Long Term Care Insurance-You May Get It Like It or Not


Many employees can buy group long term care insurance through their employer, in fact when it is available few actually enroll and fewer still younger people buy such insurance when it is quite inexpensive.  Such coverage is also available on a non-group basis.  LTC insurance provides a benefit when an individual is unable to perform the normal activities of daily living such as eating, bathing, dressing, etc.  While most people think of it as coverage for a nursing home, LTC actually provides in-home benefits as well.  Medicare or private health insurance does not cover long-term care; the services are custodial in nature and not active medical care. 

It is not hard to see why a twenty year old would avoid such coverage. It is hard to imagine the need for LTC services forty or more years in advance and likely, a young person has more pressing financial concerns than to commit to a monthly premium for this insurance. 

LTC insurance is still largely untested in the long term, insurance companies offering such coverage really do not know the extent of the liabilities they are committed to or if the premiums charged will be adequate when the liabilities hit over the next several decades.

There are many forms of financial protection people should consider.  Things like adequate life insurance, long-term disability insurance (an even more likely event for a working person than death) and even taking full advantage of the tax benefits of a flexible spending account.  For whatever reason, the average person chooses to spend their available money in different ways.

Do I have a deal for you.
Do I have a deal for you.

The choose part may be rapidly disappearing and it will be interesting to see if Americans are really in the mood for more government mandates telling them how to spend their money.  The Wall Street Journal reports that Senator Kennedy is preparing to include a form of long-term care in his health care reform legislation.  Once age 18 is attained a worker would be enrolled automatically and premiums taken from their pay.  Premiums would be age based, but the average premium could not exceed $65.00 per month.  On top of a premium cap, the coverage would be more flexible than traditional LTC and easier to collect the benefit, plus the individual could be working and collect the benefit. 

Nobody can possibly know what such a program will really cost.  To say there is a dollar cap on the premium, while making the coverage more generous than traditional LTC coverage seems a bit foolhardy although certainly consistent with political thinking about entitlements; underestimate the cost and promise the world.

There is something fundamentally wrong with government adding mandate after mandate on workers and the additional taxes (perhaps called premiums) to pay for them, especially when we all know that once instituted such programs grow in cost and demand a greater and greater commitment on workers and liability for the taxpayer.  If we follow this line of thinking why not mandate long-term disability coverage, or life insurance, a workers lack of both adds a burden on society as well.

Having operated employee benefit programs for over forty-five years including long term care and all other traditional programs, I am the first to admit that many, way too many people do dumb irresponsible things and do not pay attention to their own financial security the way we may wish they did.  However, does that mean it is the role of the federal government to mandate coverage accompanied by greater depletion of one’s take home pay?

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