Long Term Care Insurance

Long Term Care Insurance

How To Select a Long Term Care Insurance Policy

Choosing an appropriate time of when to purchase a long term care insurance policy may be a bit confusing. Finding the appropriate policy suitable to one’s lifestyle and needs can be challenging. At SilverCensus Senior Living and Home Care Directory, we encourage you to get educated on available options and get familiar with terminology that will help you make the right decision for your health care future.

Here are a few frequently asked questions about Long-Term Care Insurance that you may find helpful:

How Long Term Care Insurance Policies Work

How Do Long-Term Care Insurance Policies Work?

Long-term care insurance policies are not standardized like Medicare supplement insurance. Companies sell policies that combine benefits and coverage in different ways.

How Are Benefits Paid Once Long Term Care is Needed?

Insurance companies that sell long-term care insurance generally pay benefits using one of three different methods: the expense-incurred method, the indemnity method, or the disability method. It is important to read the literature that accompanies your policy (or certificate for group policies) and to compare the benefits and premiums.

When the expense-incurred method is used, the insurance company must ?decide if you are eligible for benefits and if your claim is for eligible ?services. Your policy or certificate will pay benefits only when you receive ?eligible services. Once you have incurred an expense for an eligible service, ?benefits are paid either to you or your provider. The coverage will pay for ?the lesser of the expense you incurred or the dollar limit of your policy. ?Most policies bought today pay benefits using the expense-incurred method.

When the indemnity method is used, the benefit is a set dollar amount. The benefit is not based on the specific services received or on the expenses incurred. The insurance company only needs to decide if you are eligible for benefits and if the services you are receiving are covered by the policy. Once the company decides you are eligible and you are receiving eligible long-term care services, the insurance company will pay that set amount directly to you up to the limit of the policy.

When the disability method is used, you are only required to meet the benefit eligibility criteria. Once you do, you receive your full daily benefit, even if you are not receiving any long-term care services.

Pooled Benefits and Joint Policies

You may be able to buy a long-term care insurance policy that covers more than just one person, or more than one kind of long-term care service. The benefits provided by these policies are often called pooled benefits.

One type of pooled benefit covers more than one person, such as a husband and wife, or two partners, or two or more related adults. This type ?of benefit is sometimes called a joint policy or a joint benefit. This pooled benefit usually has a total benefit that applies to all of the ?individuals covered by the policy. If one of the covered individuals collects benefits, that amount is subtracted from the total policy benefit. For example, if a husband and wife have a policy that provides $150,000 in total long-term care benefits, and the husband uses $25,000 in benefits from the policy, $125,000 would be left to pay benefits for either the husband or the wife, or both.

Federally Tax-Qualified Policies

1. Premiums can be included with other annual uncompensated medical expenses for deductions from your income in excess of 7.5% of adjusted gross income up to a maximum amount adjusted for inflation.

2. Benefits that you receive and use to pay for long-term care services generally will not be counted as income. For policies that pay benefits using the expense incurred method, benefits that you receive in excess of the costs of long term care services may be taxable. For policies that pay benefits using the indemnity or disability methods, all benefit payments up to the federally approved per diem (daily) rate are tax-free even if they exceed your expenses.

3. To trigger the benefits under your policy, the federal law requires you to be unable to do two ADLs ?without substantial assistance.

4. Medical necessity cannot be used as a trigger for benefits

5. Chronic illness or disability must be expected to last for at least 90 days.

6. For cognitive impairment to be covered, a person must require substantial supervision.

What Services Are Covered in a Long Term Care Policy?

It is important that you understand what services your long-term care insurance policy covers and how it covers the many types of long-term care services you might need to use.

Long Term Care Policies may cover the following:

Nursing home care
Home health care
Respite care
Hospice care
Custodial/Non-Medical/Personal care in your home
Services in assisted living facilities
Services in adult day care centers
Services in other community facilities

There are several ways policies may cover home health care. Some long-term care insurance policies only pay for care in your home from licensed home health agencies or a nurse registry. Some also will pay for care from licensed health care providers not from a licensed agency. These include licensed practical nurses; occupational, speech, or physical therapists; or licensed home health care aides.

Other policies may pay for services from home health care aides who may not be licensed or are not from licensed agencies. Home health care aides help with personal care.

You may find a policy that pays for homemaker or chore worker services. This type of benefit, though not available in all policies, would pay for someone to come to your home to cook meals and run errands. Generally, adding home care benefits to a policy also adds to the cost of the policy.

NOTE: Some policies pay benefits to family members who give care in the home.

