Sometimes even smart people don’t understand long-term care insurance–even if they write for a leading magazine

I understand that journalists don’t have time to check all their facts, but this recent article in Forbes is riddled with falsehoods and half-truths.  It doesn’t even read like something a journalist would write.  It sounds like he’s just a salesman hawking for “longevity annuities”.

If you want to suffer through the article in one sitting, you can read it at this link.

Otherwise, my response, with quotes from the article, is below.

With 38 years of journalism experience, I am sure that Mr. Baldwin is very concerned about accuracy in reporting. Here are some corrections which need to be made to this article:

Mr. Baldwin states: “You are supposed to start chipping in premiums at a young age like 55, building up equity that covers you much later in life.”

This is a common misunderstanding that most consumers have about long-term care insurance. Many people think that the amount of benefits in their LTC policy is dependent upon how long they have paid premiums. They think that they build up the values of the policy as they pay each premium each year. That is not true. After just one monthly premium payment, the full policy benefits are available for any claim made.

Just like with life insurance if someone pays the first monthly premium and then gets hit by a truck the next day, the full death benefit is payable to the beneficiary. The same is true for long-term care insurance. The entire value of the policy is available for any claim made after just one premium payment.

Additionally, long-term care can occur at any age, not just “much later in life”. One of the leading long-term care insurers reported that about 40% of their claims were for policyholders under the age of 65.

Mr. Baldwin states: “The LTC policy covers only LTC. How do you know that it’s a nursing home bill you will be paying?”

It is true that a long-term care policy only covers long-term care. However, most people who need long-term care never go to nursing homes, especially those who own long-term care policies. Less than one-third of long-term care insurance claims are for nursing home care. Most long-term care claims are for care received at home, not in a nursing home.

Mr. Baldwin states: “The LTC policy permits the seller to change the terms after you have put money in.”

This statement is false. Long-term care insurance is highly regulated by both federal and state laws. No insurance company can change the terms of any long-term care policy. Period.

Mr. Baldwin states: “LTC policyholders have confronted surprise rate hikes on the order of 45% to 85%.”

Some long-term care policies have guaranteed level premiums for life. But most long-term care policies are “guaranteed renewable” which means that the insurer has a limited right to request a premium increase from each state’s insurance commissioner.

In most states the premium increase can only be approved if the insurer has incurred significantly higher claims than the insurance commissioner had originally approved for that policy. In most states, premium increases must go towards paying claims only—not profits. And the premium increases must be shared by all the owners of that type of policy.

Most long-term care policyholders who have had premium increases have had only 1 or 2 premium increases over a 10 to 20 year span. And most premium increases have been closer to 20%, not “45% to 85%”. I’m sure most of us wish our medical insurance had only two increases over the past 10 to 20 years.

In 2004, most states adopted “Rate Stabilization Regulations” for long-term care insurance. Most long-term care policyholders who have purchased their policies after those regulations went into effect have not had any premium increases.

Mr. Baldwin states: “They then have the unpleasant choice of either walking away from the premiums they have sunk so far or else throwing good money after bad.”

This statement is false. Every long-term care policyholder can reduce their benefits at any time. Most people who have had premium increases approved for their long-term care policy have simply reduced their benefits and avoided any premium increase (e.g. reducing a 5% compound inflation benefit to a 4.2% compound inflation benefit.)

Mr. Baldwin states: “Imagine buying a Lexus for $5,000 down plus $500 a month under a contract that allows the dealer to raise the monthly payment if he wants to. Six months in, it goes to $800, and you have a free choice between paying up or handing in the car and losing your down payment. That would be a ridiculous contract to sign. LTC buyers sign contracts like that.”

