Long Term Care Policies
Over half a million people a year deplete their hard-earned assets paying for long term care services.
A Comprehensive Long Term Care Insurance Policy Will Pay for:
Home health care so that you can remain independent.
Required modifications to your home.
Adult day care.
Assisted living facilities.
Care Coordination Services
A comprehensive policy will do all this for a fraction of the actual cost of long term care.
You will spend pennies to get dollars of protection!
When you are evaluating long term care insurance policies, remember that a good care coordination program will help in assisting you in hiring the care, monitoring the delivery of care and working with your family to make sure your needs are being met. This will significantly reduce the burden of care from loved ones, and help you remain home longer and more comfortably.
Issues To Consider When Selecting A Policy
The Type of Policy:
b.) Facilities only
c.) Home Care only
Daily Benefit Amount
Total Lifetime Benefit
Inflation and the rising cost of care
1.a. Comprehensive Plan
Comprehensive plans pay for care regardless of whether the care is received in your home, a nursing home, assisted living facility, adult day care program, hospice facility or you need respite care.
1.b. Facilities Only Plan
This plan covers long term care services provided in a nursing home, assisted living facility or a hospice facility. Facility Only plans do not cover home care and are typically less expensive than comprehensive plans.
1.c. Home Health Care Only Plan
Covers expenses at home and usually services provided by an adult day care program, but not in an Assisted Living Facility or Nursing Home. Home Care Only plans are typically less expensive than comprehensive plans.
2. Daily/Monthly Benefit Amount
This is the maximum amount your policy will pay for services on a daily or monthly basis.
A Reimbursement Policy will reimburse the actual cost of care up to the daily/monthly benefit level.
An Indemnity Policy will pay you the entire daily benefit, usually on a monthly basis, regardless of the cost of your care.
3. Benefit Period
The length of time you elect to receive benefits.
4. Total Lifetime Benefit
The total lifetime benefit is obtained by multiplying the daily or monthly benefit amount by the benefit period.
Example: A $200 daily benefit amount x 1095 days (3 years x 365 days) equals $219,000. The daily benefit amount is paid according to your policy, until you have exhausted your $219,000 lifetime benefit.
5. Elimination Period
In order to lower premiums, most policies start paying benefits after you have satisfied a deductible or elimination period. Generally, the longer the elimination period, the lower the premiums. In Connecticut, the maximum elimination period is 100 days.
6. Inflation and the rising cost of care
The cost of long term care is expected to triple over the next 20 years. In order to keep up with these rising costs, there are several inflation options to choose from. The most common are Compound and Simple inflation protection where your benefits increase over time while your premiums remain level. Some plans offer inflation increases tied to the Consumer Price Index or offer a Future Purchase Option.
7. Care Coordination
This is a very important feature included in most comprehensive long term care policies. The reality of long term care is that when the need arises, few people know how to handle this life changing event. Just as a physician will coordinate medical needs, a Care Coordinator will facilitate your long term care services.
When you qualify for benefits, a Care Coordinator will:
Assess your care needs and, along with you, your family and your physician, develop a plan for your care.
Help find providers and schedule the necessary care and services.
Monitor the delivery of your care.
Modify your plan of care as your needs change.
Work with you and your family to assure your satisfaction with the care givers.
Types of Policies
Reimbursement and Indemnity Policies: A Reimbursment Policy pays for the actual expenses incurred up to your policy’s daily and lifetime limit. An Indemnity Policy will pay you the entire daily benefit, usually on a monthly basis, regardless of the cost of your care.
Tax Qualified Policy
Policies that are tax qualified meet certain standards as set forth in the 1996 Health Insurance Portability and Accountability Act, commonly referred to as “HIPAA.” HIPAA ensures that benefits paid from these policies are not considered taxable income and that qualified premiums may be tax deductible as medical expenses if certain thresholds are met.
This popular feature, designed especially for couples, enables you to maximize the value of your coverage by linking your two individual policies. This allows you to access your partner’s benefits when yours are exhausted.
The Partnership is a unique alliance between state government and the private insurance industry. It was developed to provide individuals with a way to plan for their long term care needs without the risk of impoverishment. Connecticut was the first State in the Nation to implement such a program.
With the passage of the Deficit Reduction Act of 2005, the federal government has opened the door for additional states to develop Partnership programs. In fact, most states have received approval to implement these programs.
The most unique aspect of a Connecticut Partnership policy is the Medicaid Asset Protection feature. This feature provides dollar for dollar asset protection: for every dollar that a Partnership policy pays out in benefits, an equivalent dollar of your assets can be protected from Medicaid spend-down rules. When determining Medicaid eligibility, any assets you have, up to the amount that the Partnership insurance policy paid in benefits, will be disregarded. For example, if your Partnership insurance policy paid $200,000 in benefits, Connecticut’s Medicaid program would allow you to keep $200,000 in assets (over and above what the State says you can normally keep) and still qualify for Medicaid assistance. For a single person in Connecticut, this means the $200,000 is protected in addition to the $1,600 an individual is allowed to keep.
In response to consumer and agent demand, insurance companies have designed what can be best described as hybrid or linked policies. These policies combine the benefits of a life insurance policy with a traditional long term care contract. With hybrid policies, the consumer has the guarantee of long term care benefits or, if no care is needed, the promise of tax free life insurance benefits to the beneficiaries. In addition, many of these policies offer a full return of premium money back guarantee.
Take, for example, a healthy 60 year old non-smoking woman with $400,000 in liquid assets. If she deposits $100,000 into this hybrid program, she would get up to $98,712 every year ($8226 per month) for six years to pay for long term care costs. The total reimbursement could be up to $592,269 income tax-free – nearly 600% of her original premium. However, if she never needs long term care, her beneficiaries would receive a $197,423 income tax-free death benefit. Additionally, at any time, she can request a full return of her $100,000 single premium payment – no questions asked. Coverage amounts will be different for each person depending upon age, health, gender, premiums and benefits requested. Consumers who utilize hybrid policies can avoid self-insuring against catastrophic long term care related expenses and have the peace of mind associated with a comprehensive plan.
Discounts offered by some carriers can reduce your premiums from 10% to 40%. These discounts are offered based upon health and spousal status. Some carriers also offer discounts for employer or assocation sponsored plans.
Choosing an Insurance Company
Look for an insurance company that achieves consistently high ratings from the leading insurance company rating agencies, such as Standard and Poor’s, Moody’s, and A.M. Best. It is important to base your purchase on the company’s reputation, commitment to the industry, and benefit offerings.