What type of care facilities are covered by a Long Term Care Policy?

You should know what types of facilities are covered by your long-term care insurance policy. If you’re not in the right type of facility, the insurance company can refuse to pay for eligible services. New kinds of facilities may be developed in the future, and it is important to know whether your policy will cover them.

Some policies may pay for care in any state-licensed facility.

Others only pay for care in some state-licensed facilities, such as a licensed nursing facility.

Still others list the types of facilities where services will not be covered, which may include state-licensed facilities. (For example, some places that care for elderly people are referred to as homes for the aged, rest homes or personal care homes, and are often not covered by long-term care policies).

Some policies may list specific points about the kinds of facilities they will cover.

Some will say the facilities must care for a certain number of patients or give a certain kind of care.

When shopping for a long-term care policy, check these points carefully and compare the types of services and facilities covered in the policy. Also, be aware that many states, companies and policies define assisted living facilities differently. Policies that cover assisted living facilities in one state may not cover services provided in an assisted living facility in another state. Before you move or retire to another state, ask if your policy covers the types of services and facilities available in your new state. Also, if your policy lists kinds of facilities, be sure to check if your policy requires the facility to have a license or certification from a government agency.

NOTE: If you do NOT reside in the kind of facility specified by your policy, the insurance company may not pay for the services you require.

What Services Are Not Covered (Exclusions and Limitations)?

Most long-term care insurance policies usually do not pay benefits for:

A mental or nervous disorder or disease, other than Alzheimer’s disease or other dementia.

Alcohol or drug addiction.

Illness or injury caused by an act of war.

Treatment the government has provided in a government facility or ?already paid for.

Attempted suicide or intentionally self-inflicted injuries.

NOTE: In most states, regulations require insurance companies to pay for covered services for Alzheimer’s disease that may develop after a policy is issued. Ask your state insurance department if this applies in your state. Nearly all policies specifically say they will cover Alzheimer’s disease. Read about Alzheimer’s disease and eligibility for benefits in the section on benefit triggers

How Much Coverage You Will I Have?

The policy or certificate may state the amount of coverage in one of several ways. A policy may pay different amounts for different types of long-term care services. Be sure you understand how much coverage you will have and how it will cover long-term care services you receive.

Maximum Benefit Limit. Most policies limit the total benefit they will pay over the life of the policy, but a few don’t. Some policies state the ?maximum benefit limit in years (one, two, three or more, or even lifetime). Others write the policy maximum benefit limit as a total dollar amount. ?Policies often use words like total lifetime benefit, maximum lifetime benefit, or total plan benefit to describe their maximum benefit limit. When you look at a policy or certificate, be sure to check the total amount ?of coverage. In most states, the minimum benefit period is one year. Most nursing home stays are short, but illnesses that go on for several years ?could mean long nursing home stays. You will have to decide if you want protection for very long stays. Policies with longer maximum benefit periods ?cost more. Read your long-term care insurance policy carefully to learn what the benefit period is.

Daily/Weekly/Monthly Benefit Limit. Policies normally pay benefits by the day, week or month. For example, in an expense-incurred plan, a policy might pay a daily nursing home benefit of up to $200 per day or $6,000 per month, and a weekly home care benefit of up to $1,400 per week. Some policies will pay one time for single events, such as installing a home medical alert system.

When you buy a policy, insurance companies let you choose a benefitamount (usually $50 to $350 a day, $350 to $2,450 a week, or $1,500 to $10,500 a month) for care in a nursing home. If a policy covers home care, the benefit is usually a portion of the benefit for nursing home care (e.g., ?50% or 75%), although a growing number of policies pay the same benefit amounts for care at home as in a facility. Often, you can select the home care benefit amount that you prefer. It is important to know how much skilled nursing homes, assisted living facilities, and home health care agencies charge for their services BEFORE you choose the benefit amounts in your long-term care insurance policy. Check the facilities in the area where you think you may be receiving care, whether they are local, near a grown child, or in a new place where you may retire. The worksheet on page 45 can help you track these costs.

Cost for Long Term Care Insurance

What is the annual cost of long term care?

According to the National Association of Insurance Commissioners, the average cost nationally of a year at a nursing home is $38,000. Costs tend to vary and can exceed in excess $80,000 a year. Home care expenses can range anywhere from $120 to $260 per day. Inflation is an important factor to consider. According to the United States General Accounting Office, these costs will triple in the next 20 years.

Do the rates ever go up on existing long term care insurance policies?

