Long-term care (LTC) refers to both medical and non-medical care for people who cannot independently perform daily activities or who have cognitive impairments. As lifespans increase, more people will need LTC, but it is very expensive - the average daily rate for a private nursing home room is over $200. Few have private LTC insurance to cover these costs. Private LTC insurance pays for only 7% of LTC costs currently. While it is growing as an alternative to relying on family or public programs, many are unaware of its benefits or mistakenly believe other options will cover LTC expenses.

1. A Guide to Group Long-Term Care Insurance Compensation Systems NW

2. What is Long-Term Care (LTC)?

3. Long-Term Care - Background Aging population and increased life span creates greater need for Long-Term Care (LTC) Most people fail to plan past point of retirement Health plans typically do not cover ongoing chronic care such as an extended stay in an assisted living facility, nursing home, or home health aide

4. Long-Term Care - Definition Non-medical and medical care services for people who are physically or cognitively unable to independently care for themselves Care for those who require assistance performing activities of daily life (ADLs) or need assistance due to cognitive impairment due to accident, illness, or advanced age Care provided in the home, assisted living facilities, or skilled nursing facilities like nursing homes

5. Long-Term Care – Estimated Costs The U.S. Senate Special Committee on Aging expects LTC costs to double by 2025. According to the 2008 MetLife Market Survey of Nursing Home and Assisted Living Costs, the average daily rate for a private room in a nursing home was $212 ($77,380 annually) – a 2.9% increase from $206 in 2006. The 2008 average daily rate for a semi-private room in a nursing home was $191 ($69,715 annually) – a 4.4% increase from $183 in 2006. The MetLife survey found that daily private-pay rates vary widely depending on state. For example, the lowest daily rates averaged $127 in Louisiana, while the highest came from Alaska at $577

6. Who Pays for Long-Term Care? Source: U.S. Department of Health and Human Services, www.longtermcare.gov Long-Term Care Service Medicare Private Medigap Insurance Medicaid You Pay on Your Own Nursing Home Care Pays in full for days 0-20 if you are in a Skilled Nursing Facility following a recent hospital stay. If your need continues, may pay for days 21-100 after a $128/day co-payment May cover the $128/day co-payment if your nursing home stay meets all other Medicare requirements May pay for care in a Medicaid-certified nursing home if you meet functional and financial eligibility criteria If you need only personal or supervisory care in a nursing home and/or have not had a prior hospital stay, or if you choose a nursing home that does not participate in Medicaid or is not Medicare-certified Assisted Living Facility (and similar facility options) Does not pay Does not pay In some states, may pay care-related costs, but not room and board You pay on your own except as noted under Medicaid if eligible Continuing Care Retirement Community Does not pay Does not pay Does not pay You pay on your own Adult Day Services Not covered Not covered Varies by state, financial and functional eligibility required You pay on your own (except as noted under Medicaid if eligible) Home Health Care Limited to reasonable, necessary part-time or intermittent skilled nursing care and home health aide services, and some therapies that are ordered by your doctor and provided by Medicare-certified home health agency. Does not pay for ongoing personal care or custodial care needs only (help with activities of daily living) Not covered Pay for, but states have option to limit some services, such as therapy You pay on your own for personal or custodial care, except as noted under Medicaid, if eligible.

7. Long-Term Care Insurance (LTCI)

8. Long-Term Care Insurance – Market Background Relatively few people have private insurance that covers the cost of LTC. Many common LTC needs require skilled help not covered by private health insurance policies or Medicare. Without private insurance or public program coverage, high cost of LTC is unaffordable for most Americans. Private LTC insurance currently pays for only 7% of all LTC costs. * The market for private LTC insurance has grown in recent years as an alternative to public program coverage and direct payment for services. * Source: AARP

9. Long-Term Care Insurance – Market Overview According to the Insurance Information Institute, 194 insurers wrote LTC insurance in 2007, including 9 property/casualty insurers, 25 health insurers, 6 fraternal insurers and 154 life, accident and health insurers. Earned LTC premiums rose from $8.8 billion in 2004 to $15 billion in 2007. Most policies currently sold cover services received in nursing homes, assisted living facilities and private residences. Trends that support the continued growth of the LTC industry are demographics, cost-containment pressures, the limited number of skilled nursing facilities, and a reduced reliance on family care. * * Source: Knowledge Source®

