The long-term care insurance industry is changing rapidly with costs rising significantly, with women feeling the impact more than men.
For 55-year-olds, the average cost for a male purchasing $164,000 of long-term care insurance protection is $925 a year, compared with $1,225 for a woman, according to the AALTCI 2014 Long-Term Care Insurance Price Index.
“Women accounted for two-thirds of the $6.6 billion in claims paid by insurers last year,” said Jesse Slome, executive director of the American Association for Long-Term Care Insurance.
Genworth is switching to gender-based premium rates and discontinuing coverage for informal caregivers on February 24 with the rollout of its Privileged Choice Flex2 product.
"The changes to home health care providers in this product are a requirement that informal caregivers who are non-licensed or non-certified now must have some training or background in care giving, for example lifting and transferring patients from bed to chair," said Tom Topinka, spokesperson with Genworth.
About seven in 10 65-year-olds will need care and $71 out of $100 of the cost of that care will be paid out by family members, according to Dr. Robert Pokorski, vice president and medical director of Prudential Individual Life Insurance.
"Medicare doesn't generally pay for long-term care because it’s custodial in nature, meaning, help with the activities of daily living, such as bathing, dressing and eating," said Pokorski at a press luncheon yesterday hosted by Prudential in Manhattan.
But under Medicare Part A, it does pay for short-term care. In fact, in a typical year, Medicare pays an estimated $64 billion in skilled nursing care benefits.
“The need for care increases as we get older," said Pokorski.
Though women own only about 58 percent of in-force long term care insurance policies, they account for nearly 67 percent of all claims and 71 percent of all claim dollars paid, according to Genworth.
"Up until about 6 months ago, every insurer charged men and women the exact same amount as long as they were the same age, selected the same benefits and each qualified for the same health class," said Arthur Rudnick, independent long-term care insurance specialist with New York Long Term Care Brokers in White Plains.
For consumers looking to purchase a long-term care insurance policy that reimburses for informal caregivers, such as family members or a neighbor, Genworth's Privileged Choice Flex policy is being phased out.
"The last application accepted for Genworth's Privileged Choice Flex must be in their office by February 24, which means all applications must be submitted by February 20," Rudnick told Financial Advisor.
While Genworth's long-term care policy requires receipts and invoices to reimburse for licensed home health care, Prudential's BenefitsAccess Rider disburses funds, no questions asked, once a claim for long-term care is approved.
"One of the distinctions between BenefitAccess and a long-term care rider is that it pays based on a condition not for specific care of a condition," said Mark Hug, executive vice president with Prudential Individual Life Insurance.
In other words, the benefit can be used for any need or want, including to pay informal caregivers as well as a cruise around the world or for medical expenses.
"The BenefitAccess Rider can give consumers access to income-tax-free dollars to address chronic illness costs or a cognitive impairment like Alzheimer's, stemming from an individual's inability to perform two of the six acts of daily living," said Hug.
The rider advances up to 100% of the death benefit should the policyholder become chronically or terminally ill by drawing down 2 percent per month until the death benefit is met.
"We expect our BenefitAccess Rider to be popular among financial advisors because it doesn't require the health licensing that long-term care policies require to sell and with it advisors can help address the death benefit issues and chronic illness issues of their clients," Hug told Financial Advisor magazine.
Prudential is developing a Financial Wellness Index which can assist in determining how much coverage is needed.
"It's designed to help individual employees understand where they may have gaps in financial protection when considering the risk of premature death, becoming disabled or incurring out of pocket expenses related to an unexpected medical event," said Bob Patience, vice president of voluntary benefits with Prudential Group Insurance.
If all else fails, there's always Medicare Supplement Insurance available after age 65. Premiums are deductible as medical expenses. Currently, men can expect to pay $159.77 a month and women $184 a month.