Protect Your Assets With Long-Term Care Insurance

If you haven't considered long-term care insurance yet, this might be a good time -- and not just because health care costs are spiraling. More and more states are developing long-term care partnership programs that make it easier for you to protect your nest egg.

The cost of long-term health care can easily burn through your life's savings. According to the recent annual study conducted by Genworth Financial(GNW Quote), the average hourly rate for a home health aide is $25.47 per hour, or nearly $53,000 per year for 40 hours per week. An assisted-living development costs, on average, $32,583 for a private one-bedroom, and a private nursing home room is $74,806 per year, or $204 per day.

Project those costs across several years, and you might not have assets left to enjoy yourself or have money to leave to your children. Only after having impoverished yourself would you be able to seek access to Medicaid services.

But if you purchase a policy through a long-term care partnership program, you could qualify for Medicaid after you exhaust the policy's benefits, rather than waiting until you're flat broke. That means you can retain your assets, up to the value of the policy, provided you meet all the other requirements to be eligible for Medicaid.

The original long-term care partnership program, which was developed with support from the Robert Wood Johnson Foundation, has been in existence in California, Connecticut, Indiana and New York since the early 1990s. Congress initially restricted further development, but this barrier was lifted as part of the Deficit Reduction Act of 2005, allowing for expansion to other states. Since then, 11 have received approval to implement long-term care partnership programs: Kansas, Colorado, Minnesota, Nevada, Georgia, North Dakota, South Dakota, Nebraska, Idaho, Florida and Virginia. Another 15 states are awaiting approval.

All of the new programs in development will use a dollar-for-dollar methodology, meaning you'll be able to keep $1 in assets for every dollar of benefits received from a private long-term care insurance partnership policy.

The new policies are also required to adjust benefit levels for inflation to ensure that they keep up with rising long-term care costs. Policies sold to those under the age of 61 will include compound annual inflation protection, although the actual level will be determined individually by state. If you are over 61 but under 76, the policy must include some form of inflation protection, although it won't necessarily compound.

Some of the earlier programs worked only with specific insurers, but Sandy Praeger, the Kansas Insurance Commissioner and president-elect of the National Association of Insurance Commissioners, believes that all insurers will be able to participate in the new programs as long as the policies they issue meet the state's established criteria.

Kansas has already gotten the green light to implement its long-term care partnership, and Praeger says eligible policies issued since the beginning of 2007 will be retroactively included. She aims to retroactively include all policyholders in the state with plans that meet the criteria, no matter when those plans were issued.

Three things to keep in mind: First, be aware that your long-term care policy may cover home-based care and a number of other services, whereas Medicaid may (depending on the state) only entitle you to care in a nursing facility.

Second, if you were to move to another state, the insurance benefits of your policy are portable, and the asset protection will most likely be be honored in the new state, too (but be sure to check first!); however, Medicaid benefits may differ from state to state.

Third, exhausting your partnership policy benefits is not a guarantee that you will qualify for Medicaid -- you still have to meet the state's income and functional eligibility criteria.

You can find out more about long-term care insurance at the Health and Human Services Web site or by purchasing TheStreet.com Ratings Consumer Guide to Long-Term Care Insurance here (available for $49.95). Select a plan carefully, and consider the financial strength of the insurer issuing the policy. You can look up any insurance company's rating here.

10 Biggest Providers of Individual Long-Term Care Insurance (Based on 2006 new premiums)
Company	Parent Company & Ticker	Financial Strength Rating
Allianz Life Ins Co of North America (MN)	Allianz Insurance (AZ)	B-
Bankers Life & Casualty Co (IL)	Conseco Group (CNO)	D+
Genworth Life Ins Co (DE)	Genworth Financial (GNW)	C+
John Hancock Life Ins Co (MA)	Manulife Financial (MFC)	A-
Massachusetts Mutual Life Ins Co (MA)	Mass Mutual	A
Metropolitan Life Ins Co (NY)	Metropolitan Group (MET)	B+
New York Life Ins Co (NY)	New York Life	A
Northwestern Long Term Care Ins Co (WI)	Northwestern Mutual	B
Penn Treaty Network America Ins Co (PA)	Penn Treaty America (PTA)	D+
Prudential Ins Co of America (NJ)	Prudential Financial (PRU)	B
Source: LIMRA International Financial Strength Rating based on analysis performed by TheStreet.com Ratings. Ratings from "A" (Excellent) to "E" (Very Weak) based on each insurer's historical financial performance.