What is Your Bathtub Test Score?

Bathtub Test

During a visit to my doctor, I asked him, “How do you determine whether or not an older person should be put in a nursing Home?”

“Well,” he said, “we fill up a bathtub, then we offer a teaspoon, a teacup and a bucket to the person ~ to empty the bathtub.”

“Oh, I understand,” I said. “A normal person would use the bucket because it is bigger than the spoon or the teacup.”

“No” he said. “A normal person would pull the plug . . . . Do you want a bed near the window?”

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I received this little brain teaser from a friend the other day, and I must admit that I will be taking the other bed!  Sadly, any one of us could be occupying that other bed; so it is time to get serious about what’s going on with long-term care.

2013 has served to be a period of change in the long-term care business. Changes include companies moving from unisex ratings for long-term care pricing, where premiums for male and female were the same, toward gender distinct pricing where women pay a higher cost than men. Across the board, women are probably going to get a 35% to 100% increase in their premiums, while men are going to see no change or possibly a slight reduction in their premium costs. In addition, new policies are being repriced at higher rates.

Many companies are leaving the long-term care business and those carriers who are not, are looking at new solutions for long-term care, such as riders on whole life insurance policies, universal life policies, and even, on term life insurance policies. There is a whirlwind of change in the long-term care insurance business.

What struck me as relevant and why I am doing this blog is back in August of 2012, Genworth, the largest provider of long-term care in the United States, applied for a rate increase in the state of New York. Applying for a rate increase is not so unusual, but this was not for their new policies, but for their existing policies, and they got it. Some of these increases will be 2%, some 10% and some will be 11%. These long-term care rate increases are going to affect people that already own policies, so for example, if you are paying a $5,000 premium, you may now be paying approximately $5,500.

Our advocacy is to look at products that:

• Have had no increases to their in-force business
• Are backed by a very strong company

The problem of long-term care is not going away and people need a solution. Maybe it makes more sense to allow less money to go into the traditional policy and combine it with newer solutions that cover both life insurance and long-term care.

The traditional long-term care policies that we are talking about and that are having these rate increases are also the type of policy we refer to as “use it or lose it.” If you die before putting in a claim, the money is gone.

What might be a worthwhile idea for some people who are seeking solutions for long-term care, is to buy a traditional long-term care policy through a company like Mass Mutual, that has never had an in force premium increase, and combine it with a life insurance solution that includes a long-term care rider where you are guaranteed to get your money back either while you are alive through a long-term care claim, at your death through the death benefit, or a combination of the two. In fact, you could make a long-term care claim and still have a death benefit left, and all the while, the policy would have cash value for you to access.

I think things will continue to change in the world of long-term care. Let us know how we can help you design a solution for you, your clients or your loved ones.

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS.

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