Statistically, about 7 out of every 10 Colorado residents will need some form of long-term care insurance during their lifetime.
Long Term Care Insurance CO – 2024 Guide
On average, men will need 2.2 years of long-term care, while women will need 3.7 years. About 20% of Americans need long term care for five years or longer, according to the Long Term Care Institute.
But as with all forms of healthcare, long term care is expensive: According to the 2023 Genworth Cost of Care Survey, the average annual cost of a semi-private room in a nursing home is approximately $108,000, while a private room averages around $120,000.
And neither Medicare nor traditional health insurance products cover it.
Without protection in place, patients can easily face out-of-pocket costs of a quarter of a million dollars or more. For example, consider a Colorado resident who requires a private room in a nursing home for three years. At $120,000 per year, the total cost would be $360,000. Without insurance or other financial protections, such a significant expense could lead to financial ruin.
These costs can be devastating without the proper insurance. This guide will walk you through the process of planning for long term care costs and explaining long-term care insurance, and other options available to to help pay for long-term care in Colorado.
Long-Term Care Insurance Costs in Colorado
The financial burden of long-term care can be overwhelming: In-home care services, such as a home health aide, cost around $32 per hour, translating to about $73,216 annually for 44 hours per week of care, according to data from Genworth.
Assisted living facilities in Colorado cost approximately $4,750 per month, or up to $57,000 per year. These expenses can quickly deplete savings, or swallow a pension whole, highlighting the importance of having a strategy in place to pay for long term care services, before the need arises.
Health Insurance and Long-Term Care
Regular health insurance does not cover long-term care services.
Health insurance typically covers medical expenses like doctor visits, hospital stays, and prescription drugs. It covers the costs of treating acute medical conditions that are expected to improve.
But health insurance does not pay for long-term custodial care for chronic medical conditions, which includes assistance with daily activities like bathing, dressing, and eating. Understanding this gap in coverage is crucial for planning your future care needs.
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Options to Help Pay for Long-Term Care Insurance in Colorado
Long-Term Care Insurance
Long-term care insurance (LTCI) is the primary option to cover the costs of long-term care. These policies help pay for a range of services, including in-home care, assisted living, and nursing home care.
Benefits of Long-Term Care Insurance
- Financial Protection: LTCI helps protect your savings and assets from the high costs of long-term care. By paying premiums over time, you ensure you have funds available for your care needs without depleting your savings.
- Comprehensive Coverage: Most policies cover a wide range of services, offering flexibility in choosing the care that best suits your needs.
- Peace of Mind: Having a plan in place for future care provides significant peace of mind, ensuring you and your family are not burdened with unexpected care costs.
Key Features of Long-Term Care Insurance Policies
- Benefit Amount and Duration: Policies typically offer a set daily or monthly benefit amount for covered services. The benefit duration can range from two years to a lifetime, depending on the policy.
- Elimination Period: This waiting period before benefits begin usually ranges from 30 to 90 days. A longer elimination period can lower premiums but requires you to cover initial costs out-of-pocket.
- Inflation Protection: Many policies offer inflation protection, increasing your benefit amount over time to keep pace with rising care costs.
How Long-Term Care Insurance in CO Works
Long-term care insurance (LTCI) provides coverage for services not typically included in regular health insurance, such as assistance with daily living activities and extended care in various settings. This type of insurance is designed to help cover the costs associated with long-term care, which can be significant and are often not covered by Medicare or standard health insurance plans.
Coverage Options
Long-term care insurance typically covers a wide range of services and support, including:
- In-Home Care: This includes services such as skilled nursing care, physical therapy, and assistance with daily activities like bathing, dressing, and meal preparation. Home health aides and personal care attendants are also covered to help maintain the policyholder’s independence at home.
- Assisted Living Facilities: LTCI helps pay for the costs of living in an assisted living facility, which provides housing, meals, personal care, and health services. These facilities offer a community setting with staff available to assist residents with their needs.
- Nursing Home Care: For those requiring more intensive care, LTCI covers the costs of nursing home care. This includes both semi-private and private rooms, as well as around-the-clock medical supervision and skilled nursing services.
- Adult Day Care Services: These centers provide social activities, meals, and health-related services in a community-based setting, offering relief to family caregivers.
- Respite Care: LTCI can cover temporary care services that give family caregivers a break from their caregiving duties. Respite care can be provided in various settings, including the patient’s home or a facility.
- Hospice and Palliative Care: These services focus on providing comfort and support to individuals with terminal illnesses, ensuring quality of life in their final days.
Long Term Care Insurance Policy Features
Most long-term care insurance policies come with key features that determine how benefits are accessed and used:
- Benefit Amount and Duration: Policies specify a maximum daily or monthly benefit amount and a total benefit duration, which can range from a few years to a lifetime. For example, a policy might offer $150 per day for up to three years of coverage.
- Elimination Period: This is the waiting period before benefits begin, similar to a deductible. Common elimination periods range from 30 to 90 days, during which the policyholder must cover care costs out-of-pocket.
