Post pandemic, it may be time to rethink your long term health needs

Tom Temin: Greg, good to have you back.

Greg Klingler: Thanks for having me, Tom. So how should people rethink their long term health options and requirements now that we have, I guess, for the most part come through this pandemic.

Tom Temin: But you as you mentioned, over the last 18 months, the pandemic has really thrust health insurance or health in general, into the forefront of a lot of people’s conversations, a lot of people’s consciousness, Long Term Care Insurance is very much health related. And as we look at Long Term Care Insurance, one of the things that became very obvious early in the pandemic was not only the ability to go to a health care facility, but the ability to choose the right health care facility, we saw over and over again, all of these long term care facilities unfortunately getting ravaged by the effects of the COVID virus leading to tens, if not hundreds, of deaths depending on the size of the facility. Many of those, unfortunately, were ones that had more Medicaid beds, which were effectively ones that had lower costs and a lower cost environment. So as we start looking at long term care, where you have this care, it has been shown to be much, much more important, as the higher end care facilities did not nearly have as many problems as a lower end care facilities.

Tom Temin: And as the years have marched on long term care insurance benefits have been shrinking. Basically, if you’re lucky enough to have one of those unlimited policies, you are really in clover, but the new policies, they’re costly, they’re thousands and thousands of dollars a year as premiums, and they have a three year or four year time limit on the benefit. So how do you do the calculus to know whether it’s worthwhile because nobody can predict how you’ll end up when you get to the age that you need it.

Greg Klingler: But as you mentioned, the the cost and the types of policies have changed pretty dramatically over the years. And as federal employees know, many of those plans got more expensive in 2016. As they started to reprice, these plans with different assumptions that they’ve made. The unfortunate reality is your retirement plan is not complete. without a plan for the high cost of long term care. Long term care is out there is going to happen, it’s statistically probable, it has a high duration, if you go into a care facility about 4.1 years for a woman, 2.5 years for a man. And it’s very expensive. And it’s very geographically diverse when it comes to expensive. And the costs for a semi private nursing home can swing about $50,000 between the low cost of let’s say, Texas, and the high cost of the Washington DC area, New York or Hawaii. So where you retire is just as important when you talk about long term care as ultimately when you retire.

Tom Temin: And I guess it’s also important, as you have pointed out in the past to consult with the rest of the family in the plan, because one way or another, they’re going to be part of it. And I guess the more they can come visit and bring cookies and the less they have to change your depends, the better off they’ll be.

Greg Klingler: Yeah, absolutely. Everybody has a plan when it comes to long term care when they retire. Some people just don’t know it yet. The unfortunate reality is the people who don’t know it yet the care is your children, when studies will tell us that if you don’t have a plan, and it does become your children, no matter how many children you have, typically the onus of your care falls on one child. And states will also tell us that one child is generally a female, whether it be your daughter or your daughter in law. And studies will also tell us that if it falls on a single individual, at some point during the care, there’s a high probability that person would suffer from will be chronically described as depression because of the financial, the physical and the emotional stress that it causes.

Tom Temin: All right, so then make sure the families are part of the planning so that they’re not part of the plan.

Greg Klingler: Absolutely. If that is your plan, have your child take care of you. You want to make sure that they’re aware of it. And you want to make sure that it’s coordinated with your other children as well.

Tom Temin: We’re speaking with Greg Klingler director of wealth management at the government employees benefits Association. And what are the options then available to federal employees at this point, and when should in their career do they need to start shifting their mix of options that they choose every year to think about that long term sunset period?

Greg Klingler: So what we find is most people are successfully start planning for long term care in the early to mid 50s. There’s a lot of reasons for that timeline. Number one for people who have children, generally the requirements of raising the child, whether it be college tuition, or just simply getting that child out of the house, that you normally start transitioning to now being able to think about yourself and your retirement so early to mid 50s. When we see that generally happen. We also find that pricing is still pretty good for people who are planning for long term care in the early to mid 50s, which makes signing up much, much better and people’s health is generally pretty strong in their 50s as well leads to a lower chance of declination. Now what options does a federal employee have? Well, obviously the federal employee and their parents have the federal Long Term Care Plan 3.0. That is a good plan. It is a very nice improvement from the 2.0 and the 1.0. that came before it. It does allow for some benefits if you don’t use it to be paid out to your heirs. And it does provide some cushion against increasing costs which a lot of federal employees are very wary of. In addition to that, we Everything outside of the Federal benefit package, whether it be traditional long term care, or one of those hybrid plans, life insurance and long term care combination, which can work very well for people who need both life insurance and long term care.

Tom Temin: Yeah, that point about the benefits that could be paid to heirs, I think figures in a lot of people’s thinking, because they’re worried if you pay these hefty premiums year after year after year. And then before you get to the point where you would need the benefit, you get hit by a bus and all the premiums have gone into the ether.

Greg Klingler: If the two big stressors when it comes to people who know they need long term care insurance, because they can’t self insure themselves, and they don’t buy it, is use it or lose it. They’re concerned that they pay all this money, because long term Care Insurance is expensive, because again, high probability, high duration, high cost. So that is a major concern. The other big stressor for people is they all know somebody who saw a major rate increase for people in the federal plan that was September of 2016. And it was a very big step up for anybody in the private sector. It was probably smaller step ups over one, two or three year periods, but they’ve all seen it. So that’s a concern of them as they move into a fixed income environment.

Tom Temin: And if you’ve had life insurance for many years, and they used to have whole life, I don’t know whether that still exists anymore. But there are these hybrid plans. And then there’s term is there any way of converting an older plan such that it can then be used for long term care rather than a sheer death benefit?

Greg Klingler: Yep. If you have a plan, and you have a cash value, you can definitely confirm it with what’s called a 1035 exchange to move you into something that covers something that may be a little bit more pertinent to you now that involves a flavor of long term care insurance coverage. Absolutely.

Tom Temin: Does that vary by carrier or is 1035 a legal statute or something that is required of insurance? Or is that just some plans?

Greg Klingler: Correct. It’s a legal statute. So it worked that way for every carrier. Now, keep in mind that’s for whole life or universal life type policy that do have a cash value, because converting a term life insurance policy doesn’t really make a lot of sense, because there’s no cash value to that.

Tom Temin: And finally, what’s your sense of how people in the federal government have fared with teleworking and so forth? My sense is that of the various types of cats out there in the herd that federal employees have probably done a little bit better than average through the pandemic because they had a short employment and were generally supported by agencies in what they needed to telework.

Greg Klingler: That’s what we’re seeing over here as well. The pandemic is obviously probably accelerated a lot of the virtual type work that people were going to do. Well, we were probably going to see that was going to happen over the next 20 years got accelerated into the last 18 months. So now a lot of our agency partners and our clients for that matter, they are looking at a virtual environment, at least partial from this point going forward.

Tom Temin: Greg Klingler is director of wealth management at the Government Employees Benefit Association. Thanks so much for joining me.

Greg Klingler: Thank you, Tom. Thank you for having me.