Tag Archives: Inflation Protection

Home Health Care – Another Option for Your Long-Term Care Needs

Home Health Care – Another Option for Your Long-Term Care Needs

You’ve decided that the purchase of a long-term care policy for yourself and your spouse would be advisable.   The figures, however, are daunting and the premiums exceed your budget.  If you are considering the idea of long-term care insurance, the option to receive necessary assistance in your own home may be more preferable to living in a nursing home.  Because the vast majority of the middle aged and senior population are in favor of this option, the insurance industry has responded.

The assisted living and home health care industry is growing along with the desire to receive care in your own home.  Most long-term care insurance providers are now offering the consumer the opportunity to purchase insurance that provides coverage for community health services and home health care at much lower rates than a full blown long-term care policy.

For example, using the guidelines of one “A” rated provider, full coverage for a 55-year old married couple, both in good health, with a $150.00 per day policy featuring inflation protection and a 30-day waiting period, would require an annual premium of about $2600.00.

The same provider also offers a policy covering home health care and community care coverage for an annual premium of just under $1,000.00, a considerable savings over the full coverage policy, while still offering protection for the most commonly required assistance.

While some policies will restrict the care to be offered by licensed providers, there are policies now available which also offer coverage for services performed by non-licensed personnel, allowing the opportunity for care to be provided by people known to the policyholder, such as a family friend or a neighbor.  This raises the comfort level of the care provided, since allowing strangers into their home is something of which most seniors are wary.

In order to prevent fraud or abuse of the coverage, family is excluded from providing services in most cases, unless the family member happens to be a licensed provider.

As the baby boomer population ages, and home health services are seeing increased effectiveness and popularity, the purchase of this type of coverage can be an affordable, attractive alternative to the more traditional long-term care insurance.

Federal Legislation Allows States to Develop Long-Term Care Partnership Programs

Federal Legislation Allows States to Develop Long-Term Care Partnership Programs

President Bush signed the Deficit Reduction Act of 2005 into law on February 8, 2006. Among other issues, this legislation offers all states more latitude in the way they operate Medicaid programs. One of the most significant changes, as outlined in Section 6021 of the law, allows states to develop Long-Term Care Partnership programs. These programs permit individuals who have exhausted their private long-term care insurance to access Medicaid without the same means-testing requirements as other applicants. Any state that wants to develop such a partnership program must meet the extensive federal requirements outlined in the provisions. Private long-term care insurance policies are also subject to stringent requirements in order for the insured to be eligible for the program.

The first long-term care insurance partnership programs were developed in the 1980s to encourage people to buy private long-term care insurance instead of relying solely on Medicaid. The original programs were only permitted in California, Connecticut, Indiana, and New York and were designed to allow anyone who had bought a qualifying long-term care policy and used up their benefits, to retain a designated amount of assets and still qualify for Medicaid as long as they met all other eligibility criteria.

Under the Deficit Reduction Act, private long-term care policies must meet even more criteria than before, including federal tax-qualification, and having certain consumer protection and inflation provisions. Inflation protection is a major qualifying criterion under the current law. Purchasers of long-term care policies that are under the age of 61 must have a policy with compound annual inflation protection.  

When an individual purchases a long-term care policy, they are usually offered a choice of inflation protection riders. One is the simple inflation rider. In this instance, the policy’s original benefit amount is increased by a defined percentage (usually 3-5%) on an annual basis. Another option is the compound inflation rider.  In this case, the benefit amount is increased annual by a defined percentage of the current benefit amount, not the original benefit amount.  Compound inflation protection provides a rapid increase in the benefit amount, providing a larger pool for the insured to draw from. Although a 5 percent increase is what most insurance companies typically offer for compound inflation protection, the Deficit Reduction Act lets the individual states decide on the applicable percentage rate.  

Long-term care insurance purchasers between the ages of 61 and 75 must also have some level of inflation protection. However, the law has not defined what that level should be. The Deficit Reduction Act also mandates the U.S. Department of Health and Human Services to develop a reciprocity agreement that enables purchasers of private long-term care insurance to use their benefits in other partnership states.

Be sure to speak with an advisor to discuss your long-term care needs and whether your state offers a Long-Term Care Partnership program.

Home Care Equals One-Third of All Long-Term Care Claims Paid in 2006

Home Care Equals One-Third of All Long-Term Care Claims Paid in 2006

A recent American Association for Long-Term Care Insurance study revealed that total long-term care insurance claims rose to $3.3 billion for 2006.1 This figure represents the highest amount of benefit payments to Americans for a one-year period ever.

Of the total, 34 percent of the insurance benefit payments made by eight of the nation’s largest insurers covered home care expenses. Additionally, 30 percent of benefits paid were for assisted living costs and the remainder, 36 percent, was allocated toward nursing home care. The largest single claim paid to date was more than $875,000. In fact, the largest claims paid by leading insurers ranged from well over $350,000 to one approaching $900,000.

The data also revealed that approximately eight million Americans now own long-term care insurance obtained individually or through their employer. The researchers concluded that the increasing amount of benefits paid to policyholders is proof of the growing need for long-term care insurance.

To encourage more consumers to buy long-term care insurance, The National Association of Insurance Commissioners has developed the following consumer guidelines to help you select the right policy:

·   The policy should cover at least one year of nursing home or home health care, including intermediate and custodial care. Nursing home or home health care benefits should not be limited primarily to skilled care.

·   The policy should also provide coverage for Alzheimer’s disease if the policyholder develops it after purchasing the policy.

·   Inflation protection is critically important. The policy should offer a choice between:

o   Automatically increasing the initial benefit level on an annual basis.

o   A guaranteed right to increase benefit levels periodically without providing evidence of insurability.

·   Your insurer should offer you a coverage summary that describes the policy’s benefits, limitations, and exclusions, and also allows you to compare it with others. They should also provide a long-term care insurance shopper’s guide that helps you decide whether long-term care insurance is appropriate for you.

·   There should be a guarantee that the policy cannot be canceled, non-renewed, or otherwise terminated because you get older or suffer deterioration in physical or mental health.

·   The insurer should permit you to return the policy within 30 days of purchasing to receive a full premium refund.

·   No requirements should exist that policyholders:

o   First be hospitalized in order to receive nursing home benefits or home health care benefits

o   First receive skilled nursing home care before receiving intermediate or custodial nursing home care

o   First receive nursing home care before receiving benefits for home health care

1 2007 LTCi Sourcebook published by the American Association for Long-Term Care Insurance