Educational workshop presented by WealthTrust-Arizona and special guest, Greg Anderson from Brokerage Professionals. Greg reviews issues surrounding long term care and how to best prepare for it financially.

1. LONG-TERM CARE ISSUES AND
ANSWERS

2. LONG-TERM CARE
GREG ANDERSON
• Brokerage Professionals, Inc.
– a premier full-service, wholesale insurance brokerage firm dedicated to the needs of
financial advisors and their clients
• Chartered Life Underwriter and Chartered Financial Consultant
• More than 24 years experience in the Insurance and Financial Services
industry

3. LONG-TERM CARE
WHAT IS LONG-TERM CARE?
• Refers to a broad range of services for people who need assistance on a
regular basis for chronic illness or physical and mental disabilities.
• Not usually covered by health insurance or Medicare.
• LTC can include medical, social, housing, transportation or other
supportive services. These can be provided by unpaid family members or
friends (informal care) or by specially trained and/or licensed professionals
(formal care).

4. LONG-TERM CARE
IS NEEDED WHEN…
• Inability to perform Activities of Daily Living (ADLs)
– Continence
– Transferring
– Toileting
– Bathing
– Dressing
– Eating
• Cognitive impairment
– Memory
– Orientation
– Reasoning

5. LONG-TERM CARE
HOME CARE FACILITIES CARE
SERVICES: SERVICES:
• Private Duty Nursing • Adult Day Care
• Home Health Aides • Assisted Care Facilities
• Homemaker • Nursing Home Care
• Chore Services
• Hospice care

6. LONG-TERM CARE
THE RISK OF NEEDING LONG-TERM CARE
MAY BE GREATER THAN YOU THINK…
• Medical advances allow more people to survive serious
illnesses, injuries, and conditions
• 60% of Americans who reach age 65 are expected to need LTC services
at some point (according to Office of Personnel Management)1
• 40% of those receiving LTC services now are ages 18 to 64 (according
to the U.S. Office of Personnel Management) 1
• The wife often cares for her husband – but who cares for her?
1. “A federal case for LTC.” Employee Benefit News. 02/01/03

7. LONG-TERM CARE
THE FINANCIAL RISKS
• Roughly half of Americans 45+ say they know someone who has used up
all their savings paying for long-term care and had to depend on Medicaid1
• The national average cost of a year in a nursing home for a private room is
$75,190. A semi-private room is $67,5252
1. American Society on Aging, Long Term Care study released 5/23/03
2. Genworth 2010 Cost of Care Study

8. LONG-TERM CARE
THE FINANCIAL RISKS
A recent survey published by Senior Market Advisor Magazine asked:
How would you pay for a Long-Term care event in your family?
• 21% advised they would dip into their savings/401K
• 19% believed that Medicare/Medicaid would pay
• 18% advised that they already have LTC

9. LONG-TERM CARE
HAVE YOU CONSIDERED…
• If you were to have an extended health care need, what is your written plan
of care?
• What is the first asset you would liquidate to pay for long-term care?
• Does your current annuity, life policy or CD also provide LTC coverage in
case you ever need it?

10. LONG-TERM CARE
THREE WAYS TO PAY
1. Out-of-Pocket
– Your assets
2. Government Programs
– Medicare, Medicaid, CLASS Provisions
3. Transfer the Risk
– Private Insurance

11. LONG-TERM CARE
#1 OUT OF POCKET
• National median NH rate $75,190/annually*
• Costs have been growing at 4.5%/year*
• $500,000 portfolio earning 5% would be depleted within six years
* Genworth Cost of Care Survey 2010

12. LONG-TERM CARE
#2 GOVERNMENT PROGRAMS
MEDICARE
• Pays for some skilled at-home care but only for short-term unstable
conditions and not for ongoing assistance
• Nursing Home Qualification
• Prior hospitalization at least three days not counting release day
• Facility must be Medicare-Certified and entered within 30 days after
leaving the hospital
• Patient must require a skilled level of care

13. LONG-TERM CARE
#2 GOVERNMENT PROGRAMS
MEDICARE
• Medicare Nursing Home Payments
– First 20 days Medicare full cost
– Next 80 days patient pays $141.50/day (increases annually) Medicare pays rest
– After 100 days patient pays Full Cost
• Does cover some Home Health Care costs if services include such things as
part-time nursing, physical therapy, medical and social services.

