ArkLaTex.biz | Ted A. Souter: Long-Term Care Specialist

Individual Policies
With an individual policy you have a contract between you and the insurance company. You receive a copy of the policy that is your contract with the insurance company. The company is not allowed to make any changes to the contract without your permission. The insurance company has the right to increase your premiums on a class basis. That means they can't increase it on you alone, but have to do so on the entire class.

There are different types of policies available depending on the state you live in. The most common policies are Nursing Home Only, Home Care Only and Comprehensive Policies. The Comprehensive policies are the most popular policies because they cover all types of long-term care. Contact us or email for information on the policies we have available.

Group Policies
With a group insurance policy you are not the policyholder. The contract is between the entity that set the plan up and the insurance company. This could be your employer, an association or maybe a consumer group. The insurance company and the policyholder can cancel the policy, or alter it without your permission. Usually there is little flexibility in the benefits provided. Sometimes the group plans are designed without inflation protection, limited benefit periods, and long elimination periods. Unfortunately, people mistakenly assume that because the group insurance premiums are cheaper they are a better buy. In many cases an individual policy can be a better buy for you and NOT necessarily more expensive.

Endorsed Group Policies
These policies are essentially an Individual policy offered through an endorsing group or organization. The organization researches a variety of companies and comes up with the one that they feel should be offered to their members, thus they are endorsing a particular plan. With this type of plan the policy follows the guidelines listed above for Individual Policies. An example of this type of plan is for members of The Retired Officer’s Association (TROA). Members of this organization who are interested in long term care insurance are referred to the endorsed plan by General Electric Capital Assurance. Then the individual and representatives of the company get together to design benefits.

Tip: Some people choose to co-insure the cost of long-term care rather than insuring for the full amount. For example: if they know that nursing homes are running about $140 in their area they may choose to only purchase $110 to $120 daily benefit. This helps keep the premiums affordable.

Home Care Daily Benefit
With most policies the home care daily benefit is determined by the percentage of the nursing home daily benefit you choose. For example, the most common choices are 50% and 100%. If you purchased $140 as your daily benefit and 50% as your home care option you could receive $140 a day for nursing home care and $70 per day for home care.

Tip: If home care is important to you, we highly recommend choosing the 100% home care option. If you are single you need to be realistic as to how likely it is that you could remain at home. It may be wiser to put your premium into purchasing richer benefits in a Nursing Home Only policy that covers assisted living.

Benefit Period
This is the length of time that your policy will pay you benefits. The most common range of benefits available today are anywhere from 2 years to unlimited benefits. Some policies pay benefits on a reimbursement model and others pay on an indemnity model.

The most common is the reimbursement model. Here is how it works: the benefit period and daily benefit are multiplied. This is called a "pool of money" and gives you a single lifetime maximum number of dollars, rather than days. For example if you purchased $100 per day and a three year plan (1,095 days) your "pool of money" would be $109,500. ($100 x 1,095= $109,500). $109,500 would be your single lifetime maximum and those dollars would be available until you used them all. Therefore, a three year plan could actually last longer if you did not use the full $100 per day.

An indemnity plan on the other hand does not have a "pool of money" because when you need long-term care, the policy pays the entire daily or weekly amount versus only reimbursing you for your expenses.

Tip: We have listed some of the statistics on the average length of time people need long-term care in our LTC Overview. However, what if you are not the "average"? We recommend purchasing as long of a benefit period as you can comfortably afford.

Inflation Protection
LTC Insurance is something that you purchase with the thought that you will use it in the future. In the future the costs of long-term care will be greater than they are now. The increase in nursing home care costs (and other types of long-term care) historically has surpassed the increase in the Consumer Price Index. That is why it is imperative that you purchase an inflation protection option with your policy. With this option, your daily benefit will grow every year so that when you need to access your benefits they will have kept up with the cost of long-term care. There are several options available. The most common are an annual increase of 5% simple or 5% compound. Several policies allow you to increase your daily benefit amount every three to four years by purchasing additional coverage at your current age without proving insurability. Please contact us and we can advise you on which option would be the best for you.

Tip: Please note that with the 5% simple and 5% compound options the increase is applied to your benefits, NOT your premium. The cost for the inflation benefit is already built into the premium you are paying.

Elimination Period / Waiting Period
With your other types of insurance you have deductibles that you are responsible for before your policy will pay. LTC Insurance works the same way but the deductible is known as an elimination or a waiting period. This is the time period after the onset of a loss, such as entering a nursing home or needing home care, during which benefits are not paid. After you meet your elimination period, your policy will begin paying benefits. Some common elimination periods are 20, 30, 60, 90, and 100 days. Generally speaking, the longer the elimination period, the lower the premium, all other considerations being equal.

Tip: You might want to look at the shorter elimination periods as the difference in premium is not significant, but in the future the difference of your out-of-pocket cost when you pay the deductible will be!

Benefit Triggers
Before your LTC policy pays benefits you have to qualify for a benefit trigger. The benefit triggers vary between tax-qualified and non-tax qualified policies, and also vary between companies.

Tax-Qualified Benefit Triggers
The benefit triggers in tax-qualified policies are required to meet criteria mandated by the Health Insurance Portability and Accountability Act. As part of the benefit trigger, all tax-qualified policies require a certification from a medical practitioner that your care is expected to last at least 90 days. In addition to this you must also need help with either of the two benefit triggers listed below:

You need help with at least two of at least 5, (most companies have 6), of the activities of daily living: bathing, dressing, continence, eating, toileting, and transferring.

OR

You need supervision due to a severe cognitive impairment (to the point that you are a threat to yourself or others).

Non-Qualified Benefit Triggers
Not all carriers offer non-tax qualified policies. Non-tax qualified policies do not require a 90 day certification. These policies vary greatly amongst carriers. Some of the non-tax qualified policies also have medical necessity as a trigger.

Tip: Do not make a decision on which policy to purchase based on the benefit triggers alone! There are other major differences between tax-qualified and non-tax qualified policies! Contact us for additional information on the differences!

Discounts
Most LTC companies offer spousal discounts anywhere from 10-25%. Some policies will offer these discounts even if one spouse is declined, to domestic partners, and even siblings living together.

LTC companies also offer preferred discounts between 10-20%. Each company has different criteria that you must meet to qualify.

Tip: In order to take advantage of the preferred discounts it is better to apply when you are younger. You are more likely to get the preferred discount and then in the future if your health condition changes you will get to keep the preferred discount! This will result in a considerable savings to you.

Premium Payment Options
You can pay your premiums annually, quarterly, semi-annually and monthly. Some people pay for their premiums out of their monthly income. Some people don't have much discretionary monthly income so they pay for their premiums by using interest off of their savings accounts. Contact us for recommendations and additional information on the features of LTC Insurance.

Tip: Try to pay your premiums annually as you will save money. If you pay anything less than annual there is usually an additional service charge.

Who Should Not Purchase LTC Insurance?
LTC Insurance is not appropriate for everybody. Experts recommend that you should only consider LTC Insurance if your assets, excluding your home and car (if you are married), are more than $50,000 and if your annual income is more than $25,000. If your assets and income are less than that you are probably eligible (or close to being eligible) for Medicaid. However, keep in mind that in most states Medicaid will not pay for home care. That is why even though some people are eligible for Medicaid they still purchase LTC Insurance. Many times children will pitch in and pay the premiums for mom and dad to ensure that they will get quality care and not have to rely on Medicaid.