Chapter 15- Long Term Care
highlights of LTC NAIC model legislation for policy provisions (9)
(1) Many words or terms cannot be used in a policy unless they are specifically defined in accordance with the legislation and, for example, adult day care, home health care services, personal care, and skilled-nursing care. (2) Renewal provisions must be either guaranteed renewable or noncancelable. (3) Limitations and exclusions are prohibited except in the cases of preexisting conditions (4) No policy can provide coverage for skilled-nursing care only or provide significantly more coverage for skilled care in a facility than for lower levels of care. (5) The definition of preexisting condition can be no more restrictive than to exclude a condition for which treatment was recommended or received within 6 months prior to the effective date of coverage. In addition, coverage can be excluded for a confinement for this condition only if it begins within 6 months of the effective date of coverage. (6) Eligibility for benefits cannot be based on a prior hospital requirement or higher level of care. (7) must offer the applicant the right to purchase coverage that allows for an increase in the amount of benefits based on reasonable anticipated increases in the cost of services covered by the policy. The applicant must specifically reject this inflation protection if he or she does not want it. (8) right to purchase a nonforfeiture benefit. If the applicant declines the nonforfeiture benefit, the insurer must provide a contingent benefit upon lapse that is available for a specified period of time following a substantial increase in premiums. (9) must contain a provision that makes a policy incontestable after 2 years on the grounds of misrepresentation. The policy can be contested on the basis that the applicant knowingly and intentionally misrepresented relevant facts pertaining to the insured's health.
a chronically ill individual is one who has been certified as meeting one of the following requirements (benefit triggers)
-can't perform at least 2 ADLs or -cognitive impairment
3 types of nonforefiture benefits for LTC contracts
1. Paid up coverage with shortened benefit period 2. Return of Premium 3. Contingent nonforfeiture benefit
benefit variations of long term care policies
1. facility only policies 2. home health care only policies 3. comprehensive long term care insurance policies
2 important points about NAIC model legislation
1. model legislation establishes guidelines. Insurance companies still have significant latitude in many aspects of product design. 2. many older policies are still in existence that were written prior to the adoption of the model legislation or under one of its earlier versions
What are the requirements that a long-term care insurance contract must meet to be "qualified" under the Health Insurance Portability and Accountability Act (HIPAA)?
1. only for qualified long-term care services. 2. cannot pay for expenses that are reimbursable under Medicare. 3. must be guaranteed renewable. 4. does not provide for a cash surrender value or other money that can be borrowed or paid, assigned, or pledged as collateral for a loan. 5. All refunds of premiums and policyowner dividends must be applied as future reductions in premiums or to increase future benefits. 6. must comply with various consumer protection provisions.
LTC restoration of benefits- policy provision saying if you went on benefits, and you didn't use all that you were entitled, and you recovered, and you go home and stay home for _____ days or longer, all the benefits to which you were entitled are restored and policy is back to whole
180 days
What are the types of care a long-term care insurance policy might cover?
A long-term care insurance policy can cover one, several, or more types of care. The types of care include -nursing home care -assisted-living facility care -hospice care -care in an Alzheimer's facility -home health care -care in an adult day care center -care coordination -alternative plans of care.
(T/F) Inflation protection is mandatory to be used in LTC contracts
FALSE it is mandatory to be offered
What factors affect the amount of the premium for a long-term care insurance contract?
Factors that affect the premium include -age -types of benefits -duration of benefits -inflation protection -elimination period -daily/monthly maximum -waiver-of-premium provision -marital status -tobacco use -underwriting class
(T/F) Under the Health Insurance Portability and Accountability Act (HIPAA), a "Qualified long-term care insurance contract" must provide for a cash surrender value that can be borrowed if an insured is seriously ill.
False. A long-term care insurance contract cannot provide for a cash surrender value or other money that can be borrowed or paid, assigned, or pledged as collateral for a loan.
(T/F) Both group and individual medical expense policies typically cover custodial care in a nursing home.
False. Both group and individual medical expense policies exclude custodial care.
(T/F) Coverage under a group long-term care insurance contract must be offered through a cafeteria plan to receive favorable tax treatment.
False. Coverage under a group long-term care insurance contract cannot be offered through a cafeteria plan on a tax-favored basis.
(T/F) One advantage to the insured of having a long-term care insurance policy that uses a pool of money concept is that daily benefit payments from the pool of money can exceed the otherwise stated policy benefit.
