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WEST PALM BEACH, Fla. – Gone are the days when a family could be depended on to care for the elderly at home. As life expectancies increase so do prolonged illnesses that may prove to be too much of a financial burden. Long-term care insurance is coming to the forefront of more discussions as more baby-boomers head for retirement. Generally, long-term care covers the gamut from help with daily activities such as bathing, eating, dressing and skilled nursing care or rehabilitation training, either in a nursing facility or at home, to cognitive impairment such as Alzheimer’s. Long-term care deals primarily with care-oriented conditions- not cure-oriented. Fairborn, Ohio-based Wright-Patt Credit Union has even incorporated long-term care insurance as part of its employee benefits package. When employees were asked about new benefits they would prefer, a surprising 87.5% of employees indicated an interest in adding long-term care insurance as a benefit, with 49.9% of employees willing to share the cost. As a result, Wright-Patt launched a new cafeteria benefits plan that included long-term care insurance on January 1, 2001. The cafeteria plan allows employees to select both the type and level of benefits they require around a core offering of coverages, based upon their individual needs. The plan provides a basic long-term care package at no cost to all employees. The basic plan pays a maximum lifetime benefit of $29,200. Employees may buy up the plan to a maximum benefit of $204,400, at a premium that depends upon the age and health of the employee. The plan is portable, so those employees who leave can continue coverage by paying premiums on their own. The plan also features level premiums, so that once employees enroll, their premiums cannot change for the life of the coverage. The basic long-term package adds $26,000 in annual benefits costs per year, which is offset by reductions in other less popular benefits. Employees were given the choice to “buy up” those benefits that were lowered as part of the cafeteria plan in order to maintain coverage in areas important to them. While all employees are enrolled for basic long-term care, 23% of employees bought increases in coverage at their own expense.- making long-term care the second most popular “buy-up” in the $634 million credit union’s benefits package. Despite the growing interest, according to the Center for Long-Term Care Financing, only 7% of Americans own long-term care insurance. Weiss Rating Inc., which analyzes the financial well-being of insurance companies, banks and brokerage firms, recently released a study that cited confusing policy language as one of the main reasons behind the low consumer buy-in. According to the study, although 118 insurers have long-term care policies in force, the total premium collected in 2000 was only $4.4 billion. This is small compared to $14 billion in Medicare supplement policies, where standard benefits are mandated by Congress. Moreover, among the 118 carriers, just 11 companies dominate over 81% of the market, collecting more than $3.6 billion in premiums said Weiss Ratings Chairman Martin D. Weiss, Ph.D. “The insurance industry is shooting itself in the foot by making long-term care insurance much more complicated than it need be,” said Weiss. “As a result, the number of Americans buying policies is surprisingly small given the large aging population that will be needing long-term care in this decade. Companies leading in the long-term care sector have an opportunity to design policies that will become standards for the industry.” According to Weiss, consumers seeking to buy long-term care insurance are faced with not only large variations in premiums but confusing language about when and how payments are made. Over 25,000 premium quotes offered by 35 long-term care insurers were gathered by the rating organization and huge differences in premiums on policies that offer essentially the same benefits were found. “Some of the price variation may be due to subtle differences in the policies,” said Weiss “However, it’s very difficult for the consumer to understand these differences – let alone figure out what they’re worth.” Weiss found that long-term care insurers cannot agree on a standard method of payout and “elimination period,” which is the initial time period when the policyholder has to pay for medical expenses out-of-pocket. For example, if the elimination period is 60 days and a person needs care two days a week, one policy may not pay for 30 weeks, while another might consider those two days a full week and begin paying out much sooner. Variations in payout methods include some insurers ending payments after a predetermined number of years while others letting policyholders continue receiving benefits until all paid-in funds are exhausted, said Weiss. With premiums being expensive and increasing with age, Weiss says that the market potential can stagnate without a standardization of language in the policies. [email protected]

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