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Phyllis Shelton
Phyllis Shelton advocates selling long-term care insurance by emphasizing effects on one's lifestyle over the financial implications. She recently led a seminar for staff of the Tennessee Department of Environment and Conservation on the state's group long-term care program for its employees, retirees and their families.

Long-term care market grows as boomers age

Staff Writer Tennessean

From her Nashville base, Phyllis Shelton advocates buying long-term care insurance as a means of maintaining one's dignity in the event of an accident or conditions of aging. Her approach represents a shift in marketing strategy for those selling long-term care policies.

''This is something that affects marriages, relationships with brothers and sisters and with kids,'' Shelton recently told a group of state employees and retirees about the strains of providing care.

The session was among 90 statewide being led by her training company, LTC Consultants, to educate state employees and retirees about long-term care. In January, her firm completed presentations nationwide to 90,000 federal workers and retirees about a U.S. government group long-term care insurance program.

These types of presentations have led to an increase in the sale of long-term care insurance through group arrangements with employers. An accident or conditions of aging can have a serious effect on an individual or family when it comes time to provide care, Shelton says.

''The old way to market was just to talk about the financial side,'' she said about stressing protection on one's income and assets. ''Not everybody can identify with that. What everybody can identify with is change. What will you do if you or your family member needs long-term care? How's that going to disrupt your lifestyle?''

However, appealing to a prospective policyholder's emotions is a technique that doesn't sit well with everyone in the industry. Boston-area insurance broker Benjamin Lipson is one of them.

''I resent the industry using emotional blackmail to scare people and make it difficult for them to make a rational decision,'' he said. ''Long-term care insurance is not for everybody. They have to be able to afford it. It's a risky product, and premiums will eventually go up.''

Lipson was referring to how certain long-term care carriers such as CNA have been recently raising rates on some individual policies. Some of those affected bought policies as many as 15 years ago, when they were healthier and could afford the premiums, he said.

Long-term care insurance provides money to cover the cost of caring for policyholders who become unable to take care of themselves without the aid of others. Policyholders pay a premium and can draw benefits if they become unable to do two of six living activities: bathing, dressing, toileting, moving from the bed to a chair, controlling their bowel and bladder or eating.

People generally have three options for paying for costs of such care: Medicaid, if they meet a certain income qualification; paying out-of-pocket; or buying long-term care insurance in advance.

For individual policies, annual premiums were about $1,781 (or $148 a month) in 2002, according to data from LIMRA International, a Windsor, Conn.-based benefits research firm. The average premium for employer-sponsored or group plans were about $817.

Barbara Hopkins is relocating from Ann Arbor, Mich., to Knoxville to be closer to her parents and said she's happy that her father, who is drawing on long-term care benefits, has coverage.

Her father's policy with GE Capital Assurance pays $100 a day in daily benefits — which is considered average — with a lifetime maximum of $73,000. It covers the costs related to the presence of a home health nurse four to six hours a day.

Shelton, who started LTC Consultants in 1991 after stints with insurers Blue Cross/Blue Shield of Tennessee and John Hancock, thinks long-term care insurance offers policyholders more options, such as home care or assisted living, that are not available under Medicaid. The federal program only pays for nursing home care and participants have little choice of facilities.

Shelton considers long-term care insurance necessary for most people, unless they have low income and assets, which allows them to qualify for Medicaid.

Policies are available beginning at age 18, she said, adding a younger person might be involved in an accident or develop health issues that require help of a caregiver.

''Middle America's only hope of dignity as we age is represented by long-term care insurance because that buys choices …,'' Shelton said.

Lipson thinks that certain people who live alone and families in which the children are far away or there's a dispute over which side of the family will provide care are better candidates for policies.

While long-term care insurance has less than 10% penetration with 8 million policies sold in the United States, demographics tend to indicate potential sales growth. U.S. Census Bureau numbers show that about 77 million baby boomers will reach age 65 in 2010, Shelton said. Also, one out of three workers is projected to provide care for an aging family member over 50 years old later this decade, she said.

Experts cite a lack of consumer awareness and loopholes that people use to transfer assets and qualify for Medicaid among the reasons why more consumers are yet to purchase the insurance coverage.

''It's a very unpleasant topic, like the issue of dying, people don't really want to talk about it,'' said Robert Forman, president of Long-Term Preferred Care, a unit of Franklin's Progeny Marketing Innovations that plans next month to stop selling long-term care insurance.

A factor that could make buying new policies attractive is a projected rise in the cost of care of 5% compounded annually, Shelton said. The statewide average daily cost of semiprivate room and board in a nursing home is expected to rise from $115 to $497 in 2032, according to the MetLife Mature Market Institute.

Shelton was hired by insurer MidAmerica Insurance Co. to hold the state employees seminars and by insurers John Hancock and MetLife to hold the more than 2,000 sessions for federal employees.

Lipson said that because consultants such as Shelton are paid by carriers for presentation to employees, they don't offer the prospects objective information and advice on other long-term care products.

Forman of Long-Term Preferred Care views the discussions on selling techniques as reflecting an intrinsic conflict in insurance.

''Most of us spend thousands on homeowners' insurance and never get a claim. Does it make it an unwise investment?'' he asked.

''On one hand, we pay all premiums and hope we never use it. But, if we never use it, we're upset we paid all the money and didn't use it.''

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