Ch. 21 Long-Term Care

Long-Term Care Insurance Coverage

1. Bought from insurance company 2. Insurance chooses type and amounts of coverage 3. Protects assets upon death

Types of Care: Long Term Care Insurance Policies

1. Home health care 2. Adult day care 3. Respite care 4. Assisted living facilities

Qualified Long-Term Care Insurance Plans

1. Receives favorable tax treatment -Benefits are paid tax free -Premiums may be tax deductible 2. Requirements to be a qualified -Benefit triggers: inability to perform at least two ADLs for at least 90 days or cognitive impairment requiring substantial supervision, certified by a physician -Guaranteed renewability -Coverage of only long term care expenses -No benefits for expenses reimbursable under Medicare -No cash surrender value -Any dividends or refunds of premiums must be used to offset future premiums or increase benefits -Conforms to specified consumer protection marketing and benefit standards

Medicaid's Long-Term Care Coverage

1. Safety for the poor 2. Only for the poor 3. Income paid to Medicaid 4. May take assets from person's estate upon death

Minimum Benefit Standards

1. The policy must be at least guaranteed renewable 2. A sale must include an offer of inflation protection 3. A pre-existing conditon may not be defined more restrictively than a condition for which medical advice or treatment was sough within six months before policy's effective date 4. Long term care policies cannot condition payment of benefit on a prior hospital stay 5. Group long term care insurance policies must give insureds the opportunity to continue benefits if membership in the group ceases or to convert to individual coverage if coverage terminates

Exclusions

1. war or acts of war 2. alcohol or drug abuse 3. self inflicted injury 4. treatment provided without cost to the insured 5. mental illness and nervous disorders

Optional Benefits

1.Guaranteed Insurability- allows the insured to buy additional coverage at specified future times using their attained age and without providing evidence of insurability 2. Nonforfeiture Benefits- provides for a growing cash value or for a guaranteed return of some percentage of the premium, minus any paid benefits if the policy is lapsed or surrendered 3. Inflation Protection- provides for automatic annual benefit increases based on a Cost of Living Adjustment (COLA)

Cognitive Impairment

An individual may be eligible for long term care insurance benefits if they are cognitively impaired. Tests administered by medical practitioners or social workers can measure an individual's ability to perceive, reason, or remember. Benefits are triggered when the cognitive impairment requires someone to be supervised for their own safety or the safety of others

Benefit Amount

Benefit amounts are usually expressed as dollars per day. Most applicants choose a benefit amount that is close to the average daily cost of facility-based care in their area. Naturally, higher daily benefits mean higher annual premiums. For indemnity policies, the daily benefit amount is the most the policy will pay regardless of the actual cost of care. Long term care coverage can also be issued on a reimbursement basis, which pays the lesser of the cost of care of the daily benefit If the policy is comprehensive- that is, it provides coverage for both facility based and home based care the home care amount is usually stated as 50% of the daily facility based care benefit

Medicare's Long-Term Care Coverage

Costs for skilled care in a nursing home are covered for up to 100 days. The first 20 days are covered 100% by Medicare. However, the insured is responsible for a daily co-payment for days 21 through 100 and there is no Medicare coverage after 100 days. Hospice care, other than grief counseling is covered if the insured has a terminal illness and is not expected to live more than 6 months. Medicare also provides some home and other care services as long as they are medically necessary to treat an injury or illness. As long as a doctor, every 60 days, determines this care is medically necessary, there is no time limit on how long the care may be received

State Long-Term Care Partnership Programs

Joint Effort -Insurance companies -State insurance department -States Medicaid agency Benefits -Dollar for dollar asset protection

Benefit Periods

Long term are insurance policies provide coverage for at least 12 months. Most policies allow applicants to choose among benefit periods of two to five years; the longer the benefit period, the higher the premium. Some policies offer lifetime benefit periods with a lifetime maximum benefit amount. The benefit period would end when the limit has been reached

Elimination Period

Similar to disability income policies, long term care insurance policies usually contain an elimination period. The insured must receive care for a stated number of days before the policy begins to pay. Insureds may select a longer elimination period to make a policy more affordable- the longer the elimination period, the lower the premium

3 Levels of Care

Skilled nursing care (24/7) Intermediate Care (only 7) Custodial Care- ADLs

Marketing Standards

Standards for long term care insurance are basically the same as those for Medicare supplement insurance: 1. Provide applicants with a shopper's guide and outline coverage 2. Consider whether the purchase is suitable for the applicants needs, objectives, and circumstances 3. Determine whether the sale will involve replacement, and if so, have the applicant sign a Notice Regarding Replacement

Individual vs. Group LTC Contracts

The advantages and disadvantages of individual versus group long-term care insurance are the same as those for individual versus group insurance generally. Group insurance offers lower rates and people can get coverage without providing evidence of insurability. Group insurance plans however, are not tailored to meet individual needs because the employer chooses plan coverage for all the participants

Underwriting Considerations

Underwriting factors for long term care insurance differ from those used for other health insurance plans. The main issue for long term care policies is whether an individual can perform the activities of daily living ADLS and to what degree of proficiency.

Activities of Daily Living (ADLs)

Used as measurements to determine someone's ability to live independently. The ADLs have been standardized and are listed from the least to the most impaired person: 1. Bathing 2. Dressing 3. Toileting 4. Transferring- getting out of bed and into a chair 5. Continence- bladder and bowel control 6. Eating Insureds become eligible for benefits when generally, 2 of these are met.