False. Daily benefits from a pool of money cannot exceed the daily policy benefits stated in the policy.
(T/F) Partnership policies are typically structured as non-tax-qualified policies.
False. Partnership policies must be designed as tax-qualified policies.
(T/F) NAIC model legislation regarding long-term care policies has become federal law and applies retroactively to older policies.
False. The NAIC model legislation establishes guidelines that have been adopted by several states (not federally). Furthermore, older policies that are still in existence and were written prior to the adoption of the model legislation or one of the later revisions may be unaffected.
(T/F) Under HIPAA, a "chronically ill person" must be unable to perform at least four activities of daily living (ADLs)
False. Under HIPAA, a chronically ill person must be unable to perform only at least two activities of daily living.
Growth of LTC can be traced to 1996 with the introduction of ___________.Had an included portion dealing with long term care insurance. Terms defined in accord with legislation.
HIPPA.
What are the usual issue ages for long-term care insurance contracts?
Most companies have an upper age in the range of 79 to 84, beyond which coverage is not issued. Some companies have no minimum age, while others have a minimum age, such as age 40.
qualified long term care services include
Necessary diagnostic, preventative, therapeutic, curative, treatment, and rehabilitative services and maintenance or personal care services required by a chronically ill individual and provided by a plan of care prescribed by a licensed health care practitioner
What is the nature of the partnership programs for long-term care?
Partnership programs are alliances between insurance companies and states. The states offer an incentive for the purchase of long-term care insurance by allowing persons who purchase such policies to protect a larger-than-usual amount of assets if they later are otherwise eligible for Medicaid. In most states, the additional amount of assets protected is equal to the policy benefits received. Partnership programs also protect a certain amount of assets from estate recovery programs. Partnership policies must meet certain requirements, such as being tax-qualified policies and automatically including inflation protection for applicants under the age of 76
benefit amounts for long term care policies
Reimbursement Policies vs Per Diem policies o If you have a reimbursement policy that pays $150 per day and you need to pay $100 to the provider, you re given $100 reimbursement o Per diem policy $150 per day an you need $50 worth of care today= $150 (daily benefit) o Potential to last longer is the reimbursement policy
Describe the amounts and duration of long-term care benefits
The amount of benefits is usually limited to a specified amount per day or month. The same level of benefits is usually provided for all levels of institutional care. The applicant can sometimes select home health care limits from 50 to 150 percent of the benefit amount payable for institutional stays. The policyowner is usually given a choice regarding the maximum duration of benefits, which can range from 1 year to the insured's lifetime.
(T/F) Most states require long-term care policies to offer some type of inflation protection that the applicant can purchase.
True
(T/F) NAIC model legislation regarding long-term care policies requires that a shopper's guide must be delivered to all prospective applicants.
True
(T/F) The Medicaid program in most states will provide nursing home care to low-income individuals.
True
(T/F) Variations exist among long-term care insurance policies as to how home health care services are counted toward satisfaction of the elimination period.
True
Renee has a comprehensive long-term care insurance policy that provides benefits on a reimbursement basis for a benefit period of 4 years. Her daily benefit is $200 for care in a long-term care facility and $100 per day for home health care. The policy makes benefit payments using the pool-of-money concept. Assume that Renee is chronically ill and receives home health care for 2 years at a cost of $80 per day for 5 days each week after she satisfies her elimination period. At that time, her condition deteriorates and she enters a nursing home that has a daily cost of $230.
Under a pool-of-money concept, the amount available for Renee's benefit payments is $292,000, as previously calculated. During the 2 years (104 weeks) that Renee receives home health care, the policy will make benefit payments equal to the full cost of her care because it is less than $100 per day. This totals $41,600 ($80 × 104 × 5). Therefore, the pool of money is reduced by this amount to $250,400 by the time she enters the nursing home. The policy will then pay a daily benefit but only up to the policy limit of $200 per day. (The extra $30 per day is her responsibility.) Consequently, Renee can receive benefits for an additional 1,252 days ($250,400 ÷ $200). The net effect is that Renee will actually receive benefit payments over a period that is equal to almost 5½ years. This period would be somewhat longer if an inflation increase had been assumed for the pool of money
Explain how insurance companies determine whether a long-term care policyowner is eligible for benefits.
