It is not possible at this time to fully discuss all available provisions of a LTC Insurance policy, as it is such a changing product because of regulation and the gathering of statistics by the actuaries. Therefore, any agent should carefully study the provisions of the policies that they have contracted to sell. As an example, one health insurance agency contracted with three insurers to sell their LTCI policies. One company marketed a policy that paid Daily Benefits only up to the amount of reasonable and customary charges and no one in that agency had discovered this. The end result was that all of the policyholders of this particular plan were contacted and this benefit restriction explained. This led to some red faces and some cancellations. These policies are not allowed in most states, but it illustrates the necessity for agents to become very familiar with their products.
Basically, there are two types of LTCI policies: reimbursement and indemnity. These may be called something else by a company, but basically they are only of these two types. One company may offer either type or only one type. There appears to be two different definitions, one offered by some writers of consumer-interest publications and the other definition is that used within the insurance industry and is more technically correct (which will be used in this text). However, an agent should make sure that published material and usage within the agency and insurer are the same.
A reimbursement policy pays for the actual services that the insured receives. “Reimbursement benefits payment by the insurance company to the insured for the actual expenses incurred by the insured, such as medical expenses.” (Dictionary of Insurance Terms) For example, if a nursing home charges a patient $250 a day and the LTCI policy limit is $200 a day, then the policy will only pay the $200 per day. If the nursing home charges $150 a day, then that is what the policy will pay – “up-to” is what these policy benefits are sometimes called.
Technically, indemnity is compensation for a loss. In a property and casualty insurance contract, where one usually hears of this term, the objective is to restore an insured to the same financial position after the loss that he/she was in prior to the loss. In life insurance, a payment of a predetermined amount does not make a life insurance policy a contract of indemnity. For hospital indemnity and other health insurance plans, “Coordination of Benefits” clauses are designed so that the insured cannot profit from an illness.
In respect to the “pool” of money concept, basically an individual’s total benefits is determined by multiplying the daily benefit chosen by the benefit period. Simply put, if the policy has a $200 daily benefit and has a 3-year benefit period (1095 days), the amount of the “pool” is $219,000. Therefore, under an indemnity policy, if the insured had $200 a day benefit for every day he was disabled and if he required at least one visit each day from a home care provider who only charged $100 per day, after 3 years the benefits cease. Under a reimbursement plan, he would have been reimbursed the actual cost, therefore his pool of money would last more than 3 years. This would be important if the insured was still alive and disabled after 3 years (1095 days).
Another advantage of indemnity plans is that under the reimbursement plan, only licensed caregivers can provide services, but with an indemnity plan, it may let the insured pay family members or informal caregivers who cost less than licensed providers. Indemnity policy providers maintain that their claims don’t cost much to process, less overhead, so the premiums should be less. Reimbursement insurers maintain that their premiums are lower because claims for reimbursement claims costs tend to be lower. Actually the jury is still out on this and the premiums are nearly the same, but it is possible that the indemnity plan insurers may have to play catch-up in 10 years or so as they would still have funds outstanding earmarked for claims where the reimbursement plan would have paid all their claims.
At claims time, if the plan is indemnity, then the money goes to the insured who writes the checks. With a reimbursement policy, the insurer requires only one claim form a year for each service provider – after that the provider bills the insurer.
The “Care Manager” or Care Coordinator” – discussed later – comes into play in determining the difference between the plans. With an indemnity plan, usually it is up to the insured to provide their own care manager or hire a professional to arrange these things. The reimbursement company provides the insured with a company-paid care manager. This leads to a debate as the indemnity company will maintain that the paid managers are actually paid “gatekeepers” who may be unwilling to certify the care needed by the insured. The reimbursement company will maintain that this is not true, the care managers have no axe to grind and have no motive other than to assist the insured when they need help the most.
Some insurers have blurred lines a little by offering an indemnity option, a cash benefit rider, on its reimbursement plan.
F Of the 20 most popular LTCI programs in a Life Insurance Selling survey, two were reimbursement for both nursing home and home health care; one was indemnity for home health care and reimbursement for nursing home, all the rest were indemnity for nursing facility and reimbursement for home health care.
