Long-term-care insurance fast-growing industry

When her husband, Joseph, died this March after a long battle with cancer, Sue B. Patrick of Powhatan County finally took a step the couple had considered for years but never took.

She bought a long-term-care insurance policy for herself.

"It is something that we had thought about on and off because long-term care can be so expensive," said Patrick, 62. "Once you get sick, you usually cannot get the insurance. Even if you do, it is very difficult. After [Joseph] passed away, I decided I wanted to check into it and see the options."

Long-term-care insurance has been developed over the past 30 years and has become one of the fastest-growing types of policies.

They are designed to cover care that generally is not covered by health insurance, Medicare or Medicaid. Depending on the type of policy, long-term policies cover the costs of in-home or nursing-center care for people who need help with the basic activities of daily living such as eating, dressing, bathing and walking. They also may cover assisted-living care and sometimes the costs of modifying a home so the recipient of the long-term care can keep living there safely.

The cost of such care can be enormous, and it is growing. According to an annual cost-of-care survey by Genworth Financial Inc., a Henrico County-based insurance company that offers long-term-care insurance, the national median cost of one year in a private nursing-home room is about $77,745 in 2011. That was 49 percent more than the country's median household income of $51,425.

In Virginia, the cost is about $77,380, according to the study.

Although about 7.2 million Americans have a long-term-care policy, that represents only about 3 percent of the adult population. But about 12 million are expected to need long-term care by 2020.

Patrick, who bought a long-term policy in May, said she was pleased with the coverage and premium price, which runs less than $3,000 per year.

"I was pleasantly surprised. It wasn't as expensive as I thought it would be," she said.

"It cost pretty much less in a year than what a half a month of nursing care or in-home care in this area would be," she said. " "You are going to pay anywhere from $5,000 to $6,000 a month at most places.

"In my personal situation, I wish we had gotten it earlier before my husband got sick," she added. "Had we known he was going to develop cancer, we would have gone on and done it earlier."

The Virginia Bureau of Insurance recommends shopping around before buying a long-term-care policy. More than 40 companies are authorized to sell the insurance in Virginia, and premiums vary depending on the age of the buyer.

"Before you buy long-term-care insurance, decide what coverage you need and can afford," the agency advises in its buyer's guide. "Long-term-care insurance can help to safeguard your assets and protect your financial independence, but it can be expensive."

Couples may receive a discount, and the younger you are when you buy a policy, the cheaper it will be.

"We suggest that people start looking as young as possible, but around age 50 is a typical age at which consumers will at least begin to start looking at a long-term-care policy," said Beth Ludden, senior vice president of long-term-care product development for Genworth, which has about 1 million long-term-care policyholders.

Genworth said premiums typically run about $2,200 per year.

"The way the policies are priced is that the younger you are, the less you will have to pay over time," Ludden said. "Age 50 seems like a good choice because for most people it is when they are looking at retirement planning."

According to AARP, in 2008 the average annual premium for a 40-year-old policyholder was $2,050, while a 50-year-old paid $2,306. For a person older than 60, the cost increased to $3,109, while a 70-year-old policyholder paid $6,007.

When choosing a long-term-care policy, the buyer needs to make several decisions that will influence the cost.

One choice is the "elimination period" or deductible, the length of time an individual must pay for covered services before the insurance company will begin to make payments. That could vary, for example, from 30 to 180 days, and the longer the elimination period in a policy, the lower the premium.

Buyers also must choose the maximum period of coverage, which might be anywhere from two years to unlimited. "The two most popular options are three- and five-year maximums, and that is based on the average length of stay in a nursing home," Ludden said.

She said group sales of long-term care is the fastest-growing segment of the industry, rising about 9 to 10 percent a year, but most policies are still sold to individuals.

"I believe that this whole migration of the baby boomers into their late 50s and early 60s will continue to push demand," Ludden said.

In many cases, people still rely on family, or pay out of pocket, for long-term-care services, said Wendy Boglioli, a national spokeswoman for long-term care for Genworth. "The tendency is to put it off," she said.

More than 80 percent of long-term care is still provided by family members, yet one of the major motivations for people buying the insurance is a desire to avoid being a burden to their children.

Boglioli is a former Olympic gold-medalist swimmer whose own father had to go into nursing care at age 59, more than 30 years ago. At the time, the cost was about $18 a day, she said. The cost is now $232 a day for her mother, who is in nursing care at age 90.

Neither of them had long-term-care insurance. "Thank goodness, there are seven of us kids" to help cover the costs, Boglioli said. "But at every point, you cry uncle.

"It is all about planning," she added. "I always encourage people to talk with a financial adviser or planner — someone who is well-versed in long-term-care planning."

Single people are more likely to need long-term care from a professional provider than a married person, and women are more likely to need it than men because women typically live longer.

Edwin Bradstock, a Chesterfield County resident, and wife Kathryn bought a long-term-care policy years ago.

"We were in our 70s at the time, and we figured we would need long-term care," Bradstock said. "I am 91 now, and I don't know if it will pay off for me, but I know it paid off for my wife, and more. It paid off more in the long run than what we put into it."

He describes the $2,100 annual premium as expensive but says he is pleased they got the insurance. It helped cover costs for his wife when she needed several years of in-home nursing care before her death in 2005.

Bradstock has been drawing on his policy since March. He has a home-care aide come by several days a week to help him with chores and cooking, and going for a walk. It also helped cover costs for putting hand railing in the house, he said.

"Myself, I don't know if I will recover everything I have put into it, but it sure has eased my monthly expenses," he said.