An insurance company cannot raise your rates as an individual. For example in the State of Florida, in order for insurance companies to increase the rates on your policy, they would have to get permission from the Florida Department of Insurance and raise the rates on everybody in the State of Florida on that type of policy. It is best to deal with top-tier companies. Financial stability is important. Also, it is important is to learn whether the insurance company that you are interested in, has a history of raising rates.

How does inflation factor into a long term care policy?

With the cost of care continually escalating based on the Consumer Price Index (CPI), adding an optional inflation rider to your policy is a great idea if you can afford it. This allows your policy to grow as you get older, yet the premium stays the same. If you can’t afford to add the additional inflation rider to your policy, some companies allow people to increase their coverage every three years at their option.

Does Medicare cover Long Term Care?

Medicare only covers skilled care during the first one hundred days in a skilled nursing facility. In addition it only covers intermittent and recuperative care at home. The first 20 days in a Skilled Nursing Facility (SNF) are covered in full if you have 3 days prior hospitalization or in a hospital 3 midnights. The next 80 days are covered partially by Medicare and partially by your Medicare supplement. Medicare does not cover custodial care such as personal grooming and assistance.

When to Buy Long Term Care Insurance

When Should I Consider Purchasing Long Term Care Insurance?

You should CONSIDER buying Long-Term Care Insurance if:

You have significant assets and income.

You want to protect some of your assets and income.

You can pay premiums, including possible premium increases, without financial difficulty.

You want to stay independent of the support of others.

You want to have the flexibility of choosing care in the setting you prefer or will be most comfortable in.

If, after careful consideration, you decide that long-term care insurance is right for you, check out the company and the agent, if one is involved, before you buy a policy.

Insurance companies and agents must be licensed in your state to sell long-term care insurance.

Where Can I Buy a Long Term Care Insurance Policy?

Private insurance companies sell long-term care insurance policies. You can buy an individual policy from an agent or through the mail. Or, you can buy coverage under a group policy through an employer or through membership in an association. The federal government and several state governments offer long-term care insurance coverage to their employees, retirees and their families. This program is voluntary, and premiums are paid by participants. You can also get long-term care benefits through a life insurance policy.

Can I buy an Individual Policy for Long Term Insurance?

Today, most long-term care insurance policies are sold to individuals. Insurance agents sell many of these policies, but companies also sell policies through the mail or by telephone. You will find that individual policies can be very different from one company to the next. Each company may also offer policies with different combinations of benefits. Be sure to shop among policies, companies and agents to get the coverage that best fits your needs.

Can I buy a Long Term Care Policy from my Employer?

Your employer may offer a group long-term care insurance plan or offer

individual policies at a group discount. An increasing number of employers offer this benefit,16 especially since the passage of the Health Insurance Portability and Accountability Act (HIPAA). HIPAA allows employers the same type of federal tax benefit when they pay for their employees’ long-term care insurance as when they pay for their health insurance (except for Section 125 cafeteria plans).

The employer-group plan may be similar to what you could buy in an individual policy. If you are an active employee, one advantage of an employer-group plan is you may not have to meet any medical requirements to get a policy or there may be a relaxed screening process for active employees. Many employers also let retirees, spouses, parents and parents-in-law apply for this coverage. Relatives must usually pass the ?company’s medical screening to qualify for coverage and must pay the premium.

Generally, insurance companies must let you keep your coverage after your employment ends or your employer cancels the group plan. In most cases, you will be able to continue your coverage or convert it to another long-term care insurance policy. Your premiums and benefits may change, however.

If an employer offers long-term care insurance, be sure to think about it carefully. An employer-group policy may offer you options you cannot find if you buy a policy on your own.

Is there an option to purchase a Long Term Care Policy if I am a government employee?

Federal and U.S. Postal Service employees and annuitants, members and retired members of the uniformed services, and qualified relatives of any of these are eligible to apply for long-term care insurance coverage under the Federal Long Term Care Insurance Program.

Private insurance companies underwrite the insurance, and the federal government does not pay any of the premiums. The group rates under this program may or may not be lower than individual rates, and the benefits may also be different.

If you or a member of your family is a state or public employee or retiree, you may be able to buy long-term care insurance under a state government program.

Policies Sponsored by Continuing Care Retirement Communities

Many Continuing Care Retirement Communities (CCRC) offer or require you to buy long-term care insurance. A CCRC is a retirement complex that offers a broad range of services and levels of care. You must be a resident or on the waiting list of a CCRC and meet the insurance company’s medical requirements to buy its long-term care insurance policy. The coverage will be similar to other group or individual policies.

Can I use a Life Insurance Policy Death Benefit to Pay for Long Term Care Expenses?

