What if your golden years should include not only adorable grandkids and sun-kissed cruises, but also a broken hip, a stroke, or Alzheimer's?
Americans seem largely unwilling to plan for such unwelcome possibilities, according to a wide array of people who care for elders or provide financial planning. And this year Americans have dramatically slowed purchases of a source of financial protection against such calamities: long-term care insurance.
The businesses that offer such insurance, which can pay for health-related care at home and in nursing homes, were rocked during the recession.
Several major companies left the market. Costs for existing policies shot up 30 to 50 percent from five years ago, at least partly due to today's low-interest rate environment. As a result, the number of new policies in recent years fell and stayed at about 230,000 a year, less than half the 586,000 that were written at the peak year of 2000.
Now 2013 will mark another decline. Through the end of September, the industry had written just 133,000 policies, down 23 percent from the same period a year earlier, according to new figures from LIMRA, an industry-supported research group in Windsor, Conn. Premiums declined 27 percent to $311 million.
Some of the decline may be due to consumer concerns about the cost of the annual premiums, which averaged about $2,500 last year, said Karen Fisherkeller, an analyst with LIMRA.
"I think consumers also have been shaken up a little bit by the number of carriers who have exited the market and by the rate increases," she said.
Long-term care insurance remains one of several options for those who want to plan for their senior years. Another approach involves new life insurance policies that also provide some long-term care protection. Such policies amount to a small segment of the business but one that has experienced double-digit growth annually over the last four years.
Many seniors simply pay for long-term care out of their own pockets, sometimes by tapping the equity in their houses.
Medicare offers only limited assistance for such care. Instead, the most common payment source for the state's nursing homes is Medi-Cal, part of the federal Medicaid system for those deemed unable to pay for health care.
With the number of California seniors expected to soar by 60 percent to nearly 7 million in the next decade, state officials are warning that the elderly could nearly double Medi-Cal's long-term care costs to $12.4 billion by 2023.
In response, the state wants residents to begin preparing for how they might one day receive and pay for long-term care.
"You can't plan once your house is on fire," said Brenda Bufford, director of the California Partnership for Long-Term Care. The state program provides information on long-term care, and it has certified four companies to provide long-term care insurance under its banner.
Paddy Coreris, sales and marketing director at the Friends House senior community in Santa Rosa, acknowledged it was hard to get her own parents to talk about how they wanted to address long-term care. But failing to do so often means having little control of your fate should illness or calamity occur.
"Somebody else will be making the choices for you," Coreris said.
Friends House, a nonprofit in the Quaker tradition, has 34 skilled nursing beds at its Santa Rosa complex, in addition to its 67 independent living units and six-bed assisted living facility. For the skilled nursing unit, Coreris said, about one patient in 50 pays with long-term care insurance.
The primary sources for elder care today are families, most often by a daughter or other female relative.
"When care is needed, a man asks, 'Who can I call?' A woman asks, 'What can I do?'" said Jesse Slome, executive director for the American Association for Long-Term Care Insurance, an industry trade group in Los Angeles.
Many buyers of long-term care insurance have seen someone close who needed extended care, Slome said. As a result, they don't want to turn family members "into indentured caregivers."
"Unless you've been through a significant long-term care incident with a family member," he said, "you just don't get it."
Just 10 percent of state residents age 50 and over own some type of long-term care coverage, according to the California Partnership. By some nationwide estimates, as few as 5 percent of older Americans have coverage.
Early forms of long-term care insurance arose in the 1960s. By the late 1980s nearly 100 insurance companies were offering policies, fueled by the premise that many Americans then approaching retirement age would be drawn to protection against health care bills that could wipe out all their assets near the end of life.
"Unfortunately sales have really never taken off as expected," said Fisherkeller.
Along with the cost of premiums, many consumers questioned the value of such insurance, she said. They worried they might spend so much on insurance and never file a claim — what Fisherkeller calls a "use it or lose it" mentality.
Only 20 companies reported selling long-term care policies last year, with the top five businesses controlling nearly 80 percent of the market, according to LIMRA.
Of those companies that recently left the market, a key reason is the difficulty with today's low-interest rates to earn much on investments from premiums, said Slome.
Those who stayed have raised premiums. When a long-term care insurance company sees a 1-percent drop on its investment returns, he said, it needs to raise premiums roughly 15 percent.
Even as the long-term care insurance market has stalled, companies are selling more life insurance policies with long-term care riders. It appeals to some who worry they might not get anything back if they purchased a traditional long-term care policy. And it offers an extra benefit to those looking at life insurance.
"This is the latest wave," said Alan Berman, owner of Alan Berman Insurance & Financial Services, a Santa Rosa company that sells a variety of insurance products. "Why buy a life insurance policy that only pays you if you die?"
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