has been exhausted can be financially devastating for you and your family. To compound the problem, assistance in the form of Medicaid is generally limited to the impoverished.

The Solution – The New York State Partnership for Long Term Care (NYSPLTC)
With a NYSPLTC insurance policy, after you have used all the benefits of your policy you can apply for Medicaid with complete ‘asset disregard’. This allows you to keep assets that would otherwise be disallowed. New York is one of only two states in the entire U.S. that permits Total Asset policies that provide unlimited asset protection from Medicaid. Furthermore, there is no ‘look-back’ period.

Question 1. Will my NYSPLTC policy pay for long term care both inside and outside of New York?
Answer 1. Yes. NYSPLTC policies will pay for long term care both inside and outside of New York.

Questions 2. After using up my NYSPLTC policy’s benefits, will New York Medicaid pay for my LTC in another state?
Answer 2. No. You must be a New York resident to purchase and receive New York Medicaid benefits. But, you can buy a NYSPLTC policy, move to Florida or any other state, use up your policy’s benefits over a number of years in Florida or any another state, then return to New York to receive a lifetime of long term care paid by Medicaid – while protecting an unlimited amount of your assets.

Question 3. Which of my assets are not protected under the NYSPLTC Total Asset 50 or Total Asset 100 programs?
Answer 3. None. An unlimited amount of your assets are protected under either the Total Asset 50 (often referred to as 3/6/50) or the Total Asset 100 (often referred to as 4/4/100) programs. This includes your cash, savings accounts, investments accounts, 401(k)s, 403(b)s, 457(b)s, 529s, IRAs, homes, art collections, inheritances, lottery winnings – literally, unlimited asset protection.

Question 4. Are my assets protected outside of New York?
Answer 4. Yes. An unlimited amount of your assets are protected both inside and outside of New York. For example; this includes your condominium in New York, NY, house in Westchester, NY and vacation homes in Naples, FL, Maui, HI and San Diego, CA.

Question 5. What key benefits must be included in a NYSPLTC policy versus a non-NYSPLTC policy?
Answer 5. A NYSPLTC insurance policy must cover your long term costs in a nursing home and your own home versus many policies that only cover care in a facility (e.g.: only a nursing home). A NYSPLTC Total Asset 100 insurance policy must provide minimum daily benefits of $229 in 2010 ($241 in 2011) in both a nursing facility and your own home. A NYSPLTC Total Asset 50 insurance policy must provide minimum daily benefits of $229 in 2010 ($241 in 2011) in a nursing facility and $115 in 2010 ($121 in 2011) in your own home. The minimum annual Nursing Home Care Bed Reservation benefit for a NYSPLTC policy is 20 days.

Question 6. Are there any risks if I delay purchasing a NYSPLTC policy?
Answer 6. Yes. Since NYSPLTC polices require 5% greater benefits each year, delaying your purchase means buying 5% greater coverage each year (e.g.: $241 in 2011 versus $229 in 2010). Insurers increase pricing on new policies for older applicants, reflecting the higher probability that you will need long term care sooner. The combination of these two factors can add greatly to the cost of a policy. Independent of your birthday, insurance companies can (and often do) raise rates for new applicants, subject to approval from the New York State Insurance Department. Lastly, your health is likely to deteriorate over time, placing you in a higher price health class or entirely disqualifying you from purchasing long term care insurance.

Action Step – Purchase a New York State Partnership for Long Term Care (NYSPLTC) Total Asset 50 or Total Asset 100 Policy
With a NYSPLTC policy you gain the safety of long term care insurance and the peace of mind provided by unlimited asset protection.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 07/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some insurance companies offer Partnership Qualified long term care insurance policies. Can you explain what that means, what advantages it may provide and if the California Partnership for Long Term Care is unique?

The Problem – Limited Benefits and Limited Medicaid
Most long term care (LTC) insurance policies provide a limited amount of benefits. Even lifetime benefit policies generally have a daily, monthly or annual limit. The cost of long term care after a policy has been exhausted can be financially devastating for you and your family. To compound the problem, assistance in the form of Medicaid is generally limited to the impoverished.

The Solution – Partnership Qualified Long Term Care Insurance Policies
The Partnership Program is based on the Robert Wood Johnson Foundation program called the Program to Promote Long Term Care Insurance for the Elderly, initiated in 1987. Today, a Partnership Program is a “partnership” between a state, an insurance company and state residents who buy long term care Partnership policies. With a Partnership Qualified policy you can apply for Medicaid with ‘asset disregard’. This allows you to keep assets that would otherwise be disallowed. In almost all states that have Partnership Programs, the amount of assets Medicaid will disregard is equal to the amount of the benefits you actually receive under your LTC Partnership Qualified policy. This type of disregard is often referred to as Dollar for Dollar.

The California Partnership for Long Term Care
Let’s say you are a California (CA) resident who purchases $251,850 (the average rate of a private nursing room for an average three year stay in CA in 2010) worth of insurance through a California Partnership for LTC Qualified policy. When the care is needed, the policy actually pays for $1.2 million of care (due to inflation protection). Under the CA Partnership Program you would then have $1.2 million of assets protected from Medi-Cal (Medicaid). Thus, the California Partnership for Long Term Care provides Dollar for Dollar asset protection. However, your income is considered in determining your eligibility for Medicaid.

The California Partnership for Long Term Care has minimum criteria, designed in part to protect the policyholder and in part to protect the state’s Medicaid program. Let us not forget, this is a Partnership Program. Policy benefits must increase at a 5% compound inflation protection rate for persons under the age of 70. If you are 70 years of age or older you can choose between a 5% compound inflation protection rate and a 5% simple inflation protection rate. By increasing at only a 5% simple inflation protection rate you could deplete your benefits much faster than a policy that increases at a 5% compound inflation protection rate and reduce the amount of assets protected from Medi-Cal (Medicaid).

Example 1. You purchase a policy with 730 days of care that initially meets the Program requirements, but you use 100 days for home care – leaving you with 630 days. As 630 days is less than the 730 day requirement as of the day you enter a nursing home, this policy would be become disqualified under the Program.

