LONG-TERM CARE INSURANCE LEGWORK

Web's the way to research product

By Marci Bailey, Globe Correspondent, 2/25/2001

Long-term care insurance seems an unlikely candidate for insurers to peddle online.

By nature, it's a complex product with literally dozens of choices facing an individual who is trying to craft the best possible policy for himself or his family. It's also a product most frequently sold to the so-called gray market - older adults who are less likely than younger people to be comfortable conducting transactions online.

Only about 4 percent of Americans over age 35 hold long-term care insurance policies, according to the ACLI. In short, depending on the specific policy, long-term care insurance may pay for a long-term nursing home, home health care, or assisted living facility expenses for those who need help with the activities of daily living - dressing, eating, bathing, etc.

It is a common misconception that Medicare pays for such care. Such misconceptions, along with the complexity and expense of long-term care insurance, can make it a tough sell. Still, insurance aggregator sites and insurance carriers themselves are looking increasingly to the Web to market long-term care policies.

One of the biggest marketplace sites - Quotesmith.com - began offering long-term care policies at its site earlier this month. By the end of its first week, 2,700 users received instant LTCI quotes.

Like other sites that give quotes - or, in many cases, figures that are better characterized as broad estimates of sample premiums - customers can't actually buy a policy online. The reason is manifold. Long-term care insurance is medically underwritten – meaning your health history in combination with your age is the largest determinant of whether you get a policy.

For example, at John Hancock Financial Services those under 60 years of age sail through the application process, those between 60 and 70 must complete a telephone interview with a nurse, and those over 70 are required to have an exam. according to Diana Scott, vice president of eBusiness.

''The consumer likes the process of being able to gather the information online,'' Scott says. ''We've found that the sales process itself doesn't lend itself to a complete seamless, end-to-end online product.''

Similarly, at Quotesmith and other sites, once you're ready to apply, you'll have to speak with a telephone representative.

Quotesmith has entered the long-term care insurance market cautiously. ''It's the most expensive personal insurance you'll ever buy. It is the insurance that requires the most extensive research on a prepurchase basis. There are tax considerations, enormous price differences, underwriting, and suitability issues,'' Bland says.

While Web sites may not have hit their stride yet when it comes to selling the insurance, several do an outstanding job of providing information that can help shoppers of long-term care insurance sift through the product's complexities. Using the Web to learn the lingo, to get an idea of whether the insurance is right for you, and to bone up on your state's laws regarding such insurance goes a long way toward smart shopping.

For Massachusetts residents, the first stop should be the Division of Insurance Web site at www.state.ma.us/doi. Under the consumer service section is a comprehensive booklet called ''Your Options for Financing Long-Term Care,'' required reading for Massachusetts residents. Consumers also can find a regularly updated list of carriers who have long-term care policies approved by the DOI at the individual products heading. (The same material is available by calling DOI consumer services at 617-521-7777.)

Other information and insurer lists can be found at the Health Insurance Association of America site - www.hiaa.org.

Thorough research will help you decide the best way to finance long-term care should the need arise. Insurance agents are also required to give you the state's guide when you shop for a policy, according to Kevin Beagan, the DOI's director of the bureau of managed care.

The vast majority of long-term care bills are paid by Medicaid, which often requires individuals to deplete their savings before it will cover long-term care expenses.

When shopping, Massachusetts residents should also consider the Division of Medical Assistance's minimum coverage for MassHealth exemptions. In general, if a policy covers nursing facility care, has a daily benefit of at least $125, a two-year benefit period, and an elimination period of one year or less, the insured's home will be not be treated as an asset if MassHealth requires repayment for nursing facility services.

It is especially important for Massachusetts residents to be aware of this guideline when shopping online. For example, two well-known insurers - John Hancock Financial Services and the GE Financial Network - both quoted rough estimates when I visited their sites seeking long-term care insurance for a 65-year-old female.

In fact, GE's site informed me that it was estimating cost information ''based on the most popular long-term care insurance product purchased by people your age in your state.'' The problem is that both quoted daily benefits of just $100, less than the amount needed to meet MassHealth guidelines for exemption of the insured's home. Neither afforded the flexibility to reset the parameters.

The GE policy quoted a sample rate of $1,660 annually for a four-year benefit and simple inflation protection, which GE refers to as equal increases, while the Hancock policy was $831.60 with no inflation protection and a three-year benefit period.

Hancock also offers policies to Fidelity customers, with special features like higher home health care benefits, through www.fidelity.com's retirement section.

Quotesmith.com, which currently partners with five insurers, offered a policy for $1,586 for a $130 daily benefit and two-year benefit period through the Catholic Order of Foresters, a Midwestern insurer. This policy would meet the MassHealth exemption criteria. (Note: The site provides links to informational guides, including the Massachusetts guide as required by state law.)

A more comprehensive policy with a $180 daily benefit, three-year benefit period, and compound inflation protection is estimated at $2,414.

Quotesmith doesn't provide quotes for policies with simple inflation protection because shoppers may confuse the feature with the more comprehensive and valuable compound inflation protection.

There are many features that influence the price of a policy, but inflation protection is one of the biggest. Policies can come with no inflation protection, meaning the daily dollar benefit will never change; simple inflation, meaning a fixed percentage is added each year based on the original daily benefit; and compound inflation protection, in which the daily benefit amount grows on a compounded basis each year. Obviously, compound protection adds most to the premium. Still, it is generally the most sensible choice for younger buyers who can find their original daily benefit severely eroded by inflation over time.

When it comes to shopping for a long-term care policy online, stick with well-known carriers and don't underestimate the coverage you'll need. ''There's no nursing home in Massachusetts you can pay on a $150 daily benefit,'' says Jordan Hegedus, of Beacon Insurance Group in Salem.

For example, Hegedus quotes a policy through CNA for a 65-year-old woman in a select class (some health problems) at about $2,440 annually. The policy has a $180 daily benefit, three-year benefit period, and compound inflation, among other features. Hegedus also suggests looking for affinity group discounts for which you may be eligible.

Marci Bailey is a freelance writer. She can be reached by e-mail at goingonline@mediaone.net