Americans will live, on average, until age 78, according to the World Bank. Our increasing longevity creates an interesting situation for providers of health care. While most traditional health insurance plans provide for emergency medical situations, most do not offer provisions for assisted living, adult day care and home health services. Long-term health insurance, also known as long-term care insurance, offers options for services related to permanent care.
Long-Term Insurance Defined
"Consumer Reports" states that long-term health insurance options have been offered since the 1980s. These insurance policies cover nursing care facilities and also full-time, late life care. Premiums are paid over many years, while the insured person is employed full time, and then used after retirement from work.
Types of Insurance
Long-term medical insurance policies vary in coverage, but the minimum policies cover housing costs. Policies have elimination periods, or deductibles, applying insurance coverage only after a set number of days in which the insured must cover the fees before the policy makes any payment. "Consumer Reports" states that this period may be as long as 100 days. Insurance is sold for set periods of time. Lifetime coverage is available, but the premiums are beyond the budget of most Americans, according to the consumer investigative group.
Advantages
A long-term health insurance policy may have advantages for certain people. America's Health Insurance Plans, an association of 1,300 insurance companies, reports that 19 percent of people over 65 "...experience some degree of chronic physical impairment." By the age of 85, this figure increases to 55 percent, according to the association. Setting aside funds for medical use is a wise way to save for this future care. Purchasing a policy at a young age is recommended by insurers. Younger applicants have a greater chance of passing the qualifying physical, when compared to policy applications made after retirement age.
Disadvantages
There are negatives associated with the policies. The holder assumes that the insurance company will continue in operation for decades in the future. Other problems include economic inflation and lack of any escalation factors in policy language. Coverage is based on the current prices for home day care workers, not on increased wages by the time care is necessary. Most policies include a premium escalation clause to cover company fees, and this premium increase is significant. "Consumer Reports" cites routine increases of 50 percent for policy holders. Yearly elimination periods and deductibles also apply, which the elderly may not be able to meet before coverage begins.
Expert Insight
"Consumer Reports," after careful analysis of long-term policies, makes a list of recommendations to protect the policy holder, as well as provide for future health needs. Its suggestions include buying a policy from companies with high ratings (B+ or better) from Weiss and Standard & Poor's financial analysts. It's recommended to select policies with coverage for assisted-living and nursing homes. Policies should cover future costs, with a cost-of-living escalator clause. Consider a plan that covers only four years. Most nursing home residents, age 65 years or older, use the facility for less than five years.
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