- Inflation Protection: Many policies offer inflation protection to ensure that benefits keep pace with rising care costs. This can be crucial as the cost of long-term care services tends to increase over time. Colorado Long Term Care Partnership-Qualified policies must include inflation protection as part of the policy. You can read more details about inflation protection and the Colorado Partnership for Long Term Care below.
- Coverage Triggers: To access benefits, policyholders typically need to meet specific conditions, such as being unable to perform a certain number of activities of daily living (ADLs) independently or requiring substantial supervision due to cognitive impairment.
Medicaid
Medicaid is a joint federal and state program that provides health coverage for low-income individuals.
In Colorado, Medicaid can cover long-term care costs, but eligibility requirements are strict. You must have limited income and assets to qualify. Colorado’s Long-Term Care Partnership Program allows individuals to protect more of their assets if they need to qualify for Medicaid after exhausting their LTCI benefits.
Keep reading to learn more details about this critical program.
Reverse Mortgages
A reverse mortgage allows homeowners aged 62 and older to convert part of their home equity into cash, which can be used to pay for long-term care services.
However, reverse mortgages come with risks and costs, so understanding the terms and consulting with a financial advisor is crucial.
Veterans Benefits
Veterans and their spouses may be eligible for long-term care benefits through the Department of Veterans Affairs (VA). The VA offers programs like Aid and Attendance, which provides additional financial assistance for those who need help with daily activities.
Medicaid Recovery Programs and Asset Protection
When Medicaid pays for your long-term care, the state may seek reimbursement from your estate after you die.
For example, they’ll get a lien on your house and other assets held in your name, and reimburse themselves for the cost of providing long term care for you and/or your spouse while you were alive. This process is known as Medicaid estate recovery. However, there are strategies to shelter your assets:
Colorado Long-Term Care Partnership Program
The Colorado Long-Term Care Partnership Program is a public-private initiative designed to encourage residents to plan ahead for their future long-term care needs.
Established in 2008, this program is a collaboration between private insurance companies, Colorado’s Medicaid program, and the state government. It aims to provide an incentive for residents to purchase long-term care insurance by allowing them to protect more of their assets if they eventually need to rely on Medicaid for long-term care expenses.
How the Program Works
The Colorado Long-Term Care Partnership Program operates on a “dollar-for-dollar” model.
This means that for every dollar a Partnership policy pays out in benefits, a dollar of your assets is protected from Medicaid spend-down requirements and estate recovery.
For instance, if a Partnership policy pays out $200,000 in benefits, you and your heirs can protect $200,000 of your assets against Medicaid recovery officials when qualifying for Medicaid. You’ll also be able to qualify for Medicaid sooner, without having to spend down those assets.
Colorado Partnership for Long Term Care Benefits
One of the primary benefits of the Colorado Long-Term Care Partnership Program is asset protection. Without a Partnership policy, you must spend down your assets to near poverty levels before you’ll be able to qualify for Medicaid.
But if you purchase a Partnership policy, you can retain more of your assets, providing greater financial security and preserving their estate for their heirs.
Additionally, the program encourages individuals to take personal responsibility for their long-term care needs, potentially reducing the burden on public resources. It also allows policyholders to access quality care through private insurance benefits before turning to Medicaid.
Eligibility and Requirements
To participate in the Colorado Long-Term Care Partnership Program, individuals must purchase a qualified long-term care insurance policy that meets specific state requirements.
These policies typically include inflation protection, which ensures that benefits keep pace with rising care costs. The level of required inflation protection varies based on the age of the policyholder at the time of purchase. For example, if you’re under 61, you must have compound annual inflation protection built into the policy. But if you’re aged 61 to 75, you can purchase a policy with a less expensive form of inflation protection.
Medicaid Recovery and Asset Protection
However, assets protected under the Colorado Long-Term Care Partnership Program are exempt from Medicaid recovery. This means that the benefits paid out by the Partnership policy not only help cover care costs ,but also shield equivalent amounts of assets from Medicaid recovery efforts.
The Colorado Long-Term Care Partnership Program provides an excellent opportunity for residents to plan for their future long-term care needs while protecting their financial legacy. By purchasing a qualified Partnership policy, individuals can gain peace of mind knowing they have safeguarded their assets and ensured access to necessary care without depleting their resources.
For more detailed information and personalized advice, schedule a consultation with a ColoHealth Personal Benefits Manager who can help tailor a long-term care strategy to your specific needs and circumstances.
Trusts and Asset Transfers
Establishing certain types of trusts or transferring assets can help protect them from Medicaid recovery. However, these strategies must be carefully planned to comply with Medicaid’s look-back period, which is currently five years.
Using Health Savings Accounts (HSAs) for Long-Term Care Expenses
Health Savings Accounts (HSAs) offer a tax-advantaged way to save for medical expenses, including some long-term care-related costs.
When you use your HSA to pay for any qualified medical expense, including long term care expenses and even long term care insurance premiums, you can make a tax-free and penalty-free withdrawal from your health savings account.
