How much does LTCI really cost? The power of the press and Americans' fragmented education

By Stephen D. Forman (LTCA)

Long Term Care Associates, Inc.

How much does long-term care insurance (LTCI) cost? Before we answer, please allow me to pose a seemingly unrelated question: "How much does a ticket cost?"

Stumped yet?

As a reader, you don't know whether I'm talking about a raffle ticket, a ticket to your county fair, a ticket to Italy, or a ticket to the Super Bowl. Yet our colleagues in personal finance (Forbes, Motley Fool, New York Times, you know, the usual suspects) routinely write about LTC insurance as if it were a generic "ticket," with one typical price. As if a $10 movie ticket were the same as a $1,000 plane ticket.

Nonsense, right?

Welcome to the world of LTC insurance, as portrayed in the popular media.

Such publications perpetuate the stereotype that LTC insurance costs a certain average amount: could be $2,200 a year or $4,000 a year (or often, the arbitrary number $2,268/year — an aggregate number from a 2010 study that keeps resurrecting).

Or worse, they will simply refer to LTCI off-handedly as "pricey." In either case, the American public receives a fragmented education through these influential titles. No wonder 61 percent of Americans rate "affordability" as the number one objection to the purchase of LTC insurance. Other objections don't even come close.

Meanwhile, when asked how much LTCI costs, a majority (54 percent) overestimate the number, sometimes wildly. Compounding the problem, 70 percent of non-buyers underestimate the cost of the underlying care itself.

If only there were some way to reframe the discussion.

I understand the desire to quote "average" premiums in these articles. But what's average for a 50-year-old is not average for a 70-year-old. What's average in Connecticut is not average in Mississippi. What's average for a triathlete is not average for a sedentary diabetic. And most importantly, ask anyone and they will tell you they're not average. They don't have average tastes, they don't have average needs, and they don't want an average extended care plan.

The extended care plans our clients desire may be modest or great, and this will reflect in the funding mechanisms required. Where one may choose catastrophic for a few hundred dollars, another may prefer comprehensive for several thousand. Where one insurance company may charge an individual a small premium, their competitor may charge double or triple — just as two passengers on a plane pay different fares for the same flight.

Confounding it all, buyer studies let us know the exact price point at which consumer interest is most piqued for each age-band. So, there is no average. There are only pushing and tugging forces which drive the price as high and low as one can imagine, differing from one shopper to the next.
Learning what someone in the newspaper paid for their LTCI matters about as much as learning whether they hang their TP over the roll or under.

So, what should be done? The best solution would probably be to leave premiums out of these personal finance columns entirely, since they serve only to misinform. Alternatively, the writers could say, "Premiums for coverage can vary from a few hundred dollars a year to several thousand, depending on your age, health, company and coverage chosen."

Or better yet, "Premiums for coverage can vary tremendously, but affordable coverage can be tailored for any budget."

Or best of all, "For information regarding LTCI premiums, please consult with an experienced long-term care specialist."

What do you think? Is it all right for articles to quote average rates, or do they do readers more harm than good? If a consumer asks you how much your products costs (life, health, disability), how do you answer the question?

Which financial column tend to cover your life of business farily, and which tend to get it wrong?