Some companies let you use your life insurance death benefit to pay for specific conditions such as terminal illness or for qualified long-term care expenses such as home health care, assisted living or nursing home care. A ?life insurance death benefit you use while you are alive is known as an ?accelerated death benefit. A life insurance policy that uses an accelerated death benefit to pay for long-term care expenses may also be known as a life/long-term care policy. It may be an individual or a group life insurance policy. The company pays you the actual charges for care when you receive long-term care services, but no more than a certain percent of the policy’s death benefit per day or per month. Policies may pay part or all of the death benefit for qualified long-term care expenses. Some companies let you buy more long-term care coverage than the amount of your death benefit in the form of a rider.

Some policies may allow you to withdraw the cash value of your policy to pay for specific conditions and expenses. It is important to remember that if you use money from your life insurance policy to pay for long-term care, it will reduce the death benefit the beneficiary will get. For example, if you buy a policy with a $100,000 death benefit, using $60,000 for long-term care will cut the death benefit of your policy to $40,000. It may also affect the cash value of your policy. Ask your agent how this may affect other aspects of your life insurance policy. If you bought life insurance to meet a specific need after your death, your survivors may not be able to meet that need if you use your policy to pay for long-term care. If you never use the ?long-term care benefit, the policy will pay the full death benefit to your beneficiary.

What is a Long-Term Care Insurance Partnership Plan?

Some states have long-term care insurance partnership programs designed to help people with the financial impact of spending down to meet Medicaid eligibility standards. Under these partnership programs, when you buy a specially approved insurance policy, you will receive protection against the normal Medicaid requirement to spend down your ?assets to become eligible.

The long-term care partnership program is a creation of federal law allowing states to alter their Medicaid program to allow assets to be disregarded based upon claims paid by qualified long-term care insurance policies.

Most states allow a dollar-for-dollar asset disregard for claims paid on qualified partnership policies and will not require you to exhaust the benefits offered under the partnership policy in order to qualify for Medicaid. Under the partnership program, if you need additional coverage beyond what is provided by your qualified partnership policy, you can access Medicaid without depleting all your assets.

What are the Benefits of a Partnership Program?

Partnership policies are tax-qualified plans under federal law, must contain certain consumer protections and must provide inflation protection benefits for purchasers so that benefits keep up with the cost of inflation over time.

The long-term care partnership program provides an alternative to spending down or transferring assets by forming a partnership between Medicaid and private long-term care insurers.

Once private insurance benefits are used, special Medicaid eligibility rules are applied if additional coverage is necessary.

What are the Key Features of Long-Term Care Partnership Policies?

The policies must be tax-qualified plans.

Policies must provide inflation protection:

Those under age 61 at date of purchase must have compound annual inflation protection.

Those at least 61 years of age but under the age of 76 must have some level of inflation protection.

Those over the age of 76 may have but are not required to have inflation protection.

How Will I Know I Have Purchased a Partnership Policy?

If the policy you purchased is a partnership plan, you will receive written notice from the insurance company. Depending upon the state, it will be in one of the following ways:

Your policy or certificate will be identified as a partnership policy in the policy itself either on the front page or on the schedule page of the policy.

You will receive a letter from your insurance company advising you that you have purchased a partnership policy. If this is the only notification you receive, it is extremely important to keep this letter.

Please keep in mind that these programs have specific requirements in each state in which they are offered. Check with your state insurance department or counseling program to see if these policies are available in your state. Many states with long-term care partnership programs have information about them on their Web sites.

Types of Long Term Care Policies

What Types of Long Term Care Policies Can I Buy?

You may be asked to choose between a tax-qualified long-term care insurance policy and one that is non-tax-qualified. There are important differences between the two types of policies. These differences were created by the Health Insurance Portability and Accountability Act (HIPAA). A federally tax-qualified long-term care insurance policy, or a qualified policy, offers certain federal income tax advantages. If you have a qualified long-term care policy and you itemize your deductions, you may be able to deduct part or all of the premium you pay for the policy. You may be able to add the premium to your other deductible medical expenses. You may then be able to deduct the amount that is more than 7.5% of your adjusted gross income on your federal income tax return. The amount depends on your age, as shown in the following table.

Maximum Amount

Your Age You Can Claim

40 years or younger $320

More than 40 but not more than 50 $600

More than 50 but not more than 60 $1,190

More than 60 but not more than 70 $3,180

70 years or older $3,980

2009 figures. These amounts will increase annually based on the Medical Consumer Price Index.