HSAs are by far the most tax-efficient way to pay for long-term care expenses or premiums. But you have to contribute in order to have funds available to use!
And in order to be eligible to make pre-tax contributions to an HSA, you must be enrolled in a qualified high-deductible health plan, or HDHP.
For free help in enrolling in an HDHP and getting set up to contribute to an HSA, make an appointment with an expert ColoHealth Personal Benefits Advisor. You’ll get a complementary, no obligation consultation with an experienced agent who is deeply familiar with Colorado, and who can help you integrate your health insurance, HSA contribution, and long term care insurance strategies.
Eligible Expenses
You can use your HSA to pay for qualified long-term care insurance premiums and out-of-pocket expenses for long-term care services, including home care, assisted living, and nursing home costs, among many other qualified medical expenses.
Contribution Limits
For 2024, the maximum HSA contribution limit in Colorado is $4,150 ($4,300 for 2025) for an individual and $8,300 ($8,550 for 2025) for family plans.
Those aged 55 and older can contribute an additional $1,000 as a catch-up contribution.
Learn More: HSAs –– A Powerful But Underrated Retirement Asset
Long Term Care and Asset Protection in Colorado
The Colorado Long-Term Care Partnership Program offers you the opportunity to apply for Medicaid under modified eligibility rules, featuring a significant benefit known as asset disregard. This benefit allows you to retain more of your assets if you need Medicaid to cover long-term care services.
What is Asset Disregard?
Asset disregard means that Medicaid will not count certain assets when determining your eligibility. Specifically, the amount of assets Medicaid disregards equals the benefits you receive from your Partnership-qualified long-term care policy. For instance, if your policy pays out $300,000 in benefits, you can keep an additional $300,000 in assets above the standard Medicaid asset limit, which is typically $2,000 for a single person in most states.
Inflation Protection Benefits
Long Term Care Partnership-qualified policies include inflation protection, which increases the value of the benefits you receive over time. This means the coverage amount you initially purchase can grow, offering you more significant protection as care costs rise.
Protecting Your Assets
With a Partnership-qualified policy, you can preserve your assets while still accessing Medicaid. For every dollar your policy pays in benefits, you can protect an equivalent amount in personal assets. This asset protection helps ensure you don’t have to spend down all your resources before qualifying for Medicaid.
Avoiding Estate Recovery
A significant advantage of the Partnership program is that the state will not seek to recover the Medicaid costs from your estate for the amount protected by your policy.
Typically, Medicaid recovery involves reclaiming expenses from your estate after your death, but with a Partnership policy, the benefits paid allow you to shield equivalent assets from this recovery process.
Consult With an Elder Law Attorney
To maximize your asset protection strategy’s effectiveness, it’s wise to consult with a qualified elder law or estate planning attorney. They can help you navigate complex Medicaid rules and create strategies, such as establishing irrevocable trusts, to further protect your assets against medical debt and Medicaid recovery.
Example: Suppose you have a Partnership-qualified long-term care insurance policy in place that pays up to $300,000 in benefits in the event you need long term care.
Normally, you would need to spend down your assets to the Medicaid limit of $2,000 to qualify. However, with the asset disregard, you can retain $300,000 in assets, effectively preserving your wealth while still receiving necessary care.
By taking advantage of the Colorado Long-Term Care Partnership Program, you can protect your assets, access high-quality care, and ensure financial security for your future.
Be Proactive
Planning ahead is crucial. The earlier you invest in a long-term care insurance policy, the more benefits you can secure.
It’s best to start considering these options in your 40s or 50s or earlier, when premiums are lower, and you have more choices.
Additionally, acceptance is not guaranteed. Except for some smaller group policies, you must pass medical underwriting when you apply for long-term care insurance. And underwriting standards are high. Long term care insurance carriers are very selective in whom they will approve for coverage, as they know that even seemingly small health issues now can compound over time and become a significant issue later in life that may require long term care support.
That’s why it’s important to apply now, while you are still in good health. A single accident, injury, illness or diagnosis could derail your ability to secure this valuable coverage in the future.
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Long Term Care Insurance CO Conclusion
Long-term care insurance is a vital component of a comprehensive financial plan, especially for Colorado residents facing high care costs.
By understanding the benefits, costs, and specific features of LTCI policies, you can make informed decisions to protect your financial future. Whether considering traditional LTCI or using HSAs for care expenses, planning ahead ensures peace of mind and financial security for you and your loved ones.
For more detailed information and personalized advice, consult with a Personal Benefits Manager who can help tailor a long-term care strategy to your specific needs and circumstances.
For Further Reading: Long Term Care Insurance – Overview|From Our Newsletter: How To Protect Yourself Against Alzheimer’s Disease|How To Make the Most Out of Your HSA
Leslie Alford is a Personal Benefits Manager at ColoHealth. Her aim is to help you make smart and informed healthcare coverage decisions that will fit your needs and budget. Read more about Leslie on her Bio page.