California Partnership for Long Term Care policies must cover at least 70% of the average daily private pay rate in a California Nursing Home (70% of $230 is $160), at least 70% of that amount in a Residential Care Facility or Assisted Living Facility (70% of $160 is $112) and at least 50% of that amount in your home or for community care in the form of a monthly benefit (50% of $160 is $80, multiplied by 30 days is $2,400). The key criteria of the California Partnership for LTC are listed below.

Nursing Home Min Daily Benefit 2010 Residential Care Facility Min Daily Benefit 2010 Home/Community Min Mo Benefit2010

$160______________________________ $112______________________________________ $2,400

Below Age 70 Min Inflation Protection=5% Compound, Age 70 & Over Min Inflation Protection=5% Simple

Often Overlooked – Powerful Benefit of the California Partnership for Long Term Care
The California Partnership for Long Term Care requires that a Care Management Provider Agency, approved by the CA Department of Health Care Services and independent from the insurer, provide care coordination for Partnership policyholders.

Action Step – Purchase a California Partnership for Long Term Care Insurance Policy
When you purchase a California Long Term Care Partnership Qualified policy, you gain the safety of long term care insurance and the peace of mind provided by asset protection.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 06/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Can the purchase of a long term care insurance policy qualify me for the Massachusetts MassHealth (Medicaid) Program? If so, are there any requirements?

The Problem – Limited Benefits and Limited Medicaid
Most long term care (LTC) insurance policies provide a limited amount of benefits. Even lifetime benefit policies generally have a daily, monthly or annual limit. The cost of long term care after a policy has been exhausted can be financially devastating for you and your family. To compound the problem, assistance in the form of Medicaid is generally limited to the impoverished.

The Solution – MassHealth (Medicaid) Program
If you receive MassHealth (Medicaid) benefits and have a long term care insurance policy that meets certain requirements, you might be exempt from some MassHealth eligibility and recovery rules. These rules determine:

1. Whether your home will need to be sold in order for you to become eligible for MassHealth benefits and

2. Whether you or your estate may need to repay MassHealth for any of the long term care expenses it paid on your behalf

Massachusetts is the only state in the entire U.S. that specifically protects your home from Medicaid nursing home liens and estate recovery if you meet the requirements below. Many states have adopted Dollar for Dollar Partnership Programs; where in most states for every dollar that your qualifying long term care insurance policy pays in benefits, a dollar of assets is protected from Medicaid. In those states your policy may ultimately pay $300,000 in benefits and protect $300,000 in assets. In Massachusetts, your policy may ultimately pay $100,000 in benefits and protect your $400,000 home.

MassHealth Qualifying Long Term Care Insurance Policies
Your long term care insurance policy must meet minimum requirements as of the day you enter a nursing home in order for you to qualify for the MassHealth eligibility and recovery exemptions. Specifically, your policy must meet the following requirements when you enter the nursing home:

1. Have enough benefits to cover nursing home care for at least 730 days (two years) and

2. Have benefits of at least $125 per day for nursing home care and

3. Not require an elimination period of more than 365 days, or in lieu of a waiting period a deductible of more than $54,750

Often Overlooked - Policy Benefits Can Change from Initial Purchase
Changes in policy benefits can turn a policy that initially qualified under the Program into a disqualifying policy and vice versa.

Example 1. You purchase a policy with 730 days of care that initially meets the Program requirements, but you use 100 days for home care – leaving you with 630 days. As 630 days is less than the 730 day requirement as of the day you enter a nursing home, this policy would be become disqualified under the Program.

Example 2. You purchase a policy with a $100 per day benefit that does not initially meet the Program requirements, but your policy includes an inflation protection rider. By the time you need nursing home care the daily benefit has risen to $130. As $130 per day is greater than or equal to the $125 per day minimum requirement as of the day you enter a nursing home, this policy would become qualified under the Program.

Action Step – Purchase a Long Term Care Insurance Policy that Meets MassHealth (Medicaid) Program Requirements
When you purchase a policy that meets the MassHealth (Medicaid) Program requirements you gain all the benefits of a traditional long term are insurance policy plus your home is protected.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 05/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q: We have family throughout the U.S. What federal and state tax benefits are available for long term care insurance?

The Problem – Foregoing Federal and State Tax Benefits
Too many long term care insurance policyholders forego valuable federal and state tax benefits because they simply do not know of their existence. As many policies are paid over a lifetime, foregone tax benefits could total thousands of dollars.

The Solution – Utilizing Federal and State Tax Benefits
Federal Tax Benefits. You can add the tax qualified long term care insurance premiums (limited to the chart below) to other medical expenses. Amounts in excess of 7.5% of adjusted gross income (AGI) can be itemized as a medical expense deduction on Schedule A of Form 1040 of your federal income tax return. Tax qualified long term care insurance premiums can be reimbursed through an HSA, tax-free up to the Eligible Premium amounts listed below.

Age Before the Close of the Taxable Year Premium Deduction Limit 2010

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

State Tax Benefits. In addition to the federal tax benefits, 29 states and the District of Columbia offer tax deductions and/or credits for policyholders with qualified policies. Some states disallow simultaneous federal and state deductions. The details by state are listed below.

Action Step – Utilize Your Federal and State Tax Benefits
As this is not tax advice, work closely with your tax advisor to utilize every federal and state tax benefit available to you.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 04/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q: What happens if I pay for long term care insurance for the rest of my life, pass away, and never use the benefits of my policy? Will my heirs receive a fund of the premiums I paid?

The Problem – Paying Your Premium and Never Using the Benefits
That’s a good problem to have. It’s like paying your homeowners insurance for 50 years and never seeing your house burn down. Like all insurance, you hope you never need the benefits of the policy. The idea of peacefully going to sleep at the age of 95 and never waking up again, without ever needing long term care, is a dream come true for many people. But, you may prefer receiving some benefit from long term care insurance – even if the benefit goes to your heirs

The Solution – Return of Premium Benefit
Return of Premium. Some long term care insurance policies include or provide the option to add a return of premium benefit. The insurance company pays you heirs all the premium payments you have made, less any long term care benefits paid against the policy. Some return of premium benefits are included in the policy if you pass away prior to age 65.

