ch. 13. Long-term Care - Provisions and Disclosures

Common LTC and Disclosures (Skilled Care: Nursing care and rehabilitation needed on a daily basis performed by a medical professional under physician's orders.)

-Policyholders must be provided with a 30-day free look period. -LTC policies cannot restrict coverage to only skilled care. -Applicants must be provided with a shopper's guide (outline of coverage) upon initial solicitation, prior to completing the policy application. -This document explains policy features such as premiums, policy renewability, conversion, and exclusions. -If an LTC policy is purchased in combination with a life insurance policy, then a policy summary must be provided with the shopper's guide. (Policy Summary: In life insurance, document explaining the coverage purchased and the names of the insurer and agent.) -The policy summary details how life insurance benefits are affected by utilization of LTC benefits (i.e., accelerated benefits, cash values, death benefit).

Exclusions

Following are a list of common exclusions found in LTC policies: Pre-existing conditions Injuries due to war or acts of war Self-inflicted injuries including attempted suicide Mental illnesses; however, Alzheimer's disease is covered Alcoholism or drug dependencies Treatments provided by Workers' Compensation, Medicare, veteran's hospital, etc.

Group Conversion

Individuals who are insured under group LTC coverage must be provided with the right to convert to individual LTC coverage upon termination of group coverage (unless termination is due to nonpayment of premium) without needing to provide evidence of insurability. Individuals must apply for the individual coverage and pay the premium within 31 days of the group coverage termination date.

Underwriting Considerations

Individuals who are over the age of 80 applying for an LTC policy must: -Undergo a physical exam, -Undergo an ADL evaluation, -Provide medical records and -Provide an attending physician's statement. Post-claims underwriting, in which all applicants are issued coverage, but later denied claims for health or other reasons, is prohibited in LTC policies. Insurers must carefully determine an applicant's insurability upon application. The applicant must receive a copy of the application upon policy delivery, at the latest.

Renewability LTC Policies can be cancelled for nonpayment.

LTC policies are either: -Guaranteed renewable or -Noncancellable. Policies can only be canceled for nonpayment of premium. Insurers cannot nonrenew or cancel an LTC policy on the basis of the insured's deteriorated health or advanced age.

Premiums

LTC premiums are based on several factors. The younger an applicant is upon purchase, the lower the premium. Policies with longer elimination periods have lower premiums. Policies with longer benefit periods have higher premiums. An applicant who has difficulty performing some ADLs upon application will have a higher premium. Loss ratios must be at least 60% for individual LTC policies.

Pre-existing Conditions

Many LTC policies do not cover pre-existing conditions that were present six months prior to the policy's effective date. This is the most restrictive definition of pre-existing conditions an insurer can use. Six months after the effective date of coverage, all pre-existing conditions must be covered.

Elimination Period

Many LTC policies have an elimination period similar to that found in a disability income policy, after which LTC benefits begin. The elimination period is usually 30 days or longer, during which period the insured must be confined to a nursing facility. The elimination period could be as little as 0 and as much as 365 days. LTC policies with longer elimination periods have lower premiums. A *service-day elimination period* means that only the days when the insured actually receives care count towards the elimination period requirement. In contrast, a *calendar-day elimination period* means that the elimination period begins the day the insured goes on claim and continues to run regardless of whether services are provided. A calendar-day elimination period is more *favorable* to the insured. Example: Patsy has a LTC policy with a 30-day elimination period. She receives service 3 times a week. When does the policy pay using the calendar-day period versus the service-day period? Using the calendar-day period, the insurer starts paying on day 31. If it uses the service-day period, the insurer word start paying after 10 weeks (Service 3 times a week multiplied by 10 weeks equals 30 days). Therefore the waiting period of 30 days versus 10 weeks is much more favorable to the insured.

Qualified LTC Plans Long-term care plans which provide tax advantages.

Qualified LTC plans are treated like medical expense policies, and because they are *tax-qualified*, premiums can be deducted as a business expense for plans sponsored by employers. Individually owned qualified LTC plan premiums can be deducted based on age. Benefits are not taxable. A LTC policy must meet the following qualifications to be defined as a qualified LTC plan: -Individual must be unable to perform at least two ADLs -Must be severely cognitively impaired -Individual must require LTC for at least 90 days -A plan of care for the individual must be provided by a physician or other licensed medical practitioner -Coverage cannot reimburse insureds for medical expenses or services covered by Medicare -Nonforfeiture options and inflation protection must be provided -Policies cannot accrue cash value

Waiver of Premium

The waiver of premium provision waives premiums while an insured is receiving LTC benefits. After a specified time period, such as 90 or 180 days of confinement, premiums are waived. After the insured ceases LTC, premium payments resume. Elimination periods are counted on: A service day basis (days receiving care) or Calendar day basis (days are counted once an individual is eligible for LTC benefits).