This Lexus example could only be an accurate analogy if Mr. Baldwin included all of the following requirements for the monthly payment increase:

  1. The state’s “Automobile Commissioner” regulated how much profit the Lexus dealer could make on each car,
  2. The state’s “Automobile Commissioner” had to approve any increase in the monthly payment,
  3. The increased monthly payment approved by the Commissioner had to be shared by all Lexus owners who had purchased cars from that dealer,
  4. The state’s “Automobile Commissioner” would only approve increased monthly payments after the Lexus dealer incurred higher losses and had much lower profits than the “Automobile Commissioner” had originally approved for the Lexus dealer,
  5. The “Automobile Commissioner” required the Lexus Dealer to give you the option to keep your payment at $500 but switch to a different Lexus one grade lower, and, lastly,
  6. The monthly payment increase was required in order to keep all the Lexus owners in their cars, driving safely, and the Lexus dealer in business and able to maintain all the cars and guarantee all the warranties.

Lastly, Mr. Baldwin states: “To collect on an LTC policy, your family may have to put up a fight. For an illustration of the point, read this account in the New York Times of what happened to a woman who bought a policy from CNA and then had a stroke.”

The U.S. Senate Committee on Aging commissioned the federal Dept. of Health and Human Services to conduct an audit of the top long-term care insurers’ claims practices. The 21-month study invalidates Mr. Baldwin’s statement. Stories like this from the NY Times are anomalies. You can download the actual study at the following link:


Scott A. Olson


Focus on the Major Benefits–the “fuzzy dice” are not important!

Nearly everyone who receives care today receives that care either at home or in some type of facility–care that is provided by loving, compassionate people.

I’m quite certain that 30 years hence, care will still be provided by loving, compassionate people either at home or in a facility–making the point of this article moot.

Since HIPAA standardized long-term care benefit triggers in 1996, nearly every LTCi policy pays benefits for care received at home or in a facility.

Over 200,000 policyholders receive over $7 billion each year in long-term care insurance claims benefits. And a federal audit of LTCi claims practices concluded that LTC insurance is working.

Buying a long-term care policy because it has the “alternate plan of care” benefit is kind of like buying a car because it has “fuzzy dice” hanging from the rear view mirror. In other words, it’s meaningless.

Just be sure to buy a policy that has good home care benefits and facility benefits. Don’t worry about the benefit triggers–they were standardized by HIPAA in 1996.

To learn more about the federal gov’t’s audit of LTCi claims practices go to:


Scott A. Olson

A “perfect” long-term care policy?

If you could design “perfect” long term care coverage for yourself, what would it look like?

I recently asked someone this question and she said:

“It should have premiums that are guaranteed to never go up.  It should be able to return most, if not all, of my premiums to my heirs if I never need long-term care.  It should have some type of cash value so that if I decided to cancel it for any reason in the future I could get most, if not all, of my money back.  It should give me the choice to receive my care at home and not just in a facility.”

What most people don’t realize is that policies like this are available and have been available for many years.

To learn more about this type of policy, contact me at:


Should You Buy Long Term Care Insurance? Pros and Cons.

Most of what I find on the internet about long-term care insurance is, to put it mildly, terribly miss-informed.  This recent article from a website that rates retirement communities was surprising balanced.  And the comments by members at the end of the article were very helpful.





One woman who had 3 different outcomes when she applied for long term care insurance.

Recently one of my associates asked me about a client of his who had been declined for long term care insurance.  She’d applied for coverage with a company that her financial advisor had recommended for her and she was declined because of “sticky platelet syndrome” (SPS).  ”Sticky platelet syndrome” is a blood disorder that is usually treated with blood thinners like plavix or coumadin or aspirin.

After discussions with several underwriters with some of the top long term care insurers, I recommended to my associate that she apply for long term care insurance with two of the leading long term care insurers.  Fortunately, both of them approved her.

One of them approved her with “substandard” rates (which are about 25% higher than their standard rates.)  That insurer also decreased the amount of benefits she had applied for.  She wanted a very long Benefit Period, but they approved her for a little more than half of what she had applied for.

On the other hand, the other insurer approved her with all of the benefits she had requested.  Also, since  she had no other health issues and she met the “preferred criteria” for the second insurer, they approved her with the “preferred health discount”.

What are the lessons to learn here?

1)  Just because you’ve been declined by one long term care insurer, does NOT mean that you’ll be declined by all.