Enhanced Return of Premium. Some long term care insurance policies allow you to purchase a rider that enhances your built-in return of premium benefit, beyond the age of 65. With the enhanced return of premium benefit, your heirs receive a benefit equal to your total premiums paid, less any long term care benefits paid against the policy, regardless of your age.

Seven Year Survivorship Benefit. Some long term care insurance policies include or provide the option to add a seven year survivorship benefit. The insurance company permanently waives the premium for the surviving spouse or partner when the other spouse or partner passes away. The same key criteria apply as the basic version, but with the basic version you must wait 43% longer for the benefit to be utilized.

Let’s look at an example. You pay $2,000 each year for 30 years, for a total of $60,000. You are fortunate, because you pass away without ever having used the policy. You heirs are also fortunate, as they will receive a check from the insurance company for $60,000.

Graded Return of Premium. Some long term care insurance policies allow you to purchase a rider that will return a percentage of your premium paid, less any claims paid against the policy. The percentage is dependent upon your age when you pass away. It starts at 100% and begins decreasing by 10% each year after the age of 65, until at age 75, when the percentage decreases to zero.

10-Year Return of Premium. Some long term care insurance policies allow you to purchase a rider that will return all of your premiums paid, less any claims paid against the policy. If you have been insured for at least 10 years when you pass away, and you have never filed a claim, the insurance company will return your full premium paid. If you have filed a claim, the insurance company will return your premium paid less any claims paid against the policy.

Action Step – Protect Yourself with a Return of Premium Benefit
When you purchase a long term care insurance policy with a return of premium benefit you remove any risk of not gaining any benefits from the policy – even if it is your heirs who reap the benefits.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 03/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some of the long term care insurance policies I am researching allow for a survivorship benefit. Can you explain what that means and what advantages it may provide?

The Problem – Paying Your Premium When Your Spouse or Partner Passes Away
Few long term care insurance policies are designed with a survivorship benefit. Without this benefit, when your spouse or partner passes away and your budget is pushed to the limit you will be required to make your premium payments. If your spouse or partner is the primary wage earner or their retirement income is your primary source of income, their passing could present a financial hardship in paying for your policy. Placed in this financial hardship, you may have to forego paying your policy and your policy could be cancelled.

The Solution – Survivorship Benefit
10 Year Survivorship Benefit. Some long term care insurance policies include or provide the option to add a 10 year survivorship benefit. The insurance company permanently waives the premium for the surviving spouse or partner when the other spouse or partner passes away. The waiver begins after you have satisfied the conditions of the policy. The benefit is based on three key criteria:

1) You each continuously had long term care insurance coverage in force on the date of death

2) You each had your policies in force for at least 10 years

3) Neither of you were paid benefits for the first 10 years of the policy

The survivorship benefit can be a tremendous saving grace if upon your spouse or partner’s death your long term care insurance premiums would become a budget buster.

Seven Year Survivorship Benefit. Some long term care insurance policies include or provide the option to add a seven year survivorship benefit. The insurance company permanently waives the premium for the surviving spouse or partner when the other spouse or partner passes away. The same key criteria apply as the basic version, but with the basic version you must wait 43% longer for the benefit to be utilized.

Often Overlooked. Remember to terminate the survivorship benefit if your relationship ends due to divorce, death or final separation.

Action Step – Protect Yourself with a Survivorship Benefit
When you purchase a long term care insurance policy with a survivorship benefit you remove an important financial and psychological burden of long term care – the cost of the policy when your spouse or partner passes away.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 02/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some of the long term care insurance policies I am researching allow for a waiver of premium or joint waiver of premium benefit. Can you explain what that means and what advantages it may provide?

The Problem – Waiver of Premium and Joint Waiver of Premium Benefit
Waiver of Premium. Some long term care insurance policies include or provide the option to add a waiver of premium benefit. The insurance company waives the premium payments each month you are receiving care (as defined by the policy). The waiver begins after you have satisfied the elimination period of the policy (if the policy has an elimination period). Most waiver of premium benefits apply to care you receive in a nursing facility, assisted living facility or in your home. When evaluating the waiver of premium benefit verify that the waiver applies to all three locations.

Pay close attention to what portion of the premium is waived. Ideally, the entire premium for the policy and all riders (attachments) will be waived. Some long term care insurance companies will refund a pro-rated portion of premiums paid in advance. So, if you pay your annual premium on January 1st and begin receiving care on July 1st, the insurance company will refund 50% of your annual premium (assuming you have met the elimination period).

The waiver of premium benefit can be a tremendous saving grace if your long term care expenses exceed the benefits provided by your long term care insurance policy.

Let’s look at an example of the waiver of premium. Your budget allows you to pay your $300 monthly long term care insurance premium. Unfortunately, you wind up needing care that exceeds your policy’s benefits by $300 per month. The waiver of premium benefit will allow you to stop paying your $300 monthly premium – leaving you with a balanced budget.

Joint Waiver of Premium. Some long term care insurance policies include or provide the option to add a joint waiver of premium benefit. The insurance company waives the premium payments each month you or your spouse or partner are receiving care (as defined by the policy). The waivers begin after you or your spouse has satisfied the elimination period of the policy (if the policy has an elimination period).

The joint waiver of premium benefit can relieve you of one more financial obligation associated with your spouse’s long term care expenses. Your spouse may be able to take more time off from work, knowing their premium payments will be waived – the same way your premium payments are waived.

Action Step – Protect Yourself with a Waiver of Premium or Joint Waiver of Premium Benefit
When you purchase a long term care insurance policy with a waiver of premium or a joint waiver of premium benefit you remove an important financial and psychological burden of long term care – the cost of the policy or policies when you receive care or your spouse receives care.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 01/15/10
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some of the long term care insurance policies I am researching allow for a monthly home care maximum benefit instead of a daily home care maximum benefit. Can you explain what that means and what advantages it may provide?