One ofthe most important features of a LTCI policy is what must happen in order to receive benefits from the policy –– the coverage triggers or "gatekeepers" or "safety net,” as they are often called, are activated. These were discussed earlier in the section on tax-qualified/non-tax-qualified policies.
In the early policies, coverage triggers were often highly restrictive as to coverage but this is no longer the case, thanks to customer and regulatory pressure and regulations.
Under HIPAA, Congress decided that they wanted its tax-qualified plans to contain two, and only two, benefit triggers. Not only did Congress limit the triggers, but within the two, they imposed restrictions that were not there previously.
Congress eliminated “medical necessity” as a benefit trigger. For younger claimants, “medical necessity” is probably the fairest of the benefit triggers. Simply put, this trigger states that due to a diagnosable medical problem, care is needed. The medical problem could be obvious, such as a stroke, cancer, disabling accident, etc. –– or less obvious, such as Alzheimer’s or senile dementia.
Typically, state regulations define "Chronically ill" as certified by a licensed health care practitioner as:
(a) Being unable to perform, without substantial assistance from another individual, at least two activities of daily living for a period of at least 90 days due to a loss of functional capacity; or
(b) Requiring substantial supervision for protection from threats to health and safety due to severe cognitive impairment.
Congress decided to make people eligible for claim payments only if they suffer from chronic, long-term care problems that would make them unable to substantially perform two of five or six activities of daily living. Additionally, patients must get medical certification that the loss is going to last at least 90 days, or prove that they are unable to function without causing danger to themselves or others.
As reported in trade publications, Congress effectually eliminated most short-term claims, even those that can be quite costly. Those that suffer from a chronic disability will not necessarily qualify them to receive benefits under a tax-qualified plan. One must still meet the two triggers mentioned above.
Since HIPAA was enacted in 1996, some of the companies who sold LTCI policies prior to this legislation have reported that only a small percentage of claims that the company paid would have been paid if all the policies were tax-qualified, ranging from 5% to 20%. This is really immaterial at this point as the greater percentage of LTCI policies sold today is tax-qualified.
The major benefit “trigger” is that the insured is unable to perform a specific number of ADL’s. Policies typically list what are considered ADL’s and different policies might require the inability to perform a different number of ADL’s to qualify for benefits. For example, Policy Number One might pay benefits for someone who cannot perform two of the ADL’s the policy lists, while Policy Number Two pays for the inability to perform three ADL’s listed. (Note restrictions under HIPAA.) Typical ADL’s are Eating, Dressing, Toileting, Transferring, Continence, and sometimes, Bathing and Taking Medication.
The NAIC Model Bill basically requires that a long-term care insurance policy shall condition the payment of benefits on a determination of the insured's ability to perform activities of daily living and on cognitive impairment. Eligibility for the payment of benefits shall not be more restrictive than requiring either a deficiency in the ability to perform not more than three of the activities of daily living or the presence of cognitive impairment; or
If a policy is a qualified long-term care insurance policy, the policy shall condition the payment of benefits on a determination of the insured's being chronically ill; having a level of disability similar, as provided by rule of the commission, to the insured's ability to perform activities of daily living; or being cognitively impaired as described below. Eligibility for the payment of benefits shall not be more restrictive than requiring a deficiency in the ability to perform not more than THREE of the activities of daily living. (Note: THREE is what is specified under the Model Bill.)
Activities of daily living shall include at least:
(a) "Bathing," this means washing oneself by sponge bath or in either a tub or shower, including the task of getting into or out of the tub or shower.
(b) "Continence," which means the ability to maintain control of bowel and bladder function, or, when unable to maintain control of bowel or bladder function, the ability to perform associated personal hygiene, including caring for catheter or colostomy bag.
(c) "Dressing," which means putting on and taking off all items of clothing and any necessary braces, fasteners, or artificial limbs.
(d) "Eating," which means feeding oneself by getting food into the body from a receptacle, such as a plate, cup, or table, or by a feeding tube or intravenously.
(e) "Toileting," which means getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene.
(f) "Transferring," which means moving into or out of a bed, chair, or wheelchair.
The NAIC Model Bill states that insurers may use activities of daily living to trigger covered benefits in addition to these as long as they are defined in the policy. Note: This means that:
An issuer of qualified long-term care contracts is limited to considering only the activities of daily living listed above.
