In September 2020, Brian Gordon guested on the Personal Financial Planning Section podcast to discuss a range of issues about Long Term Care Insurance and Long Term Care Planning. This is part 1. You can find part 2 here.

Below is the podcast and its transcript.

Sarah Bradley:

Welcome to the Personal Financial Planning Section podcast, delivering insights from experts on tax, retirement, estate, risk management, investment planning, and practice management, designed to help you best serve your clients and take your practice to the next level. I’m your PFP Section host Sarah Bradley. Be sure to visit us at aicpa.org/pfp and stay tuned at the end of the episode for information on how to access valuable resources. And now, over to our guest.

Brooke Salvini:

Thank you, Sarah. I’m Brooke Salvini, and I’m here to talk with you about long term care insurance planning with Brian Gordon. Brian is the president of Gordon Associates Long Term Care Planning. Brian has been in this industry for more than 30 years. His father started the company and he joined in around 1990, I believe. We’re really lucky to have Brian with us here today to give us some background information about the industry in general, and also what is happening in this unprecedented time of COVID-19.

Brooke Salvini:

I know a lot of questions have been coming in from clients, so this should be very helpful in helping us deal with those questions and just make sure we have a good understanding of where we are in the industry and just so that we can really help and guide our clients as best as possible. I want to thank you Brian, for being here and if you could just start by giving us a little bit of background information that you think we should have, that is going to help us foster good conversations with our clients.

Brian Gordon, Gordon Associates Long Term Care Planning:

Absolutely. Thanks Brooke. Thanks for having me. These times, we’re getting a lot of unusual questions and a lot of families coming to us for helping them with long term care planning. As you can imagine, we’re getting people coming to us who are, parents are already receiving care or families are already receiving care that they’re wondering what the next steps are for them. If they run out of benefits in a nursing facility, or if they shouldn’t move out and want to bring in home health care. So we’re getting a lot of calls on that end of it, but we’re also getting a lot of calls from those people, from their families, where they’re inquiring about long term care for themselves, and their spouses, or their partners, to see, well, what’s a good time for them to buy long term care, and how these plans work, and what they do.

Brian Gordon, Gordon Associates Long Term Care Planning:

I kind of want to address what’s the best age or the best time to buy the coverage. We really don’t have an age, so to speak, of what’s a good age to buy a plan, but we really look at how that financial house is looking. Are people saving for their retirement, their children or their grandchildren’s college education, do they have limited debt other than maybe a home and maybe an automobile? Are they doing the right things, and are they in the right position and are they planners, and is it time to kind of explore this?

Brian Gordon, Gordon Associates Long Term Care Planning:

We have people that are coming to us from the ages of 35, roughly to about 70, 75 years old that are looking at these types of policies. I’ve also had a number of parents reach out to me also, where their kids are between about the ages of about 22 to about 30. We have a little bit more difficult time at those ages, because most carriers will not start writing policies until someone is either 30 or 35 years old. So they’ve got to wait a few years in order to buy a policy for their kids.

Brian Gordon, Gordon Associates Long Term Care Planning:

The reason that they’re looking at it is because a lot of these people want to get these policies paid up for their children while they’re still alive and get this plan put in place, because they know it’s something that a lot of kids will not probably deal with later on down the road. That’s something that we’re seeing a lot right now.

Brian Gordon, Gordon Associates Long Term Care Planning:

We’re also seeing people that said that they were going to self-fund this on their own. And they’re now coming out of the woodwork from maybe a year or two, maybe three or four years ago, we might’ve talked to them. They’re also now also readdressing the idea of long term care for themselves. Because as we all know, if we get sick at the wrong time, and the markets are down, like they were maybe in March and April, and they had to pull their money out at that time, they’re never going to recoup that money once it comes out of those accounts. That’s making some people really think about it.

Brian Gordon, Gordon Associates Long Term Care Planning:

We also really want to make sure that people know that they do not have to insure 100% of the cost of care for themselves, because that’s been a big problem with a lot of folks is that they try to cover everything. And we all know that if we try to cover everything, whether it’s our home, and autos, and all of the liabilities we have, I always feel like we could be working beyond the grave a lot of times to do that. So you want to take a bite out of it, so that families can make a good decision if we get sick.

Brian Gordon, Gordon Associates Long Term Care Planning:

And it also allows families to know that their parents, their grandparents, their aunt and uncles, they made these decisions to buy long term care while they were of sound mind, and that so family should never feel guilty about, about putting a loved one in an assisted living facility or even needing home health care for themselves.