The Problem – Daily Home Care Maximum Benefit
Most long term care insurance policies are designed with a daily home care maximum benefit. Unfortunately, you may need more care than a daily home care maximum benefit will reimburse on any given day. Fluctuating expenses are quite common with home based long term care.

For example, after an outpatient procedure, your physician recommends you have your home health aide stays in your home 24 hours a day for two consecutive days. Your physician also recommends that the home health aide stay in your home from the time you go to bed at night until the time you wake in the morning for three consecutive days.

While the normal hourly rate for your home health aide is $25, shifts requiring more than six consecutive hours or overnight stays have additional fees. Although your long term care insurance policy’s daily home care maximum benefit of $200 per day is sufficient for most days, the costs of long shifts and overnight stays drives your costs well above the $200 daily limit – leaving you with significant out of pocket costs.

The Solution – Monthly Home Care Maximum Benefit
Some long term care insurance policies are designed with or provide the option to add a monthly home care maximum benefit. With this benefit you can convert to a monthly home care maximum benefit equal to 31 times the daily maximum benefit. This applies to the combined total of all expenses incurred during any one calendar month. Instead of a $200 daily benefit you would have a $6,200 monthly benefit. This gives you greater flexibility in managing your home health care expenses. Let’s use the example above to see the outcomes of a daily home care maximum benefit versus a monthly home care maximum benefit.

Day of Wk Expenses Incurred Daily Home Care Max Benefit Out of Pocket Expenses Monthly Home Care Max Benefit Out of Pocket Expenses
Monday____$500______________$200________________________$300__________________$6,200________________________$0

Tuesday____$500______________$200________________________$300__________________$6,200________________________$0

Wednesday_$500______________$200________________________$100__________________$6,200________________________$0

Thursday____$500______________$200________________________$100__________________$6,200________________________$0

Friday_______$500______________$200________________________$100__________________$6,200________________________$0

Total_______________________________________________________$900_________________________________________________$0

In this example you would have $900 in out of pocket expenses with a daily home care maximum benefit versus zero out of pocket expenses with a monthly home care maximum benefit. While adding a monthly feature to a daily benefit policy may add 5% to the cost of the overall policy, it could more than make up for the additional cost if you have just one week of high expenses over the life of the policy.

Action Step – Protect Yourself with a Monthly Home Care Maximum Benefit
When you purchase a long term care insurance policy with a monthly home care maximum benefit you protect yourself from large out of pocket home health care costs in any one particular day or week.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 12/15/09
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Can long term care insurance be offered as a company benefit to our employees? If so, are there any tax advantages for employers or employees? Are there still tax advantages for individuals who purchase a policy on their own?

The Problem – Attracting and Retaining Valuable Employees
A company’s success or failure is oftentimes determined by the quality of its employees. Offering an attractive benefits package can be a key element in attracting and retaining the highest quality employees. Employees seek out benefits packages that offer a competitive salary, health insurance, retirement plan and long term care insurance. Both employers and employees recognize the hidden costs of giving long term care (interruptions and decreased productivity), as well as the staggering costs of long term care.

The Solution – Offer Long Term Care Insurance as a Company Benefit to Employees
Whether the business is a sole proprietor or multi-national corporation, long term care insurance can be offered as a company benefit. Unlike most company benefits, which prohibit the employer from discriminating, long care insurance can be offered on a limited or unlimited basis at the company’s discretion. Employees of companies with multiple participants can receive simplified underwriting for themselves and their family members, portable coverage if they leave the employer and group discounts.

Tax Advantages for Employers
C corporations can deduct the full amount of tax qualified long term care insurance premiums paid for employees, their spouses and dependents as a business expense. Sole proprietors, partnerships, limited liability corporations (LLCs) and S corporations can follow the same guidelines with deductions limited to the full eligible amount (limited to the chart below). Employers paying for employees, their spouses and dependents domiciled in certain states may also be eligible for either tax credits or deductions for premiums they pay. For example, New York state provides a 20% tax credit.

Tax Advantages for Employees or Individuals Purchasing Their Own Policy
Employees and individuals purchasing their own tax qualified long term care policy receive benefits federal income tax free, up to $280 per day (including indemnity benefits). Benefits above $280 are still federal income tax free up to the actual long-term-care costs. Employees who pay all or a portion of the tax qualified long term care insurance premiums for themselves, spouses and dependents (and individuals purchasing their own policy) may be able to deduct all or a portion of the premium on their federal income tax return. Employees and individuals purchasing their own policy living in certain states may also be eligible for either tax credits or deductions for premiums they pay. For example, New York state provides a 20% tax credit.

Employees and individuals purchasing their own policy can add the tax qualified premium (limited to the chart below) to other medical expenses (health and dental insurance premiums, insurance co-payments, out-of-pocket prescription costs, and other unreimbursed medical expenses). Amounts in excess of 7.5% of adjusted gross income (AGI) can be itemized as a medical expense deduction on Schedule A of Form 1040 of federal income tax return.

Age Before the Close of the Taxable Year Premium Deduction Limit 2009 Premium Deduction Limit 2010

40 or less_____________________________________$320 _______________________$330

More than 40 but not more than 50_____________$600________________________$620

More than 50 but not more than 60 _____________$1,190______________________$1,230

More than 60 but not more than 70______________$3,180______________________$3,290

More than 70___________________________________$3,980______________________$4,110

Action Step – Offer Long Term Care Insurance as a Company Benefit to Employees
Whether you are a sole proprietor, the benefits director of a mid sized LLC or the CEO of multi-national corporation, implementing long term care insurance as an employee benefit can have tremendous qualitative and quantitative benefits.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 11/15/09
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some insurance companies offer Partnership Qualified long term care insurance policies. Can you explain what that means, what advantages it may provide and if the Connecticut Partnership for Long Term Care is unique?

The Problem – Limited Benefits and Limited Medicaid
Most long term care (LTC) insurance policies provide a limited amount of benefits. Even lifetime benefit policies generally have a daily, monthly or annual limit. The cost of long term care after a policy has been exhausted can be financially devastating for you and your family. To compound the problem, assistance in the form of Medicaid is generally limited to the impoverished.