Regardless of which policy you choose, make sure that you understand how the benefits and triggers will work and that they are acceptable to you. For example, benefits paid by a qualified long-term care insurance policy are generally not taxable as income. Benefits from a long-term care insurance policy that is not qualified may be taxable as income.

If you bought a long-term care insurance policy before January 1, 1997, that policy is probably qualified. HIPAA allowed these policies to be grandfathered, or considered qualified, even though they may not meet all of the standards that new policies must meet to be qualified. The tax advantages are the same whether the policy was sold before or after 1997. You should carefully examine the advantages and disadvantages of trading a grandfathered policy for a new policy. In most cases, it will be to your advantage to keep your old policy.

Long-term care insurance policies that are sold on or after January 1, 1997, as tax-qualified must meet certain federal standards. To be qualified, policies must be labeled as tax-qualified, be guaranteed renewable, include a number of consumer protection provisions, cover only qualified long-term care services, and generally can provide only limited cash surrender values.

Qualified long-term care services are those generally given by long-term care providers. These services must be required by chronically ill individuals and must be given according to a plan of care prescribed by a licensed ?health care practitioner. You are considered chronically ill if you are expected to be unable to do at least two activities of daily living without substantial assistance from another person for at least 90 days. Another way you may be considered to be chronically ill is if you need substantial supervision to protect your health and safety because you have a cognitive impairment. A policy issued to you before January 1, 1997, doesn’t have to define chronically ill this way.

Some life insurance policies with long-term care benefits may be tax-qualified. You may be able to deduct the premium you pay for the long-term care benefits that a life insurance policy provides. However, be sure to check with your personal tax advisor to learn how much of the premium can be deducted as a medical expense.

The long-term care benefits paid from a tax-qualified life insurance policy with long-term care benefits are generally not taxable as income. Tax-qualified life insurance policies with long-term care benefits must meet the same federal standards as other tax-qualified policies, including the requirement that you must be chronically ill to receive benefits.

Pooled Benefits and Joint Policies

You may be able to buy a long-term care insurance policy that covers more than just one person, or more than one kind of long-term care service. The benefits provided by these policies are often called pooled benefits.

One type of pooled benefit covers more than one person, such as a husband and wife, or two partners, or two or more related adults. This type of benefit is sometimes called a joint policy or a joint benefit. This pooled benefit usually has a total benefit that applies to all of the individuals covered by the policy. If one of the covered individuals collects benefits, that amount is subtracted from the total policy benefit. For example, if a husband and wife have a policy that provides $150,000 in total long-term care benefits, and the husband uses $25,000 in benefits from the policy, $125,000 would be left to pay benefits for either the husband or the wife, or both.

Federally Tax-Qualified Policies

1. Premiums can be included with other annual uncompensated medical expenses for deductions from your income in excess of 7.5% of adjusted gross income up to a maximum amount adjusted for inflation.

2. Benefits that you receive and use to pay for long-term care services generally will not be counted as income. For policies that pay benefits using the expense incurred method, benefits that you receive in excess of the costs of long term care services may be taxable. For policies that pay benefits using the indemnity or disability methods, all benefit payments up to the federally approved per diem (daily) rate are tax-free even if they exceed your expenses.

3. To trigger the benefits under your policy, the federal law requires you to be unable to do two ADLs ?without substantial assistance.

4. Medical necessity cannot be used as a trigger for benefits

5. Chronic illness or disability must be expected to last for at least 90 days.

6. For cognitive impairment to be covered, a person must require substantial supervision.

Federally Non-Tax Qualified Policies

1. You may or may not be able to deduct any part of your annual premiums. Congress and the U.S. ?Department of the Treasury have ?not clarified this area of the law.

2. Benefits that you receive may or may not count as income. Congress and the U.S. Department of the Treasury have not clarified this area of the law.

3. Policies can offer a different combination of benefit triggers. Benefit triggers are not restricted to two ADLs.

4. Medical necessity and/or other measures of disability can be offered as benefit triggers.

5. Policies don’t have to require that the disability be expected to last for at least 90 days.

6. Policies don’t have to require substantial supervision to trigger benefits for cognitive impairments.

Whether you are considering buying a tax-qualified or a non-tax-qualified policy, consult with your tax consultant or legal advisor regarding the tax consequences in your situation.

Another kind of pooled benefit provides a total dollar amount that can be used for various long-term care services. These policies pay a daily, weekly, or monthly dollar limit for one or more covered services. You can combine benefits in ways that best meet your needs. This gives you more control over how your benefits are spent. For example, you may choose to combine the benefit for home care with the benefit for community-based care instead of using the nursing home benefit.