Brooke Salvini:

So just circling back, is there a sweet spot for age? I know you said that there is that range of basically 35 to 75, but do you feel that there is a sweet spot, both for the right age to buy it? And what about, is there, again, everybody’s situation is different, but do you feel that there’s sort of a sweet spot for the percentage of coverage?

Brooke Salvini:

So if in your area, it’s going to cost $10,000 a month, you were saying that it might be just far too expensive to cover 100%. Do you have a recommendation? Or do you see that maybe most clients and planners work together and decide 60% is good to cover, or whatever? So anyway, I’m just curious about if there are any sweet spots.

Brian Gordon, Gordon Associates Long Term Care Planning:

Sure. No. And obviously, the younger someone buys it, it’s always the better, because usually our health is going to be best when we’re younger and premiums are also going to typically be lower at younger ages. We always say that if we’re in a position to buy it in our 40s, but we wait until our 50s to buy it, we might have to buy 20 to 40% more coverage for ourselves if we do it at a little bit later age.

Brian Gordon, Gordon Associates Long Term Care Planning:

The age that we really look to people to buy the insurance by is roughly ages, their mid-50s, early to mid-50s is a really good time to look at it. I know that when we did our policy, we were going to wait until we were 50 years old, but I saw a lot of changes in our industry, so I jumped on this one when I was in my mid-30s. I was 37. My wife was 35.

Brian Gordon, Gordon Associates Long Term Care Planning:

So that’s kind of what we look at, is 51 to 55 or so is a good sweet spot for people to buy it. But again, it always comes down to affordability when someone’s in their late 50s, 60s, and their 70s. Because we do have people that can afford it and they’re comfortable putting that money out there, but it’s something that it definitely is a much bigger check to write at that stage of life.

Brooke Salvini:

Have there been any changes in the industry regarding the top end of the age when a client is eligible? Is there anything that our listeners should know about that?

Brian Gordon, Gordon Associates Long Term Care Planning:

Sure. Yeah. With COVID-19, a lot of the insurance companies originally, and some of them still have this in place, where they’re not writing clients, they’re not writing policy holders over the age of 70 in some cases. We had some that were not writing people over the age of 65. That was because that the insurance companies, as states started shutting down, they weren’t able to do their face-to-face interviews and do their cognitive screenings that they need to do on the clients at those ages.

Brian Gordon, Gordon Associates Long Term Care Planning:

That’s something that is starting to change right now, is the states are opening up. So that’s one thing that’s happening. And then with our hybrid policies, those are our life insurance with long term care rider type of policies. We had one carrier out there that said, if someone was over the age of 70, that they would only allow them to do a single premium.

Brian Gordon, Gordon Associates Long Term Care Planning:

Where basically back in the day before this, they were able to do a lifetime pay, they were able to do a 10 pay, and a 20 pay. And now they’re saying that they’re going to have to do a single premium upfront on that. So that’s a few of the changes that are taking place. And then they also, if people have COVID or had COVID, that there’s going to be waiting periods a lot of times before that person can actually apply for a policy.

Brian Gordon, Gordon Associates Long Term Care Planning:

We saw that a lot in Chicago here. We had a number of families that were looking at the insurance back in March, and then April or May, they ended up getting COVID-19. So they ended up having to wait anywhere from 30 days to three months in order to apply for a policy. I also believe that we have companies that say that someone’s got to wait six months until after they’re symptom free and don’t have it anymore.

Brooke Salvini:

That’s all good to know. Very helpful. Can you just give us a quick refresher and describe, just in general, the different kinds of policies that are available, stand-alone versus the asset-based, just a quick review of that?

Brian Gordon, Gordon Associates Long Term Care Planning:

Sure, sure. With most long term care policies written in the past, with the exception of a couple of companies, they were reimbursement policies. So if I had a policy that was paying me $6,000 a month for my care, and then the cost of care only cost $3,000, with a reimbursement plan, they’re going to reimburse us the $3,000. Whatever we don’t use will stay in that policy for us to use in the future for ourselves.

Brian Gordon, Gordon Associates Long Term Care Planning:

With reimbursement policies, we must submit bills to the insurance company each month. Typically, it’s not our clients that are doing it. When we set up a claim, we always have the home health care agency or the facility our clients are at, we have them just fax over the bills every month to the insurance company. And it typically works like clockwork from that. So reimbursement’s one of the more common plans.

Brian Gordon, Gordon Associates Long Term Care Planning:

You also have a couple of companies, and right now it’s more prominent in the hybrid plans or the asset-based life and long term care policies where we have what are called cash indemnity plans. Cash indemnity plans will basically, if I am benefit eligible, they will cut me a check. And let’s say the cost of care was $3,000 and I had $6,000, they’re going to go ahead and pay that to me. The extra money I can put aside to use in the future.