The Solution – Partnership Qualified Long Term Care Insurance Policies
The Partnership Program is based on the Robert Wood Johnson Foundation program called the Program to Promote Long Term Care Insurance for the Elderly, initiated in 1987. Today, a Partnership Program is a “partnership” between a state, an insurance company and state residents who buy long term care Partnership policies. With a Partnership Qualified policy you can apply for Medicaid with ‘asset disregard’. This allows you to keep assets that would otherwise be disallowed. In almost all states that have Partnership Programs, the amount of assets Medicaid will disregard is equal to the amount of the benefits you actually receive under your LTC Partnership Qualified policy. This type of disregard is often referred to as Dollar for Dollar.

The Connecticut Partnership for Long Term Care
Let’s say you are a Connecticut (CT) resident who purchases $377,800 (the average rate of a private nursing room for an average three year stay in CT in 2009) worth of insurance through a CT Partnership Qualified policy. When the care is needed, the policy actually pays for $1.5 million of care (due to inflation protection). Under the CT Partnership Program you would then have $1.5 million of assets protected from CT Medicaid. Thus, the Connecticut Partnership for Long Term Care provides Dollar for Dollar asset protection. However, your income is considered in determining your eligibility for Medicaid.

The Connecticut Partnership for Long Term Care has minimum criteria, designed in part to protect the policyholder and in part to protect the state’s Medicaid program. Lest we not forget, this is a Partnership Program. Both the lifetime and daily, weekly or monthly benefits must increase at a 5% compound inflation protection rate for persons under the age of 65. Only the daily, weekly or monthly benefits must increase at a 5% compound inflation protection rate for persons age 65 and over.

Although there is no requirement for lifetime benefits to increase at 5% per year for persons age 65 and older, foregoing the inflation protection could limit the amount of assets protected from CT Medicaid. By increasing only the daily, weekly or monthly benefits the policyholder could deplete their benefits much faster than a policy that increases both lifetime benefits and the daily, weekly or monthly benefits. The key criteria of the Connecticut Partnership for LTC are listed below.

Minimum Daily Minimum Daily Minimum Inflation Protection of Minimum Inflation Protection of

Benefit 2009 2010 Benefits Under Age 65 Benefits Age 65 and Over

Nursing Facility $184 Nursing Facility $193 Lifetime 5% Compound Lifetime No Minimum

Home Care $92 Home Care $96.50 Daily, Weekly or Monthly 5% Compound Daily, Weekly or Monthly 5% Compound

Often Overlooked – Power Benefit of the Connecticut Partnership for Long Term Care
Connecticut Partnership for Long Term Care policyholders are guaranteed a 5% discount on nursing home rates in Connecticut.

Action Step – Purchase a Long Term Care Partnership Policy
When you purchase a Partnership Qualified policy, you gain the safety of long term care insurance and the peace of mind provided by asset protection.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 10/15/09
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Many of the long term care insurance brochures reference to the Total Pool of Money. Can you explain what that means and how it relates to a Daily or Monthly Benefit? Can a Total Pool of Money last longer than the Benefit Period?

The Problem – Understanding the Total Pool of Money
The Total Pool of Money, sometimes referred to as Total Benefit Value, is the total amount of money available to cover your long term care expenses on a daily or monthly basis. The Pool of Money is calculated by multiplying your Daily or Monthly Benefit by the Benefit Period. The value of the Total Pool of Money will be affected by claims payments, inflation protection and additions from the passing of a spouse or partner (if you have a Shared Care policy). For example, if you selected a Daily Benefit of $300 and a Benefit Period of five years, your Total Pool of Money would be $547,500.

Daily Benefit X Day Per Year X Benefit Period = Total Pool of Money
$300 X 365 X 5 Years = $547,500

Making Your Actual Benefit Period Last Longer than Your Stated Benefit Period
Your Daily Benefit can be thought of as your daily withdrawal limit from your Automated Teller Machine (A.T.M.). Although your balance is $547,500, the daily withdrawal limit is $300. Try to withdrawal more than $300 in a day and the A.T.M. will tell you that you have reached your daily limit. With your long term care insurance policy, request reimbursement in excess of your Daily Benefit and the insurance company will tell you that you have reached your daily limit.

Your Actual Benefit Period is determined by how quickly you incur Actual Long Term Care Expenses, within the Daily Benefit limit. Divide your Daily Benefit by your Actual Long Term Care Expenses and then multiply by the policy Benefit Period to determine your Actual Benefit Period. For example, if you only accumulate $150 of Long Term Care (LTC) Expenses per day, or half the $300 Daily Benefit, your Total Pool of Money remains the same while your Actual Benefit Period will be 10 years.

Daily Benefit / Actual LTC Expenses X Benefit Period = Actual Benefit Period
$300 / $150 X 5 Years = 10 Years

Your Actual Benefit Period Could Last Shorter than Your Stated Benefit Period
Some long term care insurance companies allow you to increase your Daily Benefit for Home Care. The formula for determining you Actual Benefit Period is the same as in the previous example. For example, if you selected a 150% Home Care benefit, that reimburses 150% of the Daily Limit for Long Term Care expenses incurred in your home and your Actual LTC Expenses are $450 per day, your Total Pool of Money remains the same while your Actual Benefit Period will be 3.33 Years.

Daily Benefit / Actual LTC Expenses X Benefit Period = Actual Benefit Period
$300 / $450 X 5 Years = 3.33 Years

Action Step –Understand How Your Total Pool of Money and Actual Benefit Period Relate to One Another
Your policy design will determine your Daily Benefit, Benefit Period and Total Pool of Money, while your Actual Expenses will determine your Actual Benefit Period.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 09/15/09
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some of the long term care insurance policies I am researching allow for inflation protection. Can you explain what that means and what advantages it may provide?