10. Long-Term Care Insurance – Consumer Profile Buyers and non-buyers who consider LTCI are generally wealthier, married and college-educated as opposed to their counterparts Facts about Buyers: Employed more frequently than non-buyers 62% of buyers are ages 55-69 71% have average income of $50,000+ 76% have average liquid assets of $100,000+ 57% are female and 73% are married Facts about Non-Buyers: Generally older and less wealthy than buyers 53% of those who did not purchase LTCI cited the reason being it cost too much. If employer-sponsored, employees are more inclined to consider LTCI Source: Who Buys Long-Term Care Insurance? A 15-Year Study of Buyers and Non-Buyers, 1990-2005, LifePlans, Inc. for America’s Health Insurance Plans (AHIP)

11. Long-Term Care Insurance – Consumer Purchasing Motivators Source: Who Buys Long-Term Care Insurance? A 15-Year Study of Buyers and Non-Buyers, 1990-2005, LifePlans, Inc. for America’s Health Insurance Plans (AHIP)

12. LTCI – Consumer Challenges

13. Long-Term Care Insurance – Common Misconceptions Too young to need LTC Family will take care of me Medicare or Medicaid will cover bills Health insurance will cover bills Can save enough on my own Can buy it if/when diagnosed with a possible LTC risk Underestimation of actual nursing home costs

14. Opinions about Long-Term Care Source: Who Buys Long-Term Care Insurance? A 15-Year Study of Buyers and Non-Buyers, 1990-2005, LifePlans, Inc. for America’s Health Insurance Plans (AHIP) Buyers Non-Buyers It is important to plan now for the possibility of needing LTC services. Agree or Strongly Agree 98% 89% Disagree or Strongly Disagree 2% 11% I worry about how I would pay for care if needed. Agree or Strongly Agree 70% 79% Disagree or Strongly Disagree 30% 21% If I ever needed care, the government would pay most of the costs. Agree or Strongly Agree 12% 22% Disagree or Strongly Disagree 88% 78%

15. Long-Term Care Insurance - Market Trends Employees view LTCI as a primary benefit, equally important as life or disability coverage Number of employers offering LTCI to employees is rapidly growing (including small firms) Employers of all sizes are offering voluntary, employee-pay-all LTC Majority of employers do not yet offer LTCI as an optional, voluntary benefit Employers not ready to offer LTCI benefits do show interest in state-provided employee education materials

16. Who Pays for Long-Term Care? Source: U.S. Department of Health and Human Services, www.longtermcare.gov

17. Long-Term Care Insurance – Market Projections The Kaiser Family Foundation reports that about 10 million Americans needed LTC in 2007; 58% of those were age 65 or older According to the U.S. Department of Health and Human Services, an estimated 70% of people over age 65 will eventually need LTC Currently, there are 6 to 7 million unpaid family members/friends who are sole caregivers for an estimated 78% of the total elderly population * 10% of those who enter a nursing home will remain there for five or more years * Source: Family Caregiver Alliance®

18. Long-Term Care Insurance – Legislative & Tax Benefits Federal income tax advantages apply to Tax-Qualified (or simply Qualified) Long-Term Care Policies States offer tax incentives for individuals purchasing tax-qualified long term care coverage Yearly maximum deductible amount for each individual depends on the insured’s age at close of taxable year (see table next page)

19. Long-Term Care Premiums You can include qualified long-term care premiums, up to the amounts shown, as medical expenses on Schedule A (Form 1040). Source: IRS 2008 Age 40 or under $310 Age 41 – 50 $580 Age 51 – 60 $1,150 Age 61 – 70 $3,080 Age 71+ $3,850 2009 Age 40 or under $320 Age 41 – 50 $600 Age 51 – 60 $1,190 Age 61 – 70 $3,180 Age 71+ $3,980

20. Compensation Systems NW: Your Partner in Long-Term Care Insurance Content © 2004-2009 Zywave, Inc. All rights reserved. Rev 3/09 SV