April 18, 2008
Long-term care insurance
A means to protect your assets
by Paula Van Brocklin
You think it could never happen to you -- a debilitating car accident
at 25; a massive stroke at 40; or an early diagnosis of Alzheimer's at
55.
But what if it did? Would your existing assets cover the cost of an
extended stay in a nursing home or an assisted-living facility? And if
so, would your family endure financial hardship because of it?
These are unpleasant questions to ponder, but that's exactly what
benefits specialist Jerilyn Rasmusson advises employees to do when
considering long-term care insurance.
"We all live in a world of what-if scenarios," Rasmusson said. "Our
mindset has to change because [long-term care insurance] is not just for
the aging."
In fact, 43 percent of the 12 million Americans who need long-term
care are between the ages of 18 and 65, according to the Kaiser Family
Foundation. Rasmusson said if an individual enters a nursing home at a
relatively young age, the family bears the cost for several years. To
make matters more difficult, Medicaid, Medicare and ISU's health
insurance plan do not cover nursing home expenses.
"If you go into a nursing home, figure the highest dollar amount --
say $7,000 a month -- times 12 months. Take that number times the number
of years you may be in a care facility. That's a lot of money,"
Rasmusson said.
Indeed. Assuming a 10-year stay, the cost would be $840,000.
Eligibility
Since 2006, Iowa State has partnered with John Hancock Life Insurance
Co. to offer all benefits-eligible employees long-term care
insurance. The plan covers the employee and several other family
members, including the employee's spouse or domestic partner; parents
and parents-in-law; grandparents and grandparents-in-law; the employee
and spouse's adult children and their spouses; and the employee's and
spouse's siblings and their spouses. Family members can apply for
coverage even if the employee is not enrolled in the plan.
Cost
The cost of ISU's long-term care plan is based on your age when you
enroll and the level of coverage you desire. The premium is locked in
when you enroll, and will never go up unless you decide to increase your
coverage. If you ever resign, retire or are dismissed from Iowa State,
the coverage goes with you for the same cost.
Rasmusson said the first thing employees must decide when considering
long-term care is how much coverage to purchase. According to John
Hancock, nursing homes charge an average of $150 per day. Rasmusson said
that figure is a good starting point, but she encourages employees to
examine their family histories, too.
"You need to look at yourself and you also need to look at your
family genetics," she said. "Do you have a grandmother who lived to 95?
Was she in her home her whole life or did she go to a nursing home? What
other illnesses do you have in your family?"
ISU's plan offers a daily maximum benefit (the cost per day the plan
pays for covered services) of $100 to $300 in $50 increments. Rasmusson
said it's better to enroll sooner than later because the premium is
based upon your age. For example, if you enroll in the plan at 35 and
choose the $200 daily maximum benefit your cost would be $20 per
month. The same coverage at 50 is $44 per month.
"That's why it's a fantastic opportunity for folks to invest in
[long-term care] at a younger age," Rasmusson said. "They carry forward
the same premium and the same benefit."
It's even better to enroll within 30 days of joining the university
since new employees are guaranteed coverage on the first of the month
following their hire date. But current employees can still enroll at any
time; you'll just have to complete a health questionnaire. John Hancock
will review the form, and let you know in about 90 days if your
enrollment has been accepted. The same process applies for enrolling
qualified family members.
Options
ISU's long-term care plan offers a few additional provisions. One
option (nonforfeiture) allows you to stop making premium payments for
any reason, and keep a reduced level of coverage if you've been
continuously insured for at least three years. Another provision -- the
inflation protection option -- increases the daily maximum benefit
amount by 5 percent each year. Electing one or both of these provisions
will lock you into a higher monthly premium.
Besides peace of mind, there are a few additional benefits of
long-term care coverage. Iowa State's plan will reimburse 100 percent of
paid premiums to your estate if you die prior to age 65 without using
the coverage. If you die between the ages of 65 and 75, the premium
reimbursement is reduced by 10 percent each year. And, the premium is
tax deductible since employees pay the entire amount post tax.
Though long-term care is an optional part of ISU's benefit package,
Rasmusson says it's worth a second look.
"You can't predict the future, but you can protect the future," she
said.
For more information on Iowa State's long-term care plan or to
enroll, go to http://iowasu.jhancock.com
(username: iowasu; password: mybenefit).