Under a tax-qualified plan, the insured must be chronically ill, which means that one of the following criteria must be met: (1) The insured is expected to be unable, without substantial assistance from others, to perform at least two of the six ADLs acceptable under HIPAA for at least 90 days due to loss of functional capacity. (2) Substantial services are required to protect the individual from threats to health and safety due to severe cognitive impairment. Many non-tax-qualified plans use the same criteria that are in tax-qualified contracts, except no time period applies to an expectation of the inability to perform ADLs. Some non-tax-qualified plans require the inability to perform only one ADL or extend the definition of ADLs beyond the six allowed by HIPAA. Finally, some non-tax-qualified plans make benefits available when a physician certifies medical necessity, regardless of whether other criteria are satisfied.
3 types of Inflation protection for LTC contracts
a. Simple interest b. Compound interest c. Periodic benefit increase
the criteria used to establish benefit eligibility under a long-term care contract—in other words, the telling signs of the need for nursing home care. They include eating, bathing, dressing, transferring from bed to chair, using the toilet, and maintaining continence.
activities of daily living (ADLs)
day care provided at centers specifically designed for seniors who live at home but whose families are not available to stay at home for the day. All offer social activities; some also provide health and rehabilitation services.
adult day care
care provided in facilities that provide care for the frail elderly who are no longer able to care for themselves but who do not need the level of care provided in a nursing home
assisted living care
a benefit that continues policy payments to an LTC facility for a limited time (such as 20 days) if the insured temporarily leaves the facility for any reason. For example, the insured may need to be hospitalized for an acute condition or wish to take a personal leave from the nursing home to attend a family reunion or holiday activity. Without the continuation of payments to the facility, the bed may be rented to someone else and unavailable upon the insured's return.
bad reservation benefit
a person who assesses a LTC patient who shows some degree of impairment to determine the care needs and the development of a care plan to meet those needs
care coordinator
a person who has been certified by a health care practitioner as being either (1) unable to perform, without substantial assistance from another person, at least two activities of daily living (ADLs) for a period of at least 90 days due to a loss of functional capacity, or (2) suffering from severe cognitive impairment and requiring substantial supervision to protect his or her health and safety
chronically ill individual
a long-term care insurance policy that combines benefits for facility care and benefits for home health care services into a single contract. Also known as an integrated policy.
comprehensive long term care insurance policy
a care setting, also known as a life care facility, that provides the full continuum of supportive-living arrangements and is obligated to provide the housing and defined LTC services at each level of care for the life of the resident entrance fee!
continuing care retirement community
Private medical expense insurance policies (both group and individual) almost always have an exclusion for
convalescent, custodial, or rest care. LTC is usually only policy that pays for custodial care
a type of care that helps with personal needs such as walking, bathing, dressing, and eating, and can usually be provided by someone who does not have professional medical skills or training
custodial care
a long-term care insurance policy with a per diem basis of payment that provides benefits even if no care is being received as long as the insured satisfies the policy's benefit trigger
disability based policy
a policy that is designed to provide benefits only if the insured is in a nursing home (referred to as a nursing home policy) or in another care setting, such as an assisted-living facility or hospice
facility only policy
a long-term care insurance policy designed to provide benefits only for care outside an institutional setting, although some policies may provide benefits for care in assisted-living facilities
home-health-care-only policy
a provision in some annuities by which the periodic annuity payment increases when the annuitant is determined to meet long-term care by satisfying the same criteria that trigger benefits under a long-term care insurance policy.
long term care insurance
the time period within which Medicaid authorities are allowed to review a Medicaid applicant's financial transactions to determine whether any of the transactions would cause the applicant to be disqualified for Medicaid benefits
look back period
what the elimination period for a LTC contract
may be range from 0 to 365 days
benefit period of LTC contract
may vary to 2 years to lifetime
a broad term that encompasses skilled care, intermediate care, and custodial care in a licensed facility
nursing home care
CCRCs- Continuing Care Retirement Community
o Large Entrance Fee- 6 figures and may not be refundable o Assumption if you are healthy and fine you just need independent living o Monthly fee o Meals, housecleaning, health care o Residents needing LTC must give up independent living unit and move to assisted living or nursing home portion, monthly fee may not change
home health care
part-time skilled-nursing care, therapy, and part-time services from home health aides. It also often includes help from a homemaker companion who is an employee of a state-licensed home health care agency. The companion may assist with such tasks as cooking, shopping, cleaning, bill paying, or other household chores.