The Problem – The Rising Cost of Long Term Care
At approximately $220 per day, the average cost for a one year stay in a private nursing home room in 2008 was approximately $80,000. With the average nursing home stay lasting approximately three years, you could spend over $252,000 if you entered in a nursing home today.

If you are 55 years old today, you should expect to pay approximately $930 for one day or $340,000 for one year of nursing home care when you are likely to need it 25 years from now at the age of 80. Based on the average nursing home stay, expect to pay approximately $1.1 million per person — easily wiping out a lifetime of savings for many families.

The Solution –Inflation Protection
A long term care insurance policy with inflation protection, sometimes called an increase rider, increases your benefits each year. A long term care insurance policy without inflation decreases in value, on an inflation adjusted basis, every year the cost of long term care increases. Differentiating between the two most common forms of inflation protection is critical in determining which type is best for your needs.

Simple Inflation Protection
With simple inflation protection, your policy benefits increase at a fixed percentage of your original daily benefit. As evidenced by the chart to the right, a 5% simple inflation protection policy will increase a $220 per day or $80,000 per year benefit to $495 per day or $180,000 per year, over the over the course of 25 years. This should cover about 53% of your daily or annual nursing home costs.

Compound Inflation Protection
With compound inflation protection, your policy benefits increase at a significantly faster pace, as each year’s benefit increase compounds upon the previous year’s increase. As evidenced by the chart to the right, a 5% compound inflation protection policy will increase a $220 per day or $80,000 per year benefit to approximately $930 per day or $340,000 per year, over the course of 25 years. This should cover about 80% of your daily or annual nursing home costs.

No Inflation Protection
As you approach your 80th birthday, the cost to add inflation protection can become expensive. You may consider forgoing inflation protection and simply obtaining a policy with a daily benefit greater than the current cost of care in the marketplace.

Action Step – Protect Yourself with Inflation Protection
When you purchase a long term care insurance policy with inflation protection you protect yourself from the rising cost of long term care. Be sure your policy benefits increase as the cost of long term care increases or be prepared to spend significantly more out of your own pocket.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 08/15/09
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some of the long term care insurance policies I am researching allow for a shared care benefit. Can you explain what that means and what advantages it may provide?

The Problem – You or Your Partner Need More Care than Your Individual Policy Covers
Most long term care insurance policies are designed as individual policies that insure one person, ignoring the pool of benefits inside your spouse’s or partner’s policy. Unfortunately, you may need more care than your individual policy covers.

For example, you and your spouse or partner each have a long term care (LTC) insurance policy with a $300 daily benefit and a five year benefit period, obligating the insurance company to pay $300 per day for five years. If you only need $150 worth of care, or half the $300 daily benefit, the insurance company is obligated to pay $150 per day for 10 years, or twice as long.

If you need the full $300 worth of care, or the full daily benefit, you will exhaust the policy benefits in five years. Unfortunately, you may need more than five years of care. In the event you need an additional two years of care at $300 per day, it will cost you $219,000 out of pocket. This example ignores the income taxes and early withdrawal penalties associated with the withdrawal of many retirement assets. It also ignores the devastating effects of inflation, which can wreak havoc on a lifetime of savings if your LTC insurance policy does not have inflation protection.

The Solution – Shared Care Benefit Policy
The shared benefit policy provides you the ability to utilize your spouse’s or partner’s benefits when your own policy benefits have been exhausted. In the example above, you can use the benefits of your spouse’s or partner’s policy and avoid a $219,000 expenditure. The mere avoidance of this expenditure can mean the difference between a secure and an insecure retirement.

All those assumptions are based on current dollars. If this example were 28 years in the future and the cost of care (along with your policy’s inflation protection) rose at 5% per year, the shared benefit policy would save you over $876,000 in expenditures.

Shared Benefit Policy with Survivor Benefits
Some policies have a provision to protect the surviving spouse or partner. If one of you dies, the survivor’s benefits will increase by the deceased spouse’s or partner’s remaining benefit dollars. For example, if you each have a policy that covers $300 per day for five years and one of you die, the survivor will now have a policy that covers $300 per day for 10 years – doubling the benefit period.

Shared Benefit Policy with Replenish Provision
Some polices have a provision to protect the spouse or partner whose policy has been depleted by the person receiving care. Once your spouse or partner has depleted your benefits, you have the option to purchase a new policy without medical underwriting.

Imagine your spouse or partner depletes their own policy and then depletes your policy. Unfortunately, you now suffer from a number of health conditions. With the replenish provision you can purchase a new LTC policy without any medical underwriting whatsoever. Despite the deterioration in your health the insurance company is legally obligated to issue you a new policy based on your original health – even if your current health would normally qualify you under a poor health rating or entirely disqualify your from obtaining a policy.

Action Step – Protect Yourself with a Shared Benefit Policy
When you purchase a shared benefit LTC policy with survivor benefits you protect yourself and your spouse or partner from greater than expected expenses and avoid the risk of seeing a deceased spouse’s or partner’s unused benefits evaporate.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 07/15/09
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some insurance companies offer Partnership Qualified long term care insurance policies. Can you explain what that means, what advantages it may provide and if the New York State Partnership for Long Term Care is unique?

The Problem – Limited Benefits and Limited Medicaid
Most long term care (LTC) insurance policies provide a limited amount of benefits. Even lifetime benefit policies generally have a daily, monthly or annual limit. The cost of long term care after a policy has been exhausted can be financially devastating for you and your family. To compound the problem, assistance in the form of Medicaid is generally limited to the impoverished.

The Solution – Partnership Qualified Long Term Care Insurance Policies
The Partnership Program is based on the Robert Wood Johnson Foundation program called the Program to Promote Long Term Care Insurance for the Elderly, initiated in 1987. Today, a Partnership Program is a “partnership” between a state, an insurance company and state residents who buy long term care Partnership policies. With a Partnership Qualified policy you can apply for Medicaid with ‘asset disregard’. This allows you to keep assets that would otherwise be disallowed. In almost all states that have Partnership Programs, the amount of assets Medicaid will disregard is equal to the amount of the benefits you actually receive under your LTC Partnership Qualified policy. This type of disregard is often referred to as Dollar for Dollar.