An insurer may use additional provisions, for a policy described in the regulations for the determination of when benefits are payable under a policy or certificate; however, the provisions shall not restrict and are not in lieu of, these requirements.
The NAIC Model Bill states that the determination of a deficiency due to loss of functional capacity or cognitive impairment shall not be more restrictive than:
(a) Requiring the hands-on assistance of another person to perform the prescribed activities of daily living, meaning physical assistance, minimal, moderate, or maximal, without which the individual would not be able to perform the activity of daily living; or
(b) Due to the presence of a cognitive impairment, requiring supervision, including verbal cueing by another person in order to protect the insured or others.
Assessment of activities of daily living and cognitive impairment shall be performed by licensed or certified professionals, such as physicians, nurses, or social workers.
Some policies require a physician to certify that the individual cannot perform ADL’s without assistance.
Older policies varied between companies (and sometimes, policy forms) in their definition of ADL’s, but under the NAIC Model Bill and under HIPAA regulations there is little room for change.
Cognitive impairment includes any organically‑based brain disease, such as Alzheimer's or Parkinson's disease, and is generally characterized by the deterioration of intellectual functioning. Cognitive impairments may manifest itself in various forms, including loss of memory, disorientation, loss of reasoning ability, inability to make judgments and others. A physician's diagnosis is typically required. Policies usually define exactly what is considered cognitive impairment, such as: "Cognitive impairment" means a deficiency in a person's short-term or long-term memory, orientation as to person, place, and time, deductive or abstract reasoning, or judgment as it relates to safety awareness.
The difference between tax-qualified and non-tax-qualified policies requiring that care is medically necessary is that, today, this is not typically the only requirement, but just one of several that may trigger coverage. The tax-qualified plans under HIPAA have effectively eliminated this “trigger”, but there are many non-tax-qualified plans that either are in force, or are still offered.
A definition that meets the requirement of the Partnership program would state: "Maintenance or personal care services" means any care the primary purpose of which is the provision of needed assistance with any of the disabilities as a result of which the individual is a chronically ill individual, including the protection from threats to health and safety due to severe cognitive impairment.
Medical necessity might result from an injury or illness, the latter possibly including cognitive impairment, depending on how the particular policy reads. The best definitions of medical necessity indicate that the care is "appropriate for the insured's condition. "Experimental” types of care are often excluded.
In today's more liberal policies, where medical necessity is usually just one of several alternatives, this gatekeeper provision generally permits coverage for conditions that do not fit the ADL or cognitive impairment definitions. On the other hand, be reluctant to sell policies where medical necessity is the sole coverage trigger, in which case the policy is very restrictive and obviously, not tax-qualified.
It is the responsibility and the duty of every LTCI agent to be intimately familiar with the policy that he is marketing. In the past (and possibly even now) some agents will contract on a single case basis if his carrier does not have what a prospect wants or is interested in. Nothing wrong with this, but the problem is that rarely will the agent read ALL of the policy as he is interested only in the section that the prospect wants and that does not appear in the policy that he regularly markets. With the interest in the NAIC LTCI Model bill, plus new regulations, now the agent really has to be careful. Careful attention must be made to the coverage triggers, whether the plan is reimbursement or indemnity, etc. The best way to keep out of trouble with this is to place a policy that is familiar and which all of the details are known, alongside of the new policy and compare item-to-item. More often than not, there are some surprises. Particularly if another policy is being sought as prospect did not medically qualify for one policy but can qualify for the new one.
For existing, or non-tax-qualified policies, it is possible that the provision describing the circumstances under which benefits are payable does not spell out the three "gatekeepers" or ADLs described above in precisely that manner. A person would have to "translate" the policy language in order to understand exactly what is required to receive benefits. It is extremely important for the applicant to fully understand these requirements. Some of the problems that arose with early LTCI policies came about because agents told clients they were covered for situations the policy did not cover. Some agents subsequently found themselves in court dealing with errors and omissions lawsuits. In addition, unhappy consumers may file complaints that eventually lead to further government legislation.
A Long Term Care Insurance policy's elimination period, sometimes called a deductible period, is a period of time during which no benefits are paid immediately after the insured is qualified to receive long‑term care.
