Americans want to be able to age in their own homes. Is short-term care insurance a way to help them achieve this? These plans are full of good, bad, and ugly sides that would make Clint Eastwood proud. It is worth looking at their value carefully.
Jesse Slome (director of the American Association for Long-Term Care Insurance) says that short-term plans are a good option. They provide protection for people who cannot afford long-term insurance. Short-term policies are limited in their coverage, which can be as short as one year. This limits how much they will pay out each day or week.
The policies are cheaper than long-term insurance but you get less value for your money. According to AALTCI, a short-term policy covering Illinois home care for $1,050 per week for up to 52 consecutive weeks would cost a 65 year-old woman $63 per month. The cost of the same policy that covers nursing homes is $125 per monthly, however, that benefit is considered an additional benefit and pays $200 per day for 365 consecutive days after a waiting period of 100 days. A long-term policy for care would cost the same applicant $175 per month if she is healthy, or $258 per month if she has certain health conditions. It would pay for approximately three years of care at her home, or 18 months in a facility after a similar waiting time.
Slome says that short-term care plans have one major benefit: “People will be able to get insured more easily.” He also added, “It’s an excellent planning option for people who only need a homecare benefit.” These policies are more suitable for applicants who are older than long-term insurance. They can accept applicants as old as 89 years. The applications mostly use yes/no health questions to screen applicants. For example, “Have there been a heart attack within the last 24 months?” Or “Do you use a walker?”
Skip Skolnik, founder and CEO of Skolnik Retirement Solutions, in Elyria Ohio, says that these benefits are not enough to convince him that policies are worth buying. The median annual cost for a private room at a nursing home is just over $100,000, while a home health aid is about half that. He says, “It’s almost like trying to fix a broken bone with a band-aid.” He says that someone with $200,000 in financial assets could “cover the costs for a few weeks.” “The real danger is a need that will last for years. He adds that people with less assets are more likely to be eligible for Medicaid. They don’t require additional private insurance.
In some cases, even Medicare will cover short-term home care. If you require home care for an injury or illness recovery, Medicare will cover it for up to 60 days. It can even extend the coverage if necessary. This means that you might already have some of the short-term care covered.
It is difficult to find short-term care policies. Many states, including New York, California, Florida and Massachusetts, have banned short-term care policies from their insurance markets. This is partly because the benefits are too small. Most insurers won’t deal with short-term care plans, even if they are available in your state. “Short-term care doesn’t cross anyone’s radar,” states Patrick Simasko, an elder law attorney at Simasko Law in Mount Clemens.
Slome says that only a few insurers, such as Aetna and Medico, offer short-term policies. His association can help you find other providers. Slome also stated that “very few agents are versed in these types of policies.” Slome suggests that you use an agent who is familiar with short-term insurance.