Let’s say you are a New Jersey resident who purchases $306,600 (the average rate of a private nursing room for an average three year stay in NJ in 2008) worth of insurance through a Partnership Qualified policy. When the care is needed, the policy actually pays for $900,000 of care (due to inflation protection). Under the state’s Partnership Program you would then have $900,000 of assets protected from NJ Medicaid.

The New York State Partnership for Long Term Care
Only two states in the entire U.S. can offer both Dollar for Dollar and Total Asset Partnership Programs – Indiana and New York. As its name implies, Total Asset offers unlimited asset protection from Medicaid – far more powerful than Dollar for Dollar.

Let’s say you are a New York resident who purchases a New York State Partnership for Long Term Care Qualified policy. After you exhaust your policy, you can apply for New York State Medicaid Extended Coverage – which allows you to protect some or all of your assets, depending on whether you select a Dollar for Dollar Asset Protection plan or a Total Asset Protection plan. However, your income is considered in determining your eligibility for Medicaid Extended Coverage. The plans are as follows:

Action Step – Purchase a Long Term Care Partnership Policy
When you purchase a Partnership Qualified policy, you gain the safety of long term care insurance and the peace of mind provided by asset protection – total asset protection in the case of Indiana and New York.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 06/15/09
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Some of the long term care insurance policies I am researching allow for an indemnity benefit. Can you explain what that means and what advantages it may provide?

The Problem – Reimbursement Only Policies
Most long term care insurance policies are designed as reimbursement only. With a reimbursement only policy, upon submitting all of your receipts for long term care expenses the insurance company will reimburse you up to your policy’s limits. Unfortunately, you may have ancillary expenses associated with your long term care, including expenses to:
1. add ramps and expand doorways throughout your home
2. add additional railings to your staircases or add wheelchair lifts
3. purchase or lease a van with a lift to get to and from your physician’s office

The Solution – Indemnity Policies
Unlike reimbursement only policies, indemnity policies pay benefits above and beyond your actual long term care expenses. There are two basic types of indemnity policies, full and partial.

Full Indemnity Policy
With a full indemnity policy (sometimes called a flexible cash benefit or cash model), once you simply require long term care the insurance company pays you a monthly benefit. You receive these payments regardless of your actual expenses. Imagine your policy provides a $6,000 monthly benefit. Regardless of the amount or cost of your care, the insurance company will pay you $6,000 a month. You can pay an unlicensed family member or friend to care for you. You can payoff your mortgage. You can invest in your grandchild’s college fund. You can spend, save or invest the money however you choose.

Partial Indemnity Policy
With a partial indemnity policy (sometimes called a cash benefit or monthly indemnity benefit), once you actually receive at least one hour of long term care per day you receive a daily benefit. You receive these payments regardless of your actual expenses. Imagine your policy provides a $200 daily benefit. Regardless of the cost of your care, the insurance company will pay you $200 a day. You can spend, save or invest the money however you choose.

Getting the Most Out of Your Policy
Both full and partial indemnity polices address an underlying concern that you may have when you purchase a policy – you want the policy’s maximum benefit regardless of your actual expenses. With both types of polices the concern is eliminated.

Action Step – Protect Yourself with an Indemnity Policy
When you purchase an indemnity policy you protect yourself from unexpected expenses and gain the flexibility to spend, save or invest your money how you see fit.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Long Term Care University - Question of the Month

Long Term Care University - 05/15/09
Research
By Aaron Skloff, AIF, CFA, MBA

Q: Many of the long term care insurance policies I am researching require me to make permanent choices about the policy benefits. Are there any types of policies that allow me to change my policy benefits in the future?

The Problem – Inflexible Policies
Most long term care insurance policies require you to make permanent decisions about the benefits of your policy upon purchasing the policy. This presents a host of problems, including:
1. insufficient coverage for the future if you chose coverage that is too modest
2. unmanageable premiums today if you choose higher coverage than you can afford
3. inability to change policy benefits and features if your health deteriorates

The Solution – Flexible Policies
Some long term care insurance policies allow you to make changes to your policy after the policy has been purchased. This can be a tremendous benefit if you are interested in obtaining a policy today, but are working within a budget.

Some insurance companies offer flexible policies that allow you to increase your coverage without additional underwriting. Imagine you purchase your policy when you are 55 years old and are in perfect health. After 10 years, you are now 65 years old, are interested in increasing your coverage, but now you suffer from a number of health conditions. A flexible policy would allow you to increase your benefit without any medical underwriting whatsoever. Despite the deterioration in your health the insurance company is legally obligated to increase your coverage upon your request.

Pay close attention to what conditions are associated with your flexibility options. Some insurance companies will allow you to exercise changes throughout the life of the policy. Others will discontinue your ability to make changes if your decline the option to change two times in a row.

Some insurance companies allow you to enhance you coverage as follows:
1. increase your daily benefit based on inflation
2. increase your benefit period
3. decrease your elimination period

Pay close attention to how the insurance company prices their flexible policy. Ideally, you should only pay for the additional benefits you add to the policy, while the premium for the initial coverage purchased at the inception of the policy remains unchanged. In the example above, you are able to save money during the first 10 years of the policy and are then able to enhance your coverage at a more affordable price than most long term care insurance polices would offer.

Action Step – Do Your Research
Before purchasing a policy, be sure to research the features of your policy. Understanding if your policy is a flexible or inflexible policy before you purchase it can avoid unnecessary aggravation and financial hardship in the future.

Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA) charter holder, Master of Business Administration (MBA), is the Chief Executive Officer of Skloff Financial Group, a NJ based Registered Investment Advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at www.skloff.com or 908-464-3060.

Question of the Month: How Long Term Care Insurance Program Works

The Independent Press - 01/07/09
Money Matters
By Aaron Skloff

Q: Can you explain how the recently introduced New Jersey Long Term Care Insurance Partnership Program works?