Because the insured absorbs the first costs incurred, the elimination period serves the same purpose as a deductible amount for medical expense or auto or homeowners insurance. The insurance buyer may select a longer period (thus paying more out‑of‑pocket) in order to lower the premium.
Insurers typically offer elimination periods ranging from zero days (no elimination period) up to 365 days, with different insurers offering different options. Shorter periods up to about 90 days are most common, but periods currently available include seven, ten, 15, 20, 30, 45, 60, 90, 100, 120, 150, 180, 270 and to as long as 365 days. The actual periods offered vary from insurer to insurer and it's unlikely a single insurer would offer all of these choices. For example, insurer XYZ might offer periods of zero, 20, 60 or 180 days, while insurer ABC offers zero, 30, 90 and 365 days. The insurer may also specify the elimination period with no option for the insured to choose.
Under policies that pay benefits for different kinds of care, a single elimination period usually qualifies the insured for all types of care.
For example, assume the elimination period is 60 days. The insured first requires skilled care for ten days in a Skilled Nursing Facility, followed by 20 days of intermediate care in the same facility, then goes home to receive 60 days of intermittent skilled care and custodial care before recovery is complete. Thirty days of the elimination period is fulfilled in the nursing facility. The insured absorbs the cost of the first 30 days at home to fulfill the 60 day period and benefits are paid for the balance of 30 days. When the same elimination period applies to all types of care, this is sometimes called an "integrated" elimination period.
That same term –– integrated elimination period –‑ sometimes means that the elimination period must be fulfilled only once during the life of the policy. For example, suppose insured Potter has a policy with a lifetime benefit period. He has fulfilled the elimination period during a nursing home confinement, has returned home and now, a year later, must enter a nursing home again. Potter's LTC Insurance policy begins paying benefits from the first day of nursing home confinement since the elimination period was previously satisfied. Typical provision.
On the “flip side,” Consumer Reports (Who starts out their report on the first page, “Long-term-care insurance may be a lousy deal, but right now it’s just about the only deal.”) maintains that there never is a good time to buy. Since many prospects will have read this report, their conclusions are important. They state that a plan that costs a 50-year old $1,625 annually will run a 60-year-old $3,100 and a 70 year old $7,575. Obviously they picked plans that met their criteria as “acceptable,” which means a short elimination period, 4 years of benefits, etc.
They further state that is a person age 40 buys a LTCI policy with a premium of $685 annually, and since the average age of people being admitted to a nursing home is 83, that means that the insured would have to pay for 40 years before knowing whether the policy will even be used.
And of course, there are the premium increases. If an individual cannot pay the increased premium, the insured may have to bail out of that policy and unfortunately that can happen when the insured is retired or has lost a spouse. If they choose not to pay, they may not be healthy enough to qualify for a new policy with another company. All of these things must be taken into consideration.
Insureds may be able to choose different elimination periods for different types of care, such as 30 days for nursing home care and ten days for home health care. At least one insurer specifies that a 90‑day elimination period applies for nursing home care and a 30‑day period for home and community‑based care and the insured may change the periods only by adding a rider to the policy. Another policy offers elimination periods in a range of zero to 365 days for nursing home care, but for home care the insured chooses either seven, 20 or 60 days.
The newer policies generally offer the same care-related elimination periods, and in reviewing the 20 policies surveyed by Life Insurance Selling, only one company offered different elimination periods for home care and adult daycare.
The length of the elimination period is another critical factor affecting the cost of LTCI policies. First‑day coverage (no elimination period) is nice, but costly. On the other hand, an insured whose long-term care begins in a skilled nursing facility will incur fairly high daily expenses that must be paid from personal funds during the elimination period. This means the insured must decide how much he or she can handle financially before the policy begins paying benefits.
For example, let's say the nursing home costs $90 per day. The insured selected a 90‑day elimination period. If this individual becomes very ill and must be in the nursing home for a long period, he or she conceivably could be required to pay:
$90 per day x 90 days = $8,100
This $8,100 comes out of the insured's pocket before any policy benefits begin on the 91st day of care. In addition, remember that most nursing home confinements last fewer than 90 days, so the insured might pay the full cost, having recovered before the elimination period passed, with the result that they will receive no benefit from the policy at all.