2)  Each of the top ten long term care insurers has a unique way of looking at your health history.  Whichever insurance agent you work with, make sure that he or she knows the unique “underwriting nuances” that each company has.

3)  Just because one long term care insurer approves you with a “substandard” rate, does not mean that they all would.  Each long term care insurer has a unique way of determining who can qualify for the ‘preferred’, ‘standard’, or ‘substandard’ rates.

1 Comment

Is there hope for someone who has been declined for long term care insurance?

I was reading an online “newspaper” the other day.  There was an article about long term care insurance and the importance of planning for the financial consequences of needing long term care.

I like to read the comments at the end of articles.  I often find the comments more interesting than the article itself.  I was surprised that a number of people left comments believing that only those with “perfect health” could qualify for long term care insurance.  Nothing could be further from the truth!

Since 1995 I’ve helped hundreds of people with health problems obtain quality long term care insurance policies, from highly rated insurers, at affordable prices.  The key is knowing each long term care insurer’s “underwriting nuances”.

For example, one long term care insurer might not insure someone who has had a Transient Ischemic Attack (aka T.I.A. or “mini-stroke”) in the past 5 years.  Whereas another long term care insurer can insure someone who has had a “mini-stroke” just 12 months ago.

An application submitted to the first insurer would result in an automatic declination.  An application submitted to the second company would most likely be approved.

This is an over-simplified example, but it illustrates the central point:  Most of the leading long term care insurers have very different ways of determining who is insurable and who is not insurable.

Is there hope for someone who has been declined for long term care insurance?  ABSOLUTELY!


Headline: IBM stops selling computers–future of computer industry in doubt!

In December of 2004, the company that set the standard for personal computers (remember “IBM-compatible”), stopped selling personal computers.  After dominating the PC market for most of two decades, IBM abruptly left.

No newspaper editor was silly enough to write the headline:

IBM stops selling personal computers–
future of PC industry in doubt!

Yet, earlier this month, after one of the larger long-term care insurers announced that it would stop selling new long-term care insurance policies, “experts” concluded that the future of long-term care insurance was “in doubt”.  The headlines read:

“Long-term care insurance begins to fade away”
“Is long-term care insurance doomed?”
“Is the long-term care insurance market sick?”

IBM made a simple business decision in 2004.  They concluded they were not nimble enough to profit from low-margin, price-sensitive, computer manufacturing.

Insurance companies also make simple business decisions. There are significant overhead expenses to create, market, and underwrite long-term care insurance.

These expenses are incurred regardless of how many (or how few) policies are actually sold.  If sales are too low, the overhead costs per policy make it less desirable for the company to sell new policies.  It’s MicroEconomics 101.

Fact:  More people own long-term care insurance today
than ever before in history.

More than twice as many individuals own long-term care insurance today as did in the year 2000.

The number of individually purchased long-term care policies has increased by 129% in the past 10 years.

Does that sound like a market that is sick?

While some LTC insurers’ sales have been down over the past few years, other long-term care insurers have had double-digit growth.  One of the leading long-term care insurers had a 36% increase in sales last quarter, compared to the 3rd quarter of 2009!

One highly-rated insurer that sold long-term care insurance for nearly 20 years, and then stopped selling new LTCi policies, started selling new LTCi policies again after significantly reducing their overhead and streamlining their business processes (something some insurers will have to do in order to be competitive again in this industry).

Medicaid and the CLASS Act are not the solution to the “long-term care tsunami” headed our way.  Government-approved long-term care partnership policies ARE the solution.

This recent announcement, however, has revived some common misconceptions about long-term care insurance.  In the next few posts, I will address these misconceptions:

  1. Can my long-term care insurance policy be cancelled by the insurance company?
  2. What happens to my long-term care policy, if my insurer stops selling new policies?
  3. How do I know if the long-term care insurance company will still be in business when I need to make a claim?
  4. What happens to my long-term care policy if the insurance company goes bankrupt?
  5. What happens to my long-term care policy if the insurance company sells my policy to another insurance company?

(originally published Nov. 6th, 2010).

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