As if long-term care insurance (LTC) wasn’t already expensive enough, the industry is bracing for costs to be driven higher over time by people who do at-home genetic testing and don’t disclose the results before buying a policy.
The financial pain facing long-term care insurers
The New York Times recently profiled a 77-year-old woman who decided to buy an LTC policy after doing genetic testing.
The woman had watched her mother suffer with Alzheimer’s disease and she wanted to know the likelihood she’d have the same fate. Sure enough, the genetic test results confirmed it — the woman had inherited a gene that puts her at much greater risk of developing Alzheimer’s disease.
That presents a new conundrum for insurers. Revelations about an applicant’s likelihood to develop a costly disease gleaned through genetic testing could help insurers correctly price their policies. But there’s very little chance the insurers will ever get that info.
Companies like 23andMe.com that offer at-home genetic test kits starting at $199 are prohibited from revealing personally identifiable info to third parties like insurance companies.
So it’s up to the individual consumer to disclose or not disclose the results of their findings to insurers. The fear is that many people won’t.
At-home genetic tests like 23andMe can reveal your genetic health risk of developing hereditary Thrombophilia, late-onset Alzheimer’s and Parkinson’s Disease. The test will also tell you if you’re a carrier of the genes for Cystic Fibrosis, Sickle Cell Anemia and hereditary hearing loss, among other diseases.
Meanwhile, research cited by the Times shows that people who discover they have the ApoE4 gene variant — the one the 77-year-old woman had — are nearly six times more likely to act on that info by buying an LTC policy versus those people who discover they don’t have the gene that’s linked to Alzheimer’s.
That means insurers are going to have a lot of bills to cover for those clients down the road! All of which, of course, will drive up the cost of LTC policies as a whole.
Follow these guidelines if you’re thinking of buying LTC insurance
1) Only consider companies that have been rated “A++” (by A.M. Best), which means they are of the highest financial strength.
2) The prime age to buy is late 50s to early 60s. So if you have aging parents, talk to them about it.
3) You should not buy LTC insurance if you are at either extreme of the income scale — defined as having investable assets of $3 million or being able to qualify for Medicaid.
4) Be sure the policy’s benefit adjusts over time based on inflation. Shoot for an inflation adjustment of up to 5% a year. Meanwhile, you should also look for a policy with a five-year benefit and a six-month waiting period upfront.
5) Shopping for LTC insurance can be simplified by contacting an independent agent who will shop quotes from a variety of companies for you. Companies like AALTCI.org, LTCTree.com and PrepSmart.com are all good starting points for this.
Money expert Clark Howard has additional advice on buying an LTC policy, as well as a list of recommended insurers based on financial strength.
Be sure to give it a read!