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31 Cards in this Set
- Front
- Back
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Long-term care insurance |
-introduced in 1970s, promises to pay expenses if insured is unable to engage in certain day-to-day activities. Requiring that someone provide care, either at home or in an institution such as a nursing home. -LT care benefits are offered on both an individual and group basis. -LTC market developed initially through individual product route, but group LTC insurance is increasingly playing an important role. |
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Defining LTC insurance |
-previously associated with nursing home care but is now much more broad in coverage NY State Ins Dept defines LTC as follows: -LTC refers to a broad range of supportive medical, personal, &social services needed by ppl unable to meet basic living needs for an extended period of time b/c of accident, illness, or frailty. -LTC involves receiving assistance from other ppl to perform the essential Activities of Daily Living (ADLs) when these tasks can no longer be performed independently. ADL assistance may be provided at home by formal (paid) caregivers, such as home health aids, by informal (unpaid) caregivers, such as family members or friends, or in a nursing home. |
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3 reasons to consider LTC insurance |
1. high risk, 40% of elderly population will spend time in nursing facility 2. high cost, depending on location, some areas cost can exceed $100K / yr 3. your cost, those needing LTC will use up all of their savings w/i 1 yr. |
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Medicaid option |
-provider of last resort for the poor -based on each states resource & income standards, cannot have more than $2K countable assets to apply (not counted: HH goods, jewelry, car, furniture, clothing). Not more than $500-700K in home equity depending on state. Countable assets: savings, CDs, MM, real estate, stocks, bonds, &other investments |
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Provisions applicable to Medicaid recipients |
-Property transferred to individuals, charities or a trust w/i 60 mos of application for Medicaid is considered as owned by the applicant &must be disclosed. Applicants must provide 5 yrs worth of financial records to satisfy the "look back" period, regardless of whether transfers were made to a trust or to others. -State Medicaid programs are required to attempt to recover any Medicaid payments from the estates of recipients. |
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LTC coverage |
-60% over 75 will spend time in nursing home -cost / day can be $125-300 -usually paid in fixed amt and triggered by insured's inability to perform essential activities of daily living. |
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Nursing Home Care |
3 levels: 1. Skilled nursing care-highest level care & requires greatest expertise. 24-hr care ordered by dr &provided by RN, LPN or licensed therapist 2. intermediate nursing care-similar to skilled nursing care but patient doesn't need 24-hr care. Non-continuous skilled nursing care. 3. custodial care-basic level of nursing care. Needs assistance w/ daily activities. Staff are non-medical personnel. |
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Activities of Daily Living (ADLs) |
Most policies agree to pay if insured is unable to perform activities w/o assistance. Typical policy requires that 2 out of 5-6 activities cannot be performed. List of ADLs: Eating, Bathing, Dressing, Walking, Toileting, Continence, Transferring, &Taking medicine. -Clause for those who can perform but can't be safely left alone. Cognitive Impairment Clause permits benefits for those who cannot safely perform ADLs. |
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Community Care |
provide benefit payments for those insured who require assistance but who can remain in their homes or communities. The benefits, usually stated as a percentage (such as 50 percent of the full nursing home benefit) are available for a variety of programs and services. |
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Types of Community care |
-home health care -adult day care -respite care -hospice care -therapeutic devices -assisted living facilities (ALF) -Continuing Care Centers (CCCs) |
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Home Health care |
-skilled nursing care, PT, related professional services, as well as assistance w/ ADL -typically provided on part time basis -may include payment to family members |
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Adult day care |
-might be available in LT care facility or community program -individuals receive assistance w/ ADLs and benefit from socialization |
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Respite Care |
-provides temp relief for family members, providing care in individual's home. -relief may be placing patient in LT care facility for the weekend or having someone care for them in his/her home. |
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Hospice Care |
-providing care and emotional support after someone has been diagnosed with a terminal illness. -can be in facility or at the person's home |
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Therapeutic Devices |
-equipment to help that the person remain in their community |
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Assisted Living Facilities (ALFs) |
-provide supervision, assistance, & limited health services to relatively healthy seniors. -less medical care than nursing homes but more care than common living arrangements -they complement, rather than, substitute for nursing care |
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Continuing Care Centers (CCCs) |
-also called life care centers, provide a range of sensitive living arrangements & services -reflect each person's level of needed care and assistance -typically not covered by LTC ins, but individuals purchase the right to live and receive support in the center. |
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Benefit Provisions |
-LTCI policies outline what will be payable by the insurer if an insured event occurs. -provisions relate to types &levels of care for which benefits will be provided, any prerequisite for benefit eligibility, &the level of benefits which are payable. -no policy guarantees to cover all LTCI expenses; always certain limits and/or “cost-sharing” amts insured incurs. -90% of all nursing home confinements last less than 5 yrs. 5 yrs is a suitable selection if premium is w/i budget |
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Elimination Period |
-(waiting) periods before benefits become payable. Range from 0-365 days. Longer waiting period warrants a lower premium, all other provisions remaining the same. |
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Daily benefits |