Brian Gordon, Gordon Associates Long Term Care Planning:

With the cash indemnity, the other part of it that some people like is that they can bring anybody in to be a caregiver. It doesn’t have to be through a licensed agency. If they have a niece or nephew, or a family member that wants to take care of them, or they have a person that they’ve worked with, and that had maybe been there, their cleaning person for many years, we see people in those circumstances using those folks as caregivers sometimes too. So cash indemnity gives the ultimate flexibility.

Brian Gordon, Gordon Associates Long Term Care Planning:

But I will tell you, Brooke, that I’ve had some people where they tell me, “I don’t want a policy like that, because I don’t want my kids to know about it and then they’re going to try to take care of me and do a substandard job of caring for me.” So we have people fighting back on it, but then we have some people that absolutely love that concept.

Brooke Salvini:

Interesting. Is there a cost difference between a reimbursement type policy versus a cash indemnity policy?

Brian Gordon, Gordon Associates Long Term Care Planning:

Back in the day when we had a few companies that offered it, the cash indemnity plans were more expensive. The insurance companies also put some limitations on… One particular company I have in mind, they offered unlimited benefits. But if you chose a policy that was a cash indemnity model, they maxed out at seven years of coverage for somebody, if they needed care for themselves. Because they knew the cash indemnities would be a little bit higher usage of those plans.

Brian Gordon, Gordon Associates Long Term Care Planning:

But with the hybrid plans that we’re working with today, when we run side by side comparisons, they’re all very, very close. It’s not going to make a decision one way or another, because that’s how close the premiums are with a lot of these companies. And some plans that are reimbursement on the hybrid sides actually come in more expensive in some cases, so it just depends.

Brooke Salvini:

There is so much to talk about in the world of long term care insurance. We only have a few more minutes in this podcast. We are going to follow up with you in an additional podcast, but are there any special features that you feel are really a must have in a policy?

Brian Gordon, Gordon Associates Long Term Care Planning:

I think that at certain ages, a person needs to put inflation protection on their plans. I think that that’s important, because, as time goes on, the cost of care keeps getting more expensive, so I think it’s important to keep up with that a little bit. Then one of the other riders that we like in the plans are doing a shared benefit. What a shared benefit does is, if I had a three-year benefit period and let’s say my spouse had a three-year benefit period, we’re allowed to share each other’s benefits.

Brian Gordon, Gordon Associates Long Term Care Planning:

And then there’s also one company that would give me my three years of coverage, my spouse’s three years of coverage, plus a third pool of money to work with. So those plans would give a little more leverage. Especially when I sit down with couples, or nowadays when I Zoom with couples, and they’re saying, “Well, I only want to buy it for him or her.” I always come up with the idea that we should really do a shared plan of some sort, because none of us know who or for how long we’re going to need care for.

Brian Gordon, Gordon Associates Long Term Care Planning:

And to me, it’s always important to have that first person protected very well, because that allows them to preserve more of their portfolio and assets for that second person that might need to use them down the road.

Brooke Salvini:

Brian, you’ve given us so much to think about and consider when we talk to our clients about long term care planning. And just to kind of sum this up, it is a planning decision and I always think the most important thing is to address it. One way to solve the problem may be long term care insurance or there is self-funding. But thank you so much for helping us understand more of the nuances of long term care insurance, so we can do a better job for our clients.

Brooke Salvini:

And I look forward to when we get back together for our second discussion in an additional podcast. So Brian Gordon, thank you so much. Again, you are with Gordon Associates Long Term Care Planning and you are in Chicago, I believe, Chicago, Illinois. With that, I would like to say on behalf of the PFP Section, this has been Brooke Salvini and Brian Gordon, and I hope you’ve enjoyed this podcast.

Brooke Salvini:

I highly encourage you to visit the PFP Section website and access the advisor’s guide to retirement and elder care planning, financial retirement health care. Stay tuned for Sarah Bradley, who will tell you a little bit more about how to find this valuable resource. Thank you for listening.

Sarah Bradley:

And thank you for sharing with our community of listeners. Want more information, resources, tools, and guidance on technical and practice management topics? Visit aipca.org/pfp and check out the show notes for this episode as well. So if you’re not already a member, think about joining the PFP Section, which is designed to save you time, help you best serve your clients, and take your financial planning practice to the next level.

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On September 14, 2020   /   Blog