Current Good Health Allows You to Plan for Long-Term Health Care - Older People Get Declined for Coverage Due to Poor Health

An email I received from a financial advisor recently said he always discusses long-term care planning with all his old clients. However, he couldn't understand why most of their applications were turned down for coverage. 

Recent data from the 2022 Milliman Long-Term Care Insurance Survey and published by the American Association for Long-Term Care Insurance (AALTCI), a national consumer advocacy and education group, provides a possible explanation.

The just released 2021 data shows that 49.7% of all Long-Term Care Insurance applications for those aged 70-74 were declined for coverage. For people in the age group 65-69, the percentage turned down was 38.2%. In the 60-64 age group, 30.4% of the applications were declined due to pre-existing health.

Younger age groups had much better luck. Only 20.4% of those aged 50-59 had unfavorable underwriting decisions. As you can imagine, ages 40-49 showed a decline rate of 12.4%.

These numbers do not reflect the number of people who wanted to apply for Long-Term Care Insurance but were told by their agent that they were ineligible due to health. 

Your money pays for Long-Term Care Insurance, but it's your health that really buys it. Insurers decline nearly half of those who apply after age 70.

Jesse Slome, director of the American Association for Long-Term Care Insurance.

Some Financial Professionals Don’t Understand the Consequences of Delaying

Too many people think they don't need to look into Long-Term Care Insurance until they are older and have health problems. Unfortunately, that is usually the wrong time to get coverage since many of these health issues can make you uninsurable or increase the premium due to pre-existing health problems. 

The problem is not just the general public. Many insurance agents and financial advisors suggest waiting until you are older to obtain coverage. Radio host Dave Ramsey is perhaps one of the money famous of those who say wait.

Dave Ramsey is a big fan of having LTC Insurance as part of a retirement plan. However, he tells listeners to wait until age 60 despite premiums being higher. Perhaps the more significant concern is many people who wait until age 60 or later cannot obtain coverage or get rated with an even higher premium for pre-existing health issues. 

Family History Becoming Bigger Part of Underwriting

Another concern that many insurance agents and financial advisors are unaware of is many insurance companies are now using some family history as part of the underwriting process. If you have a first-degree blood relative who had some type of dementia, for example, you might not be able to get preferred rates. 

When you delay too long, your family history could change. For example, you may have a 75-year-old mother when you are in your 50s. Waiting even five years increases the likelihood of the family member developing dementia which could impact your cost and even insurability. 

Every insurance company has its own underwriting criteria, and a qualified Long-Term Care Insurance specialist can help you navigate underwriting and the many companies and their options. Don't forget that premiums also vary widely - over 100% between insurance companies for the same coverage.

Premiums More Affordable When Obtaining Coverage Younger

Premiums are calculated by multiple factors, with age being the first one. The younger you are, the lower the premium will be, and the more likely you can obtain coverage - maybe get preferred health rates - How Much Does Long-Term Care Insurance Cost? | LTC News.

There is a lot of money being paid out by insurance companies for long-term health care. In 2021, the top companies paid over $12.3 Billion in benefits. The total incurred claims from all LTC Insurance policies from 1991 through 2020 totaled $167.3 Billion. Perhaps even better news, the insurance companies are paying the claims without hassle.

While more younger people receive long-term health care, most of the long-term insurance claims are older (most people obtain coverage in their 50s). Eighty-one percent of the Long-Term Care Insurance claims were for people aged 75 and older. 

Most LTC insurance claims start with in-home care, and half end with care at home. How do Long-Term Care Insurance claims end? Mostly death, with 67% passing away while receiving benefits. There are 20% that recover and go on to live independently. Only 13% exhaust their benefits.

The AALTCI reports that for LTC Insurance claims that last one year or less, conditions like cancer and musculoskeletal lead the way as the primary diagnosis. For claims that last longer, cognitive issues are understandably more common.

Declining Health Comes with Aging

People need long-term health care due to declining health, mobility problems, dementia, and the frailty of aging. Costs for long-term care services are exploding nationwide due to many factors, including inflation, higher demand for care, increasing labor costs, and even staff shortages in some places in the country.

The LTC NEWS Cost of Care Calculator illustrates these costs based on state and city/town within a state. The cost of long-term health care will vary depending on your location and the types of services you will require. 

For some locations, like in the northeast and the northwest states, the costs are higher compared to most southern states - Cost of Care Calculator - Choose Your State | LTC News.

Being prepared for the consequences of aging will reduce the stress on your family and your finances. You also will have access to your choice of quality care services with less concern for the cost of care. 

Fragile 50s

Once you get into your 50s, many people will start to face declining health. Many are easily treatable - if you see your doctor and get regular check-ups. Others are more serious. You, or someone you know, probably suffer from some of these health conditions:

• high blood pressure
• hypercholesterolemia (high cholesterol)
• diabetes
• osteoarthritis 
• cancer (skin cancer is the most common)
• obesity
• osteoporosis
• heart disease
• bladder issues
• hearing loss
• anxiety and depression
• loss of libido
• degenerative joints
• sleep disorders
• slower metabolism
• kidney and liver disorders
• cataracts
• tendonitis
• carpal tunnel syndrome
• thyroid disorders
• enlarged prostate (BPH - benign prostatic hyperplasia)
• increasing PSA
• decreasing hormone levels for men and women
• GERD (gastroesophageal reflux disease - acid reflux)
• decreased muscle tone
• hernia
• essential tremor

There is a risk for more severe health problems like Parkinson's, MS, Lou Gehrig's Disease (amyotrophic lateral sclerosis ALS), Alzheimer's, and dementia can start showing symptoms in your 50s and beyond.

Aging brings changes in our health, body, and mind. We suffer from decreased mobility. Everyone ages differently, so being proactive is essential, especially for retirement planning and addressing future long-term health care.

LTC Planning – About Family and Finances

Many people fail to understand (unless they have experienced it firsthand) the impact placed on the family members when an older parent needs help with daily living activities or supervision due to memory loss. Most people have told researchers that they wish never to be a burden on their adult children when the time comes they need long-term health care. Yet, that is precisely what happens since too many people fail to plan beforehand. 

If you have an LTC Insurance policy, your loved ones will have time to be family instead of becoming caregivers. The result is less stress and burden on those you love.

The U.S. Department of Health and Human Services reports that about half of us who reach age 65 will need long-term health care at some point in our lives. Aging has real consequences, and the costs and impact on families can be devastating.

Will You Be Impacted by State LTC Tax?

Now that the State of Washington is instituting a tax on those adults 18 and older who do now own an LTC Insurance policy, the need for coverage has increased. Many younger people (under age 40) are looking into coverage, albeit to avoid a tax. Several states, including California and New York, are highly active in developing their LTC tax. 

Tax or not, Long-Term Care Insurance should be considered before retirement. Because of the risk of health problems limiting or preventing you from obtaining coverage, applying for LTC Insurance in your 40s or 50s is ideal, according to experts. 

Be sure to seek help from a qualified specialist when shopping and designing an LTC Insurance policy. Every insurance company must file its products and pricing to each state's insurance department before being allowed to sell in that state. Because of regulation, agents can't offer 'deals," but premiums vary over 100% between companies. 

The numbers are staggering. If you are considering waiting until you are older, you might be wise not to delay your decision. It is your good health that allows you the ability to plan and protect your income, assets, lifestyle, and legacy from the impact of future long-term health care.