Some policies provide both types of pooled benefits. Other policies provide one or the other.

Using Your Long Term Care Policy

How Are Benefits Paid Once Long Term Care is Needed?

Insurance companies that sell long-term care insurance generally pay benefits using one of three different methods: the expense-incurred method, the indemnity method, or the disability method. It is important to read the literature that accompanies your policy (or certificate for group policies) and to compare the benefits and premiums.

When the expense-incurred method is used, the insurance company must ?decide if you are eligible for benefits and if your claim is for eligible services. Your policy or certificate will pay benefits only when you receive eligible services. Once you have incurred an expense for an eligible service, benefits are paid either to you or your provider. The coverage will pay for the lesser of the expense you incurred or the dollar limit of your policy. Most policies bought today pay benefits using the expense-incurred method.

When the indemnity method is used, the benefit is a set dollar amount. The benefit is not based on the specific services received or on the expenses incurred. The insurance company only needs to decide if you are eligible for benefits and if the services you are receiving are covered by the policy. Once the company decides you are eligible and you are receiving eligible long-term care services, the insurance company will pay that set amount directly to you up to the limit of the policy.

When the disability method is used, you are only required to meet the benefit eligibility criteria. Once you do, you receive your full daily benefit, even if you are not receiving any long-term care services.

What Senior Care Services Are Covered by a Long Term Care Policy?

It is important that you understand what services your long-term care insurance policy covers and how it covers the many types of long-term care services you might need to use.

Long Term Care Policies may cover the following:

Nursing home care
Home health care
Respite care
Hospice care
Custodial/Non-Medical/Personal care in your home
Services in assisted living facilities
Services in adult day care centers
Services in other community facilities

There are several ways policies may cover home health care. Some long-term care insurance policies only pay for care in your home from licensed home health agencies. Some also will pay for care from licensed health care providers not from a licensed agency. These include licensed practical nurses; occupational, speech, or physical therapists; or licensed home health care aides. Other policies may pay for services from home health care aides who may not be licensed or are not from licensed agencies. Home health care aides help with personal care. You may find a policy that pays for homemaker or chore worker services. This type of benefit, though not available in all policies, would pay for someone to come to your home to cook meals and run errands. Generally, adding home care benefits to a policy also adds to the cost of the policy.

NOTE: Some policies pay benefits to family members who give care in the home.

What type of care facilities are covered by a Long Term Care Policy?

You should know what types of facilities are covered by your long-term care insurance policy. If you’re not in the right type of facility, the insurance company can refuse to pay for eligible services. New kinds of facilities may be developed in the future, and it is important to know whether your policy will cover them.

Some policies may pay for care in any state-licensed facility.

Others only pay for care in some state-licensed facilities, such as a licensed nursing facility.

Still others list the types of facilities where services will not be covered, which may include state-licensed facilities. (For example, some places that care for elderly people are referred to as homes for the aged, rest homes or personal care homes, and are often not covered by long-term care policies).

Some policies may list specific points about the kinds of facilities they will cover.

Some will say the facilities must care for a certain number of patients or give a certain kind of care.

When shopping for a long-term care policy, check these points carefully and compare the types of services and facilities covered in the policy. Also, be aware that many states, companies and policies define assisted living facilities differently. Policies that cover assisted living facilities in one state may not cover services provided in an assisted living facility in another state. Before you move or retire to another state, ask if your policy covers the types of services and facilities available in your new state. Also, if your policy lists kinds of facilities, be sure to check if your policy requires the facility to have a license or certification from a government agency.

NOTE: If you do NOT reside in the kind of facility specified by your policy, the insurance company may not pay for the services you require.

What Services Are Not Covered (Exclusions and Limitations)?

Most long-term care insurance policies usually do not pay benefits for:

A mental or nervous disorder or disease, other than Alzheimer’s disease or other dementia.

Alcohol or drug addiction.

Illness or injury caused by an act of war.

Treatment the government has provided in a government facility or already paid for.

Attempted suicide or intentionally self-inflicted injuries.

NOTE: In most states, regulations require insurance companies to pay for covered services for Alzheimer’s disease that may develop after a policy is issued. Ask your state insurance department if this applies in your state. Nearly all policies specifically say they will cover Alzheimer’s disease. Read about Alzheimer’s disease and eligibility for benefits in the section on benefit triggers.

NOTE: Many policies exclude or limit coverage for care outside of the United States.

How Much Long Term Care Coverage Do You Have?

