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Greenhaven Marketing
Po Box 98
Anoka, MN 55303
Phone:
763-421-1193
Toll Free:
1-800-227-4936

Is Long-Term Care Insurance Appropriate For You
or a Family Member? 

Q. Who could benefit from purchasing long-term care insurance?
A. The need for long-term care can happen at any time, not just as you age. If you are single, it is less likely that unpaid care by family members will be readily available. Long-term care insurance can help you obtain and pay for the services that you require.

If you are married or live in a multi-member household and you and your partner age together, your day-to-day functions may decline at the same rate. If your adult children live in another location or if your care needs are greater than a family can provide, you may require paid assistance. Also, if certain chronic conditions run in your family – the kind that require some type of daily assistance – long-term care insurance might be important for you to consider.

If you don’t have a specific policy designated as
long-term care insurance (called “Nursing Home and
Home Care Insurance” in some states) you usually are not covered for long-term care expenses. 

Q. What is the right age to purchase long-term care insurance?
A. In general, long-term care insurance can provide coverage for anyone 18 years of age and older. The younger you are when you buy long-term care insurance, the greater the chance that your health will be good and you’ll be insurable. Generally, the younger you are, the lower your annual premiums will cost per year.

Q. Is there anyone who should not purchase long-term care insurance?
A. It is important to be able to afford the premiums, not only now, but in the future. If you are on a fixed income or if you have limited savings, the premiums may be too difficult to pay over the long run. In this situation, you may want to look closely at your needs and resources and perhaps talk with a family member or financial advisor to decide if this is the right purchase for you.

What About The Cost Of A Long-Term Care Insurance Policy?

Q. What is the cost of a long-term care insurance policy based on?
A. The cost of a policy is based on such factors as:

• Your age at the time the policy was purchased

• The type of the policy purchased (a “basic” policy may cost less than one      compared to one from the same company that offers more features)

• The amount of the daily/monthly benefit you have purchased

• The number of “extras” such as riders or options you may choose to purchase within a particular benefit level

• The amount of time the daily/monthly benefit will be paid

• The elimination period or “waiting period,” which are the days you must        pay for your care out-of-pocket

Every insurer offers different long-term care insurance
policies, but don’t shop by price alone. The lowest cost
policy might not be the best choice for you or your family.

How To Select A Policy

Q. What decisions do I need to make?
A. If you decide to purchase a policy, it’s important to ask the following questions to help decide which options will be the most appropriate choice for your situation.

1. Should I choose a Comprehensive or Facilities-Only plan?

2. What Daily Benefit Amount should I select?
3. What Benefit Period should I choose?
4. How long should the Elimination Period be?
5. How can I protect myself against the rising cost of care?

1. Comprehensive Plan
Comprehensive plans help pay for care received in the home as well as care received in facilities. A comprehensive plan covers long-term care services in a nursing home, assisted living or residential care facility, hospice care in a facility, and respite services in a facility. It also covers home care, adult day care, hospice care and respite care services at home. The ability to receive benefits for home care may allow the care recipient to live independently in their home instead of living in a long-term care facility.

Facilities-Only Plan^c
This plan covers long-term care services provided in a nursing home, assisted living facility or a hospice facility.^d Facilities-only plans do not cover home care but are typically less expensive than comprehensive plans.

2. Daily Benefit Amount (DBA)
Policies offer a benefit in the form of a “Daily Benefit Amount.” The DBA may be either the maximum or the actual amount the insurance policy will pay per day for covered services.

^cFacilities only policies may not be offered or sold in Vermont.
^dLong-term care facilities may be known by different names in various states.

Some policies offer benefits that are paid on a weekly or monthly basis. It’s important to know what the rules are for any policy that you might consider purchasing.

3. Benefit Period
This is defined as the amount of time you wish to receive a DBA. This period can range from two to 10 years or an unlimited amount of time.

4. Elimination Period
To keep the cost of your premiums lower, most policies become payable only after a period of time called an “elimination period” or a “waiting period,” which is similar to a deductible. These terms generally mean the same thing. This is the period of time during which you must be eligible for benefits (and in certain types of polices you must also be receiving covered services) before your insurance benefits become payable. During this time you will generally continue to pay premiums.

Policies with a short or no elimination period are usually more expensive than policies with an extended elimination period. Some companies require that you meet the prescribed elimination period only once in your lifetime. Others require you to meet the prescribed elimination period each time you need long-term care services. Policies may provide different methods for calculating elimination period requirements when you receive home health care.