The trade‑off's are between a shorter elimination period (less out‑of-pocket expense) and higher policy premium versus a longer elimination period (more out‑of‑pocket expense) and lower policy premium. Unlike choosing the benefit period, this decision is less of a gamble because it is based largely on finances and people generally know how much of the cost they can absorb. The problem, however, is that people's financial circumstances change and not always for the better. Someone who believes he could easily absorb the $8,100 mentioned in the previous paragraph, for example, could suffer setbacks such as unemployment or investment losses that would make such a payment difficult or impossible in the future.
In a discussion about benefit periods, the best choice is probably the longest period the insured can realistically afford. For the elimination period, the advice might well be just the opposite: Choose the shortest elimination period that is realistically affordable. An agent should be particularly sensitive to financial circumstances in this regard. People who can afford to buy LTC Insurance, but who are not particularly well‑fixed financially, shouldn't be encouraged to stretch out the elimination period extensively in order to lower the premium to where they feel it is affordable. There is a school of thought that maintains that even a small Daily Benefit policy is better than no policy. Because of the crowded conditions of the nursing homes, a policy of any amount will help admit a person to a good nursing home. When the benefits expire, they usually cannot be moved to the “Medicaid” ward, particularly in view of recent legislation.
However, if such clients eventually need long‑term care, they won't be happy with a policy that pays only after they have depleted their savings unless they fully and completely understand what the situation is. Unfortunately, many insureds that require long-term care are not in any condition to remember the explanation made at the time of the sale—another reason that a true professional stays in touch with their customers. Also, if the insured has to have nursing home care and is in no condition to handle the details, family members—frequently who live some distance away – may not be aware of the financial decisions made at the time of the sale. It is important to gather enough information about the clients' finances to help them make an informed choice and be certain the advice is both financially and ethically sound. (See discussion of "Suitability Standards" later in this text.)
For some time, insureds and consumer protection parties and organizations, and even agents, have raised the question as to why there were no premiums returned to long-term LTCI policyholders, and in particular if they have had no claims. A few states enacted "nonforfeiture" protection, but the NAIC Model Act provided the most comprehensive, with the results that most states are adopting this particular provision. (For those not familiar with the term, "nonforfeiture" simply means that the rights of the policyholder cannot be forfeited.)
An insurer that offers a long-term care insurance policy, certificate, or rider in this state must offer a nonforfeiture protection provision providing reduced paid-up insurance, extended term, shortened benefit period, or any other benefits approved by the office if all or part of a premium is not paid. Nonforfeiture benefits and any additional premium for such benefits must be computed in an actuarially sound manner, using a methodology that has been filed with and approved by the office.
The nonforfeiture protection provision providing a shortened benefit period shall, at a minimum, provide the following:
(a) The same benefits, amounts, and frequency in effect at the time of lapse but not increased thereafter, must be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits shall be determined as specified below.
(b) The standard nonforfeiture credit must be equal to 100 percent of the sum of all premiums paid, including the premiums paid prior to any changes in benefits. The insurer may offer additional shortened benefit period options, as long as the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration. However, the minimum nonforfeiture credit shall not be less than 30 times the daily nursing home benefit at the time of lapse.
(c) No policy or certificate shall begin a nonforfeiture benefit later than the end of the third year following the policy or certificate issue date.
(d) Nonforfeiture credits may be used for all care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.
(e) All benefits paid by the insurer while the policy is in premium-paying status and in paid-up status may not exceed the maximum benefits which would have been payable if the policy or certificate had remained in premium-paying status.
(f) There shall be no difference in the minimum nonforfeiture benefits as required under this subsection for group and individual policies.
(g) The requirements set forth in this subsection shall become effective July 1, 1997, and shall apply as follows:
1. With certain exceptions, the provisions of this subsection apply to any long-term care policy issued in this state on or after July 1, 1997.
2. The provisions of this subsection shall not apply to certificates issued under a group long-term care insurance policy in force on July 1, 1997.
(h) Premiums charged for a policy or certificate containing nonforfeiture benefits shall be subject to the loss ratio requirements of [that particular state] treating the policy as a whole.