About half the population who will reach the age of 65 are expected to enter a nursing home at least once in their lifetime. A 55 year-old New Jersey (NJ) resident is expected to pay over $300,000 for one year of nursing home care when they are likely to need it at the age of 80. Based on the average nursing home stay, total costs are expected to reach $1.5 million per person – easily wiping out a
lifetime of savings for many families.

The Deficit Reduction Act of 2005 radically changed the Medicaid playing field. The most important change was an extension of the look-back period for asset transfers to establish Medicaid’s eligibility for nursing home coverage from 3 to 5 years and changes the start of the penalty from the date of the transfer to the date of Medicaid eligibility. The second most important change was the lifting of the moratorium on states introducing new partnership programs to increase the role of private long term care insurance in financing long-term services.

The NJ Long Term Care Partnership Program (NJLTCPP) allows individuals to protect assets equal to the insurance benefits received from a Partnership Policy so that the assets will not be taken into account in determining financial eligibility for Medicaid. One of the key aspects of the policies is their requirement for inflation protection (minimum of 3%) in the policy for most individuals.

For example, a NJ resident purchases $102,200 (the average rate of a private room in NJ in 2008) worth of annual care through the policy. When the care is needed, the policy pays for $900,000 of care (due to inflation protection). Under the NJLTCPP, a person would then have $900,000 of assets protected from NJ Medicaid. This type of protection is commonly referred to as “dollar for dollar” asset protection.

Establishing LTC insurance immediately reduces the financial and psychological burdens that will ultimately plague most families when the need for long-term care arrives. With many states running large deficits, it is even more critical than ever to take advantage of any programs designed to protect your assets, before they review the legislation and discontinue the issues of new policies. Like most insurance, the earlier you start your policy, the lower your cost of the policy.

Note. Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA), Master of Business Administration (MBA) is CEO of Skloff Financial Group, a Registered Investment Advisory firm based in Berkeley Heights, NJ. Phone: 908-464-3060.

New Jersey Long Term Care Costs Are High, So Plan

Princeton Business Journal - 02/06/2007
IT'S YOUR BUSINESS
Aaron Skloff

Q: Having lived and worked in New Jersey for over 30 years, my husband and I have built a healthy retirement nest egg. Our concern is one or both of us will ultimately need long-term care that could wipe out our savings. What are the issues regarding long-term care in New Jersey?

The Problem: The Cost of Long Term Health Care. About half the people reaching the age of 65 are expected to enter a nursing home at least once in their lifetime. A 55-year-old New Jersey resident today is expected to pay over $300,000 for one year of nursing home care when he or she is likely to need it 25 years from now at the age of 80. Based on the average nursing home stay, total costs are expected to reach $1.3 million per person — easily wiping out a lifetime of savings for many families. New Jersey's longterm care costs are among the highest in the country.

The Solution: Long Term Care Insurance. Just a quick background on long-term care (LTC) and long-term care insurance. Let's start with what conditions would fall into the category of LTC: a prolonged physical illness, a disability, or a cognitive impairment, such as Alzheimer's disease. The need for LTC is generally driven by the inability to perform one or more of the six activities of daily living: bathing, continence, dressing, eating, going to the toilet and transferring (getting out of bed). LTC insurance is designed to cover the expenses of long-term care.
Before we dig into LTC insurance policies, let's dispel two common myths about publicly provided LTC.

Myth No. 1: Medicare Covers LTC Costs. Unfortunately, Medicare covers very limited circumstances in facilities of Medicare's choice for a mere 100 days and may require the patient to pay a significant amount of coinsurance.

Myth No. 2: Medicaid Covers LTC Costs. Unfortunately, Medicaid covers long-term care in locations of Medicaid's choice for those who meet Medicaid's stringent financial requirements. Eligibility for Medicaid in New Jersey requires proof that the patient receives a very modest income and has insignificant assets beyond a limited amount of equity in the home. To avoid abuse, Medicaid eligibility includes a detailed review of a couple's combined assets and a five-year "lookback period" for spending down assets. Medicaid is designed to cover impoverished people.

LTC insurance provides financial protection from the exorbitant cost of long-term care. Most policies cover the cost of care in a nursing home, adult day care center, assisted living facility or your own home. Most policies will cover the cost of care from a licensed agency, independent licensed professional or an unlicensed caregiver. While many people would choose to receive care in their home, they shiver at the thought of receiving assistance in bathing or going to the toilet from a son, daughter or even a spouse. During this challenging period in someone's life, LTC insurance gives the patient control of where they will receive care and by whom. Long-term care insurance policies should be examined based on four key criteria:

1. The Elimination Period. This defines how long you will pay for your own care before the policy begins paying. The longer the elimination period, the lower the cost of the policy. A 90-day elimination period, which is common, could cut the policy price by 20 percent.

2. Daily Benefits. This defines how large a benefit will be paid. For example, a $300 daily benefit policy will pay approximately $110,000 per year.

3. Inflation Protection. This is a critical part of any policy. In order to keep up with the rising costs of LTC, most policies provide for 5 percent compounding of benefits. Without this compounding, your $300 daily benefit would not provide a great deal of coverage when you need it in the future.

4. Length of Coverage. Coverage lengths range from one year to an entire lifetime. A four-year length of coverage, which is common, could cut the policy price by 40 percent versus the cost of lifetime coverage.

There are advantages provided to couples that purchase LTC insurance from the same company. Many insurers provide sharedcare policies, providing a shared pool of benefits. Instead of having two policies that cover a five-year period, you wind up with 10 years of coverage that can be utilized by one or both of you. Lastly, many adult children have purchased LTC insurance for their parents and loved ones once they realize all the benefits it provides.

Action Step — Establish Long Term Care Insurance. Establishing LTC insurance immediately reduces the financial and psychological burdens that will ultimately plague most families when the need for long-term care arrives. Like most insurance, the earlier you start your policy the lower your cost of the policy.

Aaron Skloff is an accredited investment fiduciary, chartered financial analyst and holds a master's of business administration degree. He is the chief executive officer of Skloff Financial Group, a Berkeley Heights-based registered investment advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle-sized companies. He can be contacted at (908) 464-3060.

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