Long-term health-care policy: Buy it or not?

WASHINGTON — My friend Kathy Seddon spent more than three years taking care of her parents during their stay in a nursing home.

Her mother, who died at 88, had Alzheimer's and Parkinson's. Her dad, a retired preacher who died at 91, had dementia.

Given her family's medical history, Kathy signed up in a heartbeat when the federal government made long-term-care insurance available to its employees.

"It was real simple," she said. "I took a look at where things could be headed."

Now retired from her federal job, Kathy was 55 when she bought long-term-care coverage. While it's not for everyone, for folks in Kathy's situation, with neither husband nor children — and a family history suggests she may someday need full-time nursing care — long-term-care insurance makes sense, experts say.

On the other hand, said Morris Snow, "if everyone in your family dropped dead of a heart attack at 50, you may feel like playing the odds." Snow is a principal in Mercer Human Resource Consulting's health and benefits division.

Long-term-care insurance covers people who need help with some basic activities, such as bathing. Depending on the policy, that care may be delivered in a nursing home, an assisted-living facility or at home.

For most people, family history isn't as definitive as Kathy's. In those cases, finances are the key to whether long-term-care insurance makes sense or not.

Generally speaking, it's not for people with either a lot of money or very little.

Affluent consumers may be able to save enough money to pay for several years of nursing-home care if they need it. And low-income consumers are eligible for Medicaid.

But people in the middle may want to look into long-term-care insurance. With the average daily cost of a private room in a nursing home at $206 and home-health-care aides charging about $25 an hour, paying out of pocket could quickly wipe out everything you've accumulated.

One benefit of such insurance is it allows you to protect property or money you'd like to pass on to your heirs or keep for your own needs. If you end up in a nursing home without long-term insurance, you may have to use the assets you'd like to protect to pay for your care until they are nearly gone and Medicaid kicks in.

A big question is when to buy. Doing so at an early age may mean you'll have lower premiums and an easier time qualifying. But premiums may rise while you hold the policy.

In the past several years, many insurers raised premiums by substantial amounts, Snow said. But he added he thinks insurance companies have become better at pricing policies, which may result in a lower risk of increases in the future.

Another question is whether you can afford the premiums after you retire. If not, you could lose everything you have paid into the plan.

"It's not for people with limited resources, because the premium could be more than they can afford at the time they're closest to needing it," said Sandy Praeger, Kansas insurance commissioner.

In a 2004 survey of long-term-care insurance, Consumer Reports said to consider buying a plan at around age 65, noting that if you buy at 40, new policies may emerge that might not be covered by a policy purchased today.

"For example, 15 years ago, long-term-care insurance did not pay for care in assisted-living facilities," it noted.

The magazine also said insurance agents encouraging clients to buy the policies at an early age may get a commission each year a policy is in force.

Snow said it is important to talk to a number of agents and compare notes. "Not all agents have the same level of training and the same level of integrity."

He also recommends talking to an accountant or a lawyer about whether long-term-care insurance is the best way to protect assets.

"People who can buy through their employers are usually better off — especially if they work for a large, savvy employer," said Snow.

And more companies — 81 percent of employers with 25,000 or more workers, according to MetLife — are offering employees access to such insurance.