(i) At the time of lapse, or upon request, the insurer must disclose to the insured the insured's then-accrued nonforfeiture values. At the time the policy is issued, the insurer must provide to the policyholder schedules demonstrating estimated values of nonforfeiture benefits; however, such schedules must state that the estimated values are not to be construed as guaranteed nonforfeiture values.
For a shortened benefit period must, at a minimum, provide a benefit that is actuarially equivalent to the minimum benefit required for a shortened benefit period.
The insurer must make the offers required by these regulations to each proposed certificateholder, except that the insurer must make the offers to the policyholder in the case of a continuing care contract.
This section does not apply to life insurance policies or riders containing accelerated long-term care benefits.
F If a Care Manager or Care Coordinator is involved, many policies will waive the elimination period, making the length of the elimination period, a moot point.
Coverage is written on the basis of a daily benefit amount, with a wide span between the minimum and maximum amounts available. The daily benefit amount generally applies to nursing home care and may or may not vary for care in other types of facilities. Nursing home benefits will be discussed first, and then the text will address various ways policies handle benefit payments for care under other circumstances.
An important point about the daily benefit is that this is usually the maximum amount the policy will pay for a day of care. Most policies stipulate that the insurer will pay 100% of actual costs incurred up to the daily benefit amount. See discussion prior in respect as to how this is handled with reimbursement type policies and indemnity type policies.
Policies available as of this writing offer daily nursing home benefits ranging from as little as $20 per day to as much as $500 per day with most having a maximum of $300. Some policies place a minimum on the total maximum benefits, such as $900,000, and one company has maximum daily benefit of $10,000 per month and another has a maximum of $12,000 per month. Some have no maximum published. Insureds generally may choose from the insurer's offerings in $10 increments after the minimum. If an insurer offers a minimum of $40 and a maximum of $200, the insured could choose, for example, $50 or $80, (but not $75) in $10 increments up to $200.
The amount of the daily benefit is one of the critical pricing factors—the higher the daily benefit, the higher the premium, all other things being equal. The advent of the “pool” approach has created some confusion in this respect—it used to be simple, just so much per day but now things are different.
People who choose a lower daily benefit may not have all of their care costs covered and must make up the difference. In addition to considering the premium that will be required, selecting the appropriate amount also involves at least two factors:
In many parts of the U.S., the $200 per day average will currently cover most nursing home costs. But in some parts of the U.S., especially the West Coast and the Northeast, $300 per day may be more realistic. A professional agent and his clients should both be aware of average nursing home costs where the insured lives. Even better, the insured may know exactly what nursing home he/she would prefer if it were necessary, find out the daily rate, and use that figure as a guideline.
Determining the exact figure for a specific nursing facility is sufficient only if the policy includes an option to have the daily benefit amount indexed for inflation. Inflation protection will be covered in more detail later, but just be aware that it is very important. Some LTCI policies will be purchased 20 years before they are ever used. Relying on the past as a portent for the future, a benefit purchased on the basis of today's costs only is likely to be woefully inadequate 20 –– or even ten years –– from now.
The various levels of care—custodial, intermediate and skilled nursing care—were discussed and defined previously. Most new LTCI policies cover all levels of care and do not require any prior higher level before paying for lower levels, such as a requirement for skilled care before paying for custodial care. Most state laws now require that all levels be covered under LTC Insurance policies.
Some older policies, which may still be in force, incorporated such requirements, often including prior hospitalization lasting at least three days. This limitation excludes the payment of benefits for some of the most common needs for long‑term care, for example, people who suffer from Alzheimer's disease rarely require hospitalization, but do need custodial care. Fortunately, most policies currently available for sale have eliminated this very severe restriction. In most, if not all, states, such restrictions are illegal.
Today, most LTCI policies pay benefits for any level of care the insured requires without a higher level of care as a prerequisite. However, some policies still require a period of confinement in a nursing home before paying home care benefits.
Associated with the level of care is where care occurs. Newer LTCI policies usually pay benefits at skilled nursing facilities, intermediate care facilities and custodial care facilities, but long‑term care can occur in a variety of different settings. There is wide variation in what types of settings qualify insureds for LTC Insurance policy benefits. When care is provided anywhere outside the home, policies usually require the facility to be state‑licensed.
