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Long-Term-Care Insurance After the CLASS Act
The government recently pulled the plug on a new long-term-care insurance program, but you still have policy options.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
December 12, 2011
I heard that the government scrapped the CLASS Act, which I was counting on to cover potential long-term-care expenses. What are my options now?
SEE ALSO: New Ways to Pay for Long-Term Care
The CLASS Act (which stands for Community Living Assistance Services and Supports) was a part of the health-care-reform law that would have created a voluntary long-term-care insurance program that workers could pay for through payroll deductions. Under the now-defunct program, any worker could sign up for the plan, which would provide a daily cash benefit if he or she needed long-term care. But the U.S. Department of Health and Human Services later determined that the CLASS Act was financially unsustainable and pulled the plug on the program. See Long-Term Care That Falls Short for our take on the problems with the CLASS program when it was first introduced.
The CLASS Act may be gone, but ever-increasing long-term-care costs are still a threat to your retirement plan, with the cost of a private room in a nursing home averaging $87,235 per year. Even assisted-living facilities average $41,724 per year, and the average home health aide charges $21 per hour, according to the MetLife Mature Market Institute. A stand-alone long-term-care insurance policy can provide valuable protection against these expenses. But it is becoming tougher to qualify for long-term-care insurance. Several large insurers have left the business recently, and others have raised rates for current policyholders. Rates have jumped even higher for new buyers. See Long-Term Care Rate Hikes Loom for more information.
If you can't qualify for a stand-alone policy or you worry that you'd pay increasing premiums for years and might never get a payout, consider a policy that combines long-term care and life insurance, or long-term care and an annuity. It is generally easier to qualify for these combo policies than it is for stand-alone long-term-care coverage. They provide a guaranteed payout to you or your heirs, regardless of whether you ultimately need long-term care. And because you normally need to invest a lump sum or pay premiums for a limited period of time, insurance costs are unlikely to increase.
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