The policy or certificate may state the amount of coverage in one of several ways. A policy may pay different amounts for different types of long-term care services. Be sure you understand how much coverage you will have and how it will cover long-term care services you receive.

Maximum Benefit Limit. Most policies limit the total benefit they will pay over the life of the policy, but a few don’t. Some policies state the ?maximum benefit limit in years (one, two, three or more, or even lifetime). Others write the policy maximum benefit limit as a total dollar amount. ?Policies often use words like total lifetime benefit, maximum lifetime benefit, or total plan benefit to describe their maximum benefit limit. When you look at a policy or certificate, be sure to check the total amount ?of coverage. In most states, the minimum benefit period is one year. Most nursing home stays are short, but illnesses that go on for several years ?could mean long nursing home stays. You will have to decide if you want protection for very long stays. Policies with longer maximum benefit periods ?cost more. Read your long-term care insurance policy carefully to learn what the benefit period is.

Daily/Weekly/Monthly Benefit Limit. Policies normally pay benefits by the day, week or month. For example, in an expense-incurred plan, a policy might pay a daily nursing home benefit of up to $200 per day or $6,000 per month, and a weekly home care benefit of up to $1,400 per week. Some policies will pay one time for single events, such as installing a home medical alert system.

When you buy a policy, insurance companies let you choose a benefitamount (usually $50 to $350 a day, $350 to $2,450 a week, or $1,500 to $10,500 a month) for care in a nursing home. If a policy covers home care, the benefit is usually a portion of the benefit for nursing home care (e.g., 50% or 75%), although a growing number of policies pay the same benefit amounts for care at home as in a facility. Often, you can select the home care benefit amount that you prefer. It is important to know how much skilled nursing homes, assisted living facilities, and home health care agencies charge for their services BEFORE you choose the benefit amounts in your long-term care insurance policy. Check the facilities in the area where you think you may be receiving care, whether they are local, near a grown child, or in a new place where you may retire. 

When You Are Eligible for Benefits (Benefit Triggers)

The term usually used to describe the way insurance companies decide when to pay benefits is benefit triggers.This term refers to the criteria and the methods that the insurance company uses to evaluate when you are eligible for benefits, and the conditions you must meet to receive benefits. This is an important part of a long-term care insurance policy.

Look at it carefully as you shop. The policy and the outline of coverage usually describe the benefit triggers.

Look for a section called Eligibility for the Payment of Benefits or simply Eligibility for Benefits. Different policies may have different benefit triggers. Some states require certain benefit triggers, and the benefit triggers for tax-qualified contracts are also fairly ?standardized across insurance policies. Check with your state insurance department to find out what your state requires.

NOTE: Companies may use different benefit triggers for home health care coverage than for nursing home care, although most do not do so. If they do, they generally have a more restrictive benefit trigger for nursing home care than for home care.

Types of Benefit Triggers

Activities of Daily Living. The inability to do activities of daily living, or ADLs, is the most common way insurance companies decide when you are ?eligible for benefits. The ADLs most companies use are bathing, continence, dressing, eating, toileting and transferring. Typically, a policy pays benefits when you cannot do a certain number of the ADLs, such as two of the six or three of the six. The more ADLs you must be unable to do, the harder it will be for you to become eligible for benefits. Federally tax-qualified policies are required to use the inability to do certain ADLs as a benefittrigger. A qualified policy requires that a person be unable to perform at least two of their ADLs to collect benefits. The ADLs that trigger benefits in a tax-qualified policy must come from the list above. These triggers are specified in your policy.

If the policy you’re thinking of buying pays benefits when you cannot do certain ADLs, be sure you understand what that means. Some policies spell out very clearly what it means to be unable to feed or bathe oneself. Some policies say that you must have someone actually help you do the activities. That’s known as hands-on assistance. Specifying hands-on assistance will make it harder to qualify for benefits than if only stand-by assistance is required. The more clearly a policy describes its requirements, the less confusion you or your family will have when you need to file a claim.

NOTE: The six activities of daily living (ADLs) have been developed through years of research. This research also has shown that bathing is usually the first ADL that a person cannot do. While most policies use all six ADLs as benefit triggers, qualifying for benefits from a policy that uses five ADLs may be more difficult if bathing isn’t one of the five.

Cognitive Impairment. Most long-term care insurance policies also pay benefits for cognitive impairment. The policy usually pays benefits if you cannot pass certain tests of cognitive function.

