The fourth of five

installments excerpted from Christine Benz’s comprehensive Jan. 3 Improving Your Finances article on focuses on . . . :

Long-Term Care Provision of Health-Care Reform 

What’s Happening:
Originally a component of the landmark 2010 health-care reform law, the Community Living Assistance Services and Supports (CLASS) Act was designed to create a national insurance pool, offered through employers, to help workers pay for long-term care. Yet concerns about the program’s financial sustainability dogged it from the start, and it was never implemented. The recently passed budget agreement finally repealed the CLASS Act.

“What You Should Do: Unfortunately, the demise of the CLASS Act coincides with dramatic increases in long-term care insurance premiums, owing to both low interest rates and misguided actuarial assumptions about long-term care claims. In the face of these headwinds, would-be long-term care insurance purchasers have a few options. One is to skinny down your long-term care insurance buy, purchasing a policy that provides a baseline of long-term protection but has a longer elimination period (that is, higher deductible) or a lower dollar limit on the amount of benefit you can receive in your lifetime. Would-be purchasers of long-term care insurance who are younger might consider delaying their purchases in the hope that higher interest rates will help tamp down premiums in the future. (If insurers are able to earn higher interest rates on the premiums they take in, that could put downward pressure on premiums.) Just bear in mind that time won’t necessarily be your friend: Not only will you face higher premiums as you age, but you’re also more likely to develop a health condition that could make insurance costly or out of reach. Finally, you could plan to pay long-term care costs out of pocket. Just be sure to be realistic about the amount of money you’ll need to amass.

“And no matter which route you choose, the aforementioned health-savings account is likely to prove a good fit. Monies in an HSA can be used to pay long-term care insurance premiums, and HSA proceeds can also be used to pay for long-term care expenses themselves.”


In the concluding blog: Alternative Minimum Tax and Estate Tax