14. LONG-TERM CARE
#2 GOVERNMENT PROGRAMS
MEDICAID
• Must meet state income and asset requirements
• All countable assets must be depleted to $2,000
• All assets are “countable” EXCEPT:
– Life Insurance with face value less than $1,500
– Personal property (clothing, furniture, jewelry etc. up to reasonable limits)
– Burial funds up to $1,500
– Burial space
– Auto and Home within certain limits

15. LONG-TERM CARE
#2 GOVERNMENT PROGRAMS
CLASS PROVISIONS
• Patient Protection & Affordable Care Act (Healthcare Reform) includes the
Community Living Assistance Services and Supports provisions (CLASS)
which is a voluntary government program primarily designed to assist the
working disabled under which participants:
– Pay monthly premium through payroll estimated to be $180-$240/month
– Guaranteed issue basis
– 60-month waiting period
– Approximate benefit $75/day for as long as disabled

16. LONG-TERM CARE
#2 GOVERNMENT PROGRAMS
CLASS PROVISIONS
• Department of Health and Human Services will work out the terms of the
program which will not go into effect for two years.
• It is unclear how the final regulations will look like. However, due to the
adverse selection, premiums could potentially be very high and will be
subject to increase to keep the program fiscally sound, since there is no tax-
payer funding of the program.
• It is not clear if retirees are able to join the program.

17. LONG-TERM CARE
#3 TRANSFER THE RISKS
PRIVATE INSURANCE
1. Traditional Long-Term Care Policies
2. Long-Term Care Partnership Policies
3. Life Insurance With LTC Benefits
4. Annuities With LTC Benefits

18. LONG-TERM CARE
#1 TRADITIONAL LONG-TERM CARE
POLICIES
• Daily/monthly benefit
• Benefit period
• Elimination period
• Inflation
• Pool of Money

19. LONG-TERM CARE
#1 TRADITIONAL LONG-TERM CARE
POLICIES
• Can cover all occurrences (NH, AL, HHC, AD)
• Flexible (you determine benefits and features)
• Premiums not guaranteed
• Premiums can be tax-deductible
• If no benefits paid no benefit from premiums
• Inflation protection available

20. LONG-TERM CARE
#2 LONG-TERM CARE PARTNERSHIP
POLICIES
• State-by-state
• Protect more assets from Medicaid
• Benefits based on state minimums

21. LONG-TERM CARE
#3 LIFE INSURANCE W/ LONG-TERM
CARE BENEFITS
• Can cover all occurrences (NH, AL, HHC, AD)
• LTC Benefits are less flexible than traditional
• Premiums can be guaranteed
• No tax deduction for premiums
• Can guarantee a benefit is paid LTC or DB
• Full underwriting for both LTC and Life

22. LONG-TERM CARE
#4 ANNUNITIES W/ LONG-TERM CARE
BENEFITS
• Most have wavier of Surrender fees for NH confinement
• Can cover all occurrences (NH, AL, HHC, AD)
• No tax deduction for charges
• LTC claims draw down annuity value first
• Moderate underwriting for LTC
• Inflation protection available at additional cost

23. LONG-TERM CARE
TWO SECRET ADVANTAGES OF
PRIVATE INSURANCE
• Care Coordination services
• Get care sooner – eliminates procrastination when someone else pays

24. LONG-TERM CARE
CASE STUDY #1
• 65 year old husband & 65 year old wife both standard rate class
• Arizona residents
• Average Daily Cost: $200
• 4 year benefit
• Pool of Money:$292,000
• 90-day elimination
• Inflation 5% compounded

25. LONG-TERM CARE
COMPARISON OF TRADITIONAL
LONG-TERM CARE
Company Gen JH Met
Premium $6,768 $8,292 $8,582
Pool of
Money $288,000 $292,000 $292,000
Maximum
Benefit Monthly Daily Daily
Elimination 90 90 100
Spouse
Premium
Waiver No Yes No

26. LONG-TERM CARE
LONG-TERM CARE BREAK-EVEN
ANALYSIS
Annual Premium $6,768 Annual Benefit $146,000
Years Premium Paid Time Benefits Equal Premium
2 2 months
5 3 months
10 6 months
20 1 year

27. LONG-TERM CARE
SPOUSAL DISCOUNT HELPS
• $3,120 with discount versus $5,640 without
• So what if there was NO discount?