Coverage of cognitive impairment is especially important if you develop Alzheimer’s disease or other dementia. If being unable to do ADLs is the only benefit trigger your policy uses, it may not pay benefits if you have Alzheimer’s disease but can still do most of the ADLs on your own. But if your policy also uses a test of your cognitive ability as a benefit trigger, it is more likely to pay benefits if you have Alzheimer’s disease. Most states do not allow policies to limit benefits solely because you have Alzheimer’s disease.

Doctor Certification of Medical Necessity. Some long-term care insurance policies will pay benefits if your doctor orders or certifies that the care is medically necessary. However, tax-qualified policies cannot use this benefit trigger.

Prior Hospitalization. Long-term care insurance policies sold in the past required a hospital stay of at least three days before paying benefits. Most companies no longer sell policies that require a hospital stay.

NOTE: Medicare still requires a three-day hospital stay to be eligible for Medicare payment of skilled nursing facility benefits.

When Benefits Start (Elimination Period)

With many policies, your benefits won’t start the first day you go to anursing home or start using home care. Most policies have an elimination period (sometimes called a deductible or a waiting period). That means benefits can start zero, 20, 30, 60, 90, or 100 days after you start using long-term care or become disabled. Elimination periods for nursing home and home health care may be different, or there may be a single elimination period that applies to any covered service. How many days you have to wait for benefits to start will depend on the elimination period you pick when you buy your policy. You might be able to choose a policy with a zero-day elimination period, but expect it to cost more.

Some policies calculate the elimination period using calendar days, while other policies count only the days on which you receive a covered service. Under the calendar days method, every day of the week would count in determining the elimination period regardless of whether you received any services on those days. Under the days of service method, only days when you receive services will count toward the elimination period. This means if you only receive services three days a week, it will take longer for your benefits to start, and it could mean that you have more out-of-pocket ?expenses before your benefits begin. Also, some policies have an elimination period that you only need to satisfy once in your lifetime, while ?other policies require that you satisfy the elimination period with each episode of care. Some policies allow you to accumulate non-consecutive days toward satisfying the elimination period, and some policies require consecutive days. Make sure you know how the policy defines the elimination period.

During an elimination period, the policy will not pay the cost of long-term care services. You may owe the cost of your care during the elimination ?period. You may choose to pay a higher premium for a shorter elimination period. If you choose a longer elimination period, you’ll pay a lower ?premium but must pay the cost of your care during the elimination period.

For example, if a nursing home in your area costs $150 a day and your policy has a 30-day elimination period, you’d have to pay $4,500 before your policy starts to pay benefits. A policy with a 60-day elimination period would mean you’d have to pay $9,000 of your own money, while a policy ?with a 90-day elimination period would mean you’d have to pay $13,500 of your own money.

If you only need care for a short time and your policy has a long elimination period, your policy may not pay any benefits. If, for example, your policy had a 100-day elimination period, and you received long-term care services for only 60 days, you would not receive any benefits from ?your policy.

On the other hand, if you can afford to pay for long-term care services for a short time, a longer elimination period might be right for you. It would protect you if you need extended care and also keep the cost of your insurance down.

You may also want to think about how the policy pays if you have a repeat stay in a nursing home. Some policies count the second stay as part of the first one as long as you leave and then go back within 30, 90 or 180 days. Find out if the insurance company requires another elimination period for a second stay. Some policies only require you to meet the elimination period ?once per lifetime.

What type of care facilities are covered by a Long Term Care Policy?

You should know what types of facilities are covered by your long-term care insurance policy. If you’re not in the right type of facility, the insurance company can refuse to pay for eligible services. New kinds of facilities may be developed in the future, and it is important to know whether your policy will cover them.

Some policies may pay for care in any state-licensed facility.

Others only pay for care in some state-licensed facilities, such as a licensed nursing facility.

Still others list the types of facilities where services will not be covered, which may include state-licensed facilities. (For example, some places that care for elderly people are referred to as homes for the aged, rest homes or personal care homes, and are often not covered by long-term care policies).

Some policies may list specific points about the kinds of facilities they will cover.

Some will say the facilities must care for a certain number of patients or give a certain kind of care.

When shopping for a long-term care policy, check these points carefully and compare the types of services and facilities covered in the policy. Also, be aware that many states, companies and policies define assisted living facilities differently. Policies that cover assisted living facilities in one state may not cover services provided in an assisted living facility in another state. Before you move or retire to another state, ask if your policy covers the types of services and facilities available in your new state. Also, if your policy lists kinds of facilities, be sure to check if your policy requires the facility to have a license or certification from a government agency.

NOTE: If you do NOT reside in the kind of facility specified by your policy, the insurance company may not pay for the services you require.

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