By far the greatest number of policies offered today includes both nursing home and home care. As described in this text, the newer policies offer the “Pool of Money”, or “Lifetime Payment Maximum” wherein the Home Health Care payments may not be restricted as to a function of the Maximum Daily Benefits, but the entire amount may be paid (and thereby decreasing the Lifetime Payment Maximum). Many newer policies automatically include home care and home health care benefits, while others offer such benefits as an optional rider for an additional premium. There are also "stand‑alone" home care policies that cover only care at home, not in any other type of facility.
When benefits are paid for home care, the agent must also know what types of care are covered at home. For example, a few policies might pay for home health care, but only if it is provided by skilled medical personnel, such as registered or licensed practical nurses or various types of therapists. In this case, there is no coverage for custodial care at home. Other policies cover skilled care as well as expenses incurred by home health aides, homemaker services and others. Many policies do not pay for home care provided by family members even if those people are licensed to care for others, but it might be discovered that the policy will pay family members who are licensed or certified caregivers. Some policies even make provisions to pay for the training of a family caregiver.
Policies that pay hospice and respite care benefits often cover such care whether it occurs in the home or in an outside facility.
In general, alternate care is care provided anywhere other than at home or in a nursing home. Some insurers use just this terminology, but most will further define it, limiting benefits to certain types, such as adult day care, hospice care, assisted living facilities, or whatever facilities a particular policy specifies. Some policies specifically name Alzheimer's centers and Christian Science facilities as covered locations.
One term sometimes used in association with alternate care is community‑based care, which also might be further defined. Community‑based care occurs in assisted living facilities, nursing homes, adult congregate living facilities, adult day care centers and others. Often a physician must indicate that the proper care can be provided in such a facility, especially when only custodial care is needed.
Be careful to determine precisely what facilities are included. Some policies exclude care that occurs in "homes for the aged," for example, a term that must be further defined. Another caution for agents: A policy that pays for "alternate care" does not necessarily pay for home care. In the past, agents have mistakenly informed clients that alternate care is home care, but it is not.
When a LTCI policy also covers home care, the daily benefit might not be the same as for care received in a nursing home. It is mentioned earlier that some policies cover care at home only when it is health care provided by a skilled medical professional, while other policies pay benefits for various types of home care. In either event, the daily benefit available for skilled nursing care at home under newer policies is usually the same as the nursing home benefit, although some policies are for some percentage of the daily benefit – such as 70% or 80%.
Under some policies, an hourlyfigure and a daily maximum are stipulated. For example, the policy might pay up to $20 per hour, but no more than $60 per day.
At least one policy currently on the market has an even more complicated formula for paying home care costs. That particular policy pays:
Basically, companies are more competitive in their coverage for home care. Typically, home care benefits cover approximately 36 hours a week of care, even though the average beneficiary needs 59 hours and the additional funds comes out of the insured’s pocket.
Typically, states may require certain home health care services to be offered, such as:
A long-term care insurance policy, certificate, or rider that contains a home health care benefit must meet or exceed the minimum standards specified in this section. The policy, certificate, or rider may not exclude benefits by any of the following means:
(1) Providing that home health care cannot be covered unless the insured or claimant would, without the home health care, require skilled care in a skilled nursing facility.
(2) Requiring that the insured or claimant first or simultaneously receive nursing or therapeutic services in a home setting or community setting before home health care services is covered.
(3) Limiting eligible services to services provided by registered nurses or licensed practical nurses.
(4) Requiring that a nurse or therapist provide services covered by the policy that can be provided by a home health aide or by another licensed or certified home care worker acting within the scope of his or her license or certification.
(5) Requiring that a licensed home health agency provide services covered by the policy that can be provided by a nurse registry licensed under chapter 400.
(6) Excluding coverage for personal care services provided by a home health aide.
(7) Requiring that the provision of home health care services be at a level of certification of licensure greater than that required by the eligible service.
(8) Requiring that the insured /claimant have an acute condition before home health care services are covered.
(9) Limiting benefits to services provided by Medicare-certified agencies or providers.
(10) Excluding coverage for adult day care services.
If it might appear that the above were from the NAIC Model Bill, that would be correct. If Partnership plans are being marketed, these provisions will apply.