There are a number of options available to help keep pace
with the future cost of care. Before you purchase a policy, be
sure you understand the benefits and options offered with the policy that you are considering

 5. How Can I Protect Myself Against the Rising Cost of Care?
There are four options that may help you protect yourself against the increased costs of care in the future.

A. Automatic Compound Inflation Option
Automatic inflation protection helps keep pace with the future cost of care. This annual increase is based on your compounded DBA. It’s important to note that not all policies offer the option of automatic inflation increases. Choosing an Automatic Compound Inflation Option will result in a higher DBA than the Automatic Simple Inflation option.

 B. Automatic Simple Inflation Option

The annual increase, for the life of the coverage, is based on the DBA originally purchased.

Selecting either of these options at the time of purchase will result in initially higher premiums, but they will also provide
 an “automatic” yearly increase in benefits without an increase in premium — typically five percent each year.

Source: Planning for Long-Term Care, United Seniors Health Council, McGraw
Hill, 2000;  ISBN: 0071398481 Used with Written Permission

C. Periodic Inflation Protection
The premium that you pay when the insurance is purchased pays for the daily benefit amount you initially choose. Opportunities are offered periodically to increase coverage usually without having to provide evidence of good health. 15

In some policies, these offers are only given to people who have not declined a certain number of increase offers. Your premium will increase based on your age at the time each inflation offer is accepted, but it will only increase for the current additional benefit you purchase.

D. Future Purchase Option (FPO)
This option also offers protection against increases in long-term care costs. It increases your DBA and the remaining amount of your Maximum Lifetime Benefit every few years at an extra cost, as long as you are not eligible for benefits and you don’t decline the increase.

In some policies, once you have declined a certain number of increases that have been offered to you, you will not receive other increase offers unless you specifically request an increase in your DBA and pass the insurance company’s underwriting requirements.

Q. How much coverage is right for me?
A. The cost of care varies throughout the country so when selecting a Daily Benefit Amount it’s important for you to buy sufficient coverage that will pay for care where you expect to receive it. Costs for home care, nursing homes and assisted living facilities vary widely, depending on the region. The Area Agency on Aging may be able to provide current cost figures for you. See page 3 for national average costs.

You should also consider whether or not you wish to purchase inflation or benefit increase option, and what amount, if any,
you are able or willing to self-insure.

What About Different Types Of Policies and Coverage?

Q. What is the difference between “Reimbursement,” “Indemnity,” and “Disability” type policies?
A. A reimbursement policy, also known as an “expense-incurred policy,” is the most common type of policy currently purchased. To prove benefit eligibility you are required to meet the ADL or severe cognitive impairment benefit triggers as indicated in your policy. You will receive benefits only when eligible services are received; benefits are paid directly to you or to the provider. This type of coverage pays for the expense incurred or up to your policy’s monetary limit, whichever is less.

Unlike a reimbursement (expense-incurred) policy, benefits paid by an indemnity policy are a set dollar amount. Benefit eligibility is generally the same as for a reimbursement policy. When eligibility is established and you are receiving covered long-term care services, the insurance company will pay the pre-determined daily benefit amount indicated in your policy on days you receive a covered service.

 
A disability type policy will pay a flat dollar amount on any day that you are determined to be eligible to receive benefits. Under this plan, provider bills are not needed, and the insurer will often pay out monthly the fixed amount you selected, regardless of whether services have been received to who provides them.

Q. What is a “Tax Qualified” policy?
A. Policies that are tax qualified meet certain standards as set forth in the Health Insurance Portability and Accountability Act, commonly referred to as “HIPAA,” which Congress passed in 1996. HIPAA ensures that benefits paid from policies that meet its standards are not considered taxable income and that qualified premiums may be deductible as medical expenses if certain thresholds are met. Almost half of all states offer tax incentives for long-term care insurance premiums.

Q. What are “Partnership Programs?”
A. There are four states that currently have Partnership Programs: California, Connecticut, Indiana, and New York. The Partnership Programs are joint efforts by state governments and the private long-term care insurance industry to create an option to help individuals plan to meet their future long-term care needs without depleting all of their assets to pay for care.8

Features of the Partnership Program generally vary by state but function in a similar way. If someone purchases state approved Partnership long-term care insurance, and the benefits under that insurance coverage are exhausted, the individual may apply for Medicaid (called “Medi-Cal” in California) coverage. The person may retain all or a portion of the assets he or she would otherwise have to “spend down” if Partnership long-term care insurance had not been purchased. The individual will then, however, generally have to contribute any income to the cost of any long-term care services provided under Medicaid. Consult the Partnership Program in your state for further information about how these partnership programs operate.

 The Essentials 3  u

The Essentials 1   |  The Essentials 2   |  The Essentials 3