a state program under which Medicaid requirements are modified for persons who maintain approved long-term care insurance policies
partnership period
the method of paying long-term care insurance benefits whereby the insured receives a specified daily or weekly benefit amount regardless of the actual cost of care
per diem basis
NAIC model legislation focuses on 2 major areas
policy provisions marketing
an indirect method for determining the benefit period under a reimbursement type of long-term care policy. Under this approach, there is a _______________ from which benefit payments are made. When tit is exhausted, the policy terminates. However, the____________ may last well beyond the policy's specified benefit period if benefits are paid at a rate that is less than the policy's maximum daily benefit amount.
pool of money
Partnership programs LTC
program in some states (about 45) under which insurers issue LTC policies that meet specific state requirement · Individuals with state approved policies qualify for Medicaid more easily after policy benefits exhausted · Assets protected for Medicaid eligibility purposes and from estate recovery requirements · Does not address income; income not protected only assets
a long-term care contract that meets specified standards and qualifies for favorable tax treatment under the Health Insurance Portability and Accountability Act
qualified long term care insurance contract
HIPPA gives favorable tax treatment to long term care acts that are
qualified long term care insurance contracts
necessary diagnostic, preventive, therapeutic, curing, treating, and rehabilitative services, and maintenance or personal care services that are required by a chronically ill person and are provided by a plan of care prescribed by a licensed health care practitioner
qualified long term care insurance services
the method of paying long-term care insurance benefits that reimburses the insured for actual expenses incurred up to the specified benefit amount
reimbursement basis
Teresa, aged 70, recently entered a nursing home following a lengthy hospitalization. The cost of her care is $200 per day. Because she will need skilled-nursing care for many months, Medicare will pay the cost of the first 20 days of care in full and provide an additional 80 days of benefits with a daily copayment. Teresa also has a tax-qualified long-term care insurance policy that will provide benefits of $150 per day after a 30-day elimination period. REIMBURSEMENT VS PER DIEM
reimbursement basis- no benefits will be payable as long as Teresa is collecting any benefits from Medicare. When Medicare payments cease after 100 days, Teresa will collect $150 per day as long as her policy counts the days she was receiving Medicare benefits toward the elimination period. per diem basis and if the policy is not integrated with Medicare, Teresa will collect a daily benefit of $150 beginning on the 31st day, regardless of any Medicare reimbursement.
enables caregivers to be temporarily relieved from their caregiving responsibilities
respite care
a benefit offered by some insurers when both a husband and wife are insured with them. It allows each spouse to access the benefits of the other spouse. For example, if each spouse has a 4-year benefit period and one spouse has exhausted his or her benefits, benefit payments can continue by drawing on any unused benefits under the other spouse's policy. An insurer may allow the transfer of any unused benefits to a surviving spouse's benefits or allow the spouses to purchase an extra benefit, equal to the separate benefit on each spouse.
shared benefit
federal income tax treatment of a qualified long-term care insurance contract
treated like other medical expenses. -Self-employed persons may exclude from income the premiums paid up to certain limits. -Persons who itemize deductions can include long-term care insurance premiums, up to the same limit, for purposes of deducting medical expenses in excess of 7.5 percent of adjusted gross income. -Limits are based on a covered individual's age and subject to cost-of-living adjustments. -Employer contributions for group contracts are deductible to the employer and do not result in taxable income to an employee. reimbursement basis = tax free by an employee. per diem basis= proceeds are excludible from income up to a specified figure that is indexed annually. Amounts in excess of this limit are also excludible to the extent that they represent actual costs for long-term care services.
Why do we need LTC?
· Aging population · Increasing costs · Inability of families to provide full care · Adequacy of your insurance protection
how are LTC contracts underwritten?
· Based on your health · Focused on potential claims far into the future · The older you get, the more restrictive approvals get to be
ADLs
· Eating · Bathing · Dressing · Transferring from bed to chair · Using toilet · Maintaining continence
Compare group long-term care insurance with the coverage being sold in the individual marketplace. What differences exist between the two types of coverage?
· Kevin bought it as member of a group 10 years (portability!) · Eligibility usually requires full time active employment · Slightly cheaper than individual coverage · Fewer choices
some ways to pay for LTC insurance
• Personal income and assets • Family support • Medicaid/public assistance programs • Continuing care retirement communities • Accelerated benefits in life insurance policies • Long-term care insurance
LTC NAIC model provisions for marketing
• Prospective purchasers must be given an outline of the coverage, a shopper's guide, and a 30-day free look at the policy. • Procedures for fair and accurate policy comparisons must be established. • Applications must be clear and unambiguous. • Applicants must have option to name a third party to be notified of pending lapse due to nonpayment of premium.