28. LONG-TERM CARE
HOW ABOUT LIFE INSURANCE WITH
LONG-TERM BENEFITS?
• $150,000 GUL
• 4% Monthly LTC Benefit
• $300,000 Total LTC Benefit
• Husband $6,975 annual premium
• Wife $6,114 annual premium
• $13,089 total annual premium

29. LONG-TERM CARE
A QUICK COMPARISON
Product LTC LI
Premium $5,640 $6,975
Guaranteed Premium No Yes
Tax-Deductible Premium Yes No
Inflation Yes No
Death Benefit No Yes

30. LONG-TERM CARE
CASE STUDY #2
• 75 year-old female standard rate class
• Arizona resident
• Average Daily Cost: $200
• 4 year benefit
• Pool of Money: $292,000
• 90-day elimination
• With or without inflation?

31. LONG-TERM CARE
A QUICK COMPARISON
LTC w/
Product LTC inflation LI
Premium $7,392 $11,424 $11,692
Guaranteed Premium No No Yes
Tax-Deductible Premium Yes Yes No
Inflation No Yes No
Death Benefit No No Yes

32. LONG-TERM CARE
CASE STUDY #3
• 72 year-old Female
• Angioplasty 2 years ago - otherwise good health
• Has current LTC without inflation that is 8 years old
• Current daily benefit is $120 for 4 years
• Daily benefit insufficient

33. LONG-TERM CARE
1. Traditional Long-Term Care
– Cost $11,940 to replace $200/day with inflation
– Cost $2,825 to add $80/day w/o inflation
– Underwriting - medical records needed
– Premiums already paid
2. Life Insurance with Long-Term Care benefits
– Cost $9,270 to replace $200/day no inflation
– Cost $4,737 to add $3,000/month w/o inflation
– Underwriting - probably will not qualify for standard
– Premiums already paid
3. Annuity with Long-Term Care benefits
– Deposits $50,000
– All usual annuity benefits
– 10 year surrender period
– 3x the deposit in LTC benefits
– Inflation can be added

34. LONG-TERM CARE

35. LONG-TERM CARE
WHAT WAS ACCOMPLISHED
• Additional $162,323 available for LTC (daily max starts at $74)
• Internal charges start out at $58.50/month
• LTC benefit grows as the annuity value grows
• Underwriting limited to application and phone interview
• If LTC is not used annuity value can be withdrawn or paid to a beneficiary

36. LONG-TERM CARE
CASE STUDY #4
• 65 year-old female
• Arizona resident
• Std NT rating
• 3 In Force life policies $216,500 DB ($150,000 CV $0 Premiums)
• No LTC coverage - too expensive

37. LONG-TERM CARE
CONSIDERATIONS
• Life insurance purpose - wealth transfer
• No Current LTC coverage - too expensive
• 1035 Exchange to Life insurance?...expenses, limited access to cash value
• 1035 Exchange to Annuity?...taxable gain at death
• Use cash value to fund LTC?...no guaranteed return for premium
But, what if we rolled them all into one?

38. LONG-TERM CARE
SINGLE PREMIUM LIFE INSURANCE
• DB: $334,692
• CSV: $150,000
• LTC: $468,118 total/ $5,573 monthly
• Premium: $0 , 1035 exchange of current policies

39. LONG-TERM CARE
QUESTIONS?

40. LONG-TERM CARE
NEXT STEPS
• Dig out your old policies
• Schedule a complimentary consultation
• Evaluate your situation
• Make adjustments as you deem appropriate
• Monitor

41. LONG-TERM CARE
THANK YOU!