Buyer is usually offered a choice from a schedule of maximum daily benefits and length of benefit periods. A typical LTC policy might offer the buyer a daily benefit schedule of: -$140 per day -increasing in $10 increments -to a maximum of $400 per day |
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Benefits period |
-In the past, policies paid daily benefit for a period up to benefit period chosen at policy issuance. But now, improved feature is a max lifetime approach to defining benefit payments is common. -In this way, the benefit period can extend beyond 4 years by using services costing less than $100 per day. This pool of money concept is becoming more popular than traditional specified daily limit with policies sold today due to the flexibility it affords. |
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Inflation protection |
-majority of LTC policies offer some kind of inflation protection for added premium, designed to ensure that benefit amt increases w/cost of living -inflation rider is the most expensive rider Many companies offer options such as: -Increasing the benefit amount by 5% of the original amount per year. -Increasing the benefit amount by 5% compounded annually. -Adjusting benefit amt annually according to increases in a price index |
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Contract Provisions |
-premiums are determined by applicant's age, gender, medical condition, history, & benefits provided. 3 basic components: elimination period, benefit period, and amount of daily benefit. -When selecting co for LTCI, ask how long they've been offering LTCI policies. If >10 yrs experience, co's actuaries will have better info on claims experience, &can design a more accurate premium. Be wary of companies w/ first LTCI product &unusually low premiums. |
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Waiver of Premium |
-annual premium differs greatly from one LTC policy to another, depends on age at issue, waiting period, benefits and other policy features. Insurer financial stability &economies of scale impact premiums as with all insurance products. -Nearly all LTC policies provide for a waiver of premium, usually after 60, 90, or 180 days of confinement or days of benefits paid. |
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Renewability |
-all individually issued LTCI are guaranteed renewable. -insurer reserves right to revise rates on a class basis (must apply same rate hike for the whole class) -insurer can only refuse to renew or cancel if premiums are unpaid -most are guaranteed renewable for life -insurers in some state required to offer non-forfeiture benefits, carry higher premiums. Typical options include right to cease premium pmts, take reduced paid-up policy that provides benefits for a shorter period, or receive a partial refund of premiums |
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Coverage limitations |
-Common exclusions: war, self-inflicted injuries &chemical or alcohol dependency. -may also exclude coverage for mental illness that is not organically based. -In the past, policies did not cover senile dementia, Alzheimer's disease or Parkinson's disease. Virtually all LTC policies now cover these conditions &all other mental illnesses that can be demonstrated as organically based. |
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Regulations |
-NAIC (National Association of Insurance Commissioners) wrote model legislation that has been adopted in many states. -LTC Insurance Model Act specifies min standards products must meet to be considered LTC insurance. -as with all insurance products, regulated at state level &financial planner will need to read specific provisions relating to where the client is located. |
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Long-Term Care Insurance Model Act |
Includes the following major provisions: 1. Insurers must provide an outline of coverage &summarize features of policy. 2. contain following min standards: -individual policy-owners must have a 30-day "free-look" period (policy can be canceled & premiums returned for any reason) -Waivers denying coverage for specific health conditions are prohibited. -Insurers may not offer substantially greater benefits for skilled nursing care than for intermediate or custodial care. -Insurers must have a min loss ratio of 60% on their LTCI policies.Policies must be guaranteed renewable, although state ins commissioners may allow cancellation under limited circumstances. -Coverage for Alzheimer’s disease must be included. -Inflation-protection option must be offered. -Policies must be incontestable for misrepresentation after 2 years. -Policies may not be cancelled for non-payment of premium w/o insurer providing 30-day written warning sent to the insured &person designated by the insured. (to avoid a mentally impaired forgetting to pay premium.) |
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Key elements in choosing LT care policy |
Financial Strength Average daily benefit Inflation protection Comprehensive coverage Claims Stable premiums |
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Tax Treatment |
To be tax-qualified, a policy must: -Be guaranteed renewable -Not provide a cash value for any reason other than upon full surrender or death of insured -Other than at full surrender or death, any dividends or refund may only be used to reduce future premiums or increase future benefits. -Generally, policies must not pay for services that would be covered by Medicare, unless Medicare is specified as a secondary payer. |
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Tax Treatment cont'd |
-In general, benefits received are excluded from taxable income. Insurers must report to the IRS amount of enefits paid out to recipient. -Benefits paid by per diem-based policies to individuals are tax-free up to $380/day in 2015, & not taxable income as long as benefit payments above $380 per day do not exceed the actual cost of care for indemnity policies. This amount is indexed for inflation. -Out-of-pocket spending for LTC services qualify as medical expense deductions subject to standard limitation of 7.5% of AGI (adjusted gross income). -Expenditures for LTCI premiums that cover taxpayer, spouse &dependents also qualify as medical deductions to extent that total medical expenses, including LTC premium, exceeds 7.5% of AGI. However, there are limits on the premium deduction based on the taxpayer's age. -Self-employed individuals who are sole proprietors can deduct 100% of their premiums from their income and&there is no 7.5% of AGI requirement. -ER contributions to an EE's LTC premium are excluded from EE's income. Consequently, EE cannot take an income tax deduction for premiums paid. -ER can deduct premiums paid for LTC coverage for EEs as an ordinary &necessary business expense. LTC coverage cannot be offered as part of an ERss cafeteria plan. |