Today, most policies have a weekly benefit for home health care, not a daily benefit. This change was because there were too many situations where an insured had assistance for part of the week from a family member, but the daily benefit did not cover completely the daily charge when a paid caregiver was required. By making the benefit a weekly benefit, this problem was eliminated.
Insurers use many methods to pay for the home care benefits and the same insurer might offer different policies with different funding arrangements. It must be clearly and completely understood how the benefits are determined and applied for the particular policy represented.
Policies that pay benefits for alternate care, such as adult day care, assisted living facilities, respite care and others generally attempt to be consistent with the benefits that are paid for home care. For example, if the policy pays actual expenses up to 80% of the nursing home benefit for home health care, it likely pays that same amount for care in alternate facilities. Some policies pay up to 100% of the nursing home benefit if skilled nursing care is provided in one ofthe alternate facilities, but only 80% for other types of care
STUDY QUESTIONS
CHAPTER THREE
1. Basically, there are two types of LTCI policies:
A. Qualified and Unqualified.
B. reimbursement and indemnity.
C. expensive and cheap.
D. Partnership and NAIC Qualified.
2. Technically, indemnity is
A. a fiscal reward for strenuous compliance.
B. payment for the action services received.
C. compensation for a loss
D. a term used only in property and casualty insurance.
3. One ofthe most important features of a Long Term Care Insurance policy is what must happen in order to receive benefits from the policy ––
A. the gatekeeper, usually a Medical Doctor, makes the decision.
B. the Claims Committee of the insurance company must make that decision.
C. the insured must be admitted to a nursing home.
D. the coverage triggers are activated.
4. When Congress eliminated the "Medically Necessary" trigger on an LTCI policy,
A. this released considerable funds to pump up the Medicaid budget.
B. the majority of LTCI companies stopped selling Long Term Care Insurance.
C. Congress effectually eliminated most short-term claims, even those that can be quite costly.
D. the loss is commissions was drastic.
5. An issuer of qualified long-term care contracts is limited to
A. marketing only through securities-licensed agents.
B. considering only the 8 activities of daily living listed in HIPAA regulations (& IRS).
C. marketing only a set number of LTCI policies in each nursing home.
D. A+ or higher Best's rated companies.
6. A deficiency in a person's short-term or long-term memory, orientation as to person, place, and time, deductive or abstract reasoning, or judgment as it relates to safety awareness is the definition of
A. cognitive impairment.
B. mental illness.
C. short-term reasoning deficiency.
D. old age.
7. A period of time during which no benefits are paid immediately after the insured is qualified to receive long‑term care, is called
A. the benefit period.
B. the elimination period.
C. the nonforfeiture period.
D. reserve time.
8. Care related periods are
A. the benefit periods for different types of care.
B. different elimination periods for different types of care.
C. dictated by the state and usually are broken down by age.
D. are no longer accepted in LTCI policies.
9. In a discussion about benefit periods, the best choice is probably
A...the shortest period the insured can realistically afford.
B. the longest period the insured can realistically afford.
C. to equal the benefit and the elimination periods.
D. to let the agent pick the period.
10. " An insurer that offers a long-term care insurance policy, certificate, or rider in this state must offer a protection provision providing reduced paid-up insurance, extended term, shortened benefit period, or any other benefits approved by the office if all or part of a premium is not paid." This describes the regulation regarding
A. nonforfeiture benefits.
B. non-confined benefit.
C. the long-term care benefits of an Universal Life Insurance policy.
D. cancellation of an LTCI policy.
11. What are the various levels of care addressed in a LTCI policy?
A. poor, mediocre and professional.
B. institutionalized, home care and alternate-care.
C. immediate, delayed and end-of-period.
D. custodial, intermediate and skilled nursing care
12. "Providing that home health care cannot be covered unless the insured or claimant would, without the home health care, require skilled care in a skilled nursing facility" is a requirement for
A. a Major Medical policy.
B. a Home Health Care only policy.
C. Long Term Care Insurance policies.
D. Medicaid qualification.
ANSWERS TO STUDY QUESTIONS
1B 2C 3D 4C 5B 6A 7B 8B 9B 10A 11D 12C