Loren White Senior Insurance Market Examiner. 1-877-310-6560 (804) 371-9691 BUREAU OF INSURANCE STATE CORPORATION COMMISSION COMMONWEALTH OF VIRGINIA 1300 EAST MAIN STREET (23219) P.O. BOX 1157 (23218) RICHMOND, VA. Are There Any Risk You Haven’t Already Insured?.
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BUREAU OF INSURANCE
STATE CORPORATION COMMISSION
COMMONWEALTH OF VIRGINIA
1300 EAST MAIN STREET (23219)
P.O. BOX 1157 (23218)
Most people invest in many forms of insurance but neglect the most important—long term care.
This graphic illustrates that without a plan to pay for long term care, you’ve left a hole in the wall of protection surrounding your finances.
Long Term Care is the greatest uninsured financial risk for older people.
--The Labor Department
* Insurance is an important tool for protecting yourself against risk.
A person may need this care if they suffer
(such as Alzheimer’s disease)
Long-term care is different from traditional medical care. It helps one live as he or she is now; it may not help to improve or correct medical problems.
Long-term care is a relatively new type of insurance introduced in the 1980s as nursing home insurance.
*Private insurance companies offer individual or group long-term care policies that provide benefits for a range of services not covered by your health insurance, Medicare, or Medicare supplement insurance.
*You can buy an individual policy from an agent or through the mail.
* You can buy a group policy through an employer or through membership in an association.
As of July 2000, Long-term care became available to state employees, retirees, and certain family members.
Family and Friends as Caregivers
Pay Out of Your Pocket for Care
Medicaid - “Spend Down” to Poverty Level
Purchase a Long-Term Care Policy
** See page 27 of the Shopper’s Guide to Long-Term Care Insurance for premium examples. **
Daily Benefit Amount - How much is your daily benefit amount going to be? Benefits range from $50 to over $250 a day. It is important to know that in Virginia the average nursing home cost is $153 a day and approximately $56,000 a year.
Age – How old are you at the time of purchase? The younger you are the cheaper it will be.
Benefit Period – How many years of coverage should you buy? 3 year, 5 year, or even lifetime.
Elimination Period - How long before your benefits begin? 30, 60, or 90 days. Sometimes this is referred to as your elimination or deductible period. The number of days at the beginning of a claim you agree to cover yourself before benefits begin.
Inflation Period - How are your going to be protected against future inflation? Purchase an inflation protection rider, if age 70 or younger.
Most LTC policies use a trigger to determine when benefits are payable under the provisions of the policy. Following are the most common benefit triggers.
Activities of Daily Living (ADLs) - payment of policy’s benefits is triggered by the loss of a specified number of activities of daily living most commonly the loss of 2 or more ADLs. The basic ADLs are defined as bathing, dressing, eating, transferring, toileting, and continence.
Impairment of Cognitive Ability - payment can be triggered by an individual’s inability to maintain self awareness of time and place.
Doctor’s Certification - regardless of the benefit trigger, the policies may require certification by a physician before the policy will begin benefit payments.
Daily Benefit amount: Supplement to your income.
Elimination or waiting period: How long can you afford to pay the full cost of care?
Number of years of coverage: What’s realistic?
Inflation protection: 5% rider or provision for adding to coverage.
Pooled benefits for couple.
1. There can be no requirement for a prior hospital or skilled nursing home stay as a trigger for benefits.
2. All pre-existing conditions must be covered after six months.
3. Policies must be guaranteed renewable or noncancelable.
4. Inflation protection coverage must be offered.
5. After age 65, no attained age rating is allowed.
6. Policies must provide benefits for a minimum of 12 months.
7. Policies may not use waivers or riders to exclude coverage for pre-existing conditions.
8. Policies cannot require that home health care be provided by an RN or LPN.
9. All policies must have a 30 day “free-look” provision.
10. No policy may exclude or limit benefits based on Alzheimer’s disease, senility, dementia, organic brain disorder, or
other similar diagnoses.
11. An option for an insured to designate an individual to receive a notice of policy lapse or termination.
12. Rate revisions must be approved by the Bureau prior to implementation.
13. No new waiting period for pre-existing conditions when replacing policies.
You should know that a federal law, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, gives some federal income tax advantages to people who buy certain long-term care insurance policies. These policies are called Tax-Qualified Long-Term Care Insurance Contracts, or simply Qualified Contracts.
***See page 13***
If you bought a long-term care insurance policy before January 1, 1997, that policy is probably qualified. HIPAA allowed these policies to be “grandfathered”.
An average policy providing a $100 a day benefit for 4 years for care delivered in a nursing home or at home, 20 day elimination period; and 5% compound inflation protection:
At age 40 - $649
At age 50 - $881
At age 65 - $1,802
At age 79 $5,895
** See page 27**
Virginia’s Long-term Care (LTC) Partnership is a public private venture designated to encourage and reward Virginians for planning ahead for future long-term care needs.
Partnerships are an alliance between the private insurance industry and state government to help Virginians plan for future long-term care needs.
For every dollar that a LTC Partnership insurance policy pays out in benefits, a dollar of personal assets can be protected (disregarded during the eligibility review) if the individual chooses to apply for Medicaid.
You should NOT buy Long-Term Care Insurance if:
You can’t afford the premiums
You have limited assets
Your only source of income is a Social Security benefit or
Supplemental Security Income (SSI)
You often have trouble paying for utilities, food, medicine, or other
You should CONSIDER buying Long-Term Care Insurance if:
You have significant assets and income
You want to protect some of your assets and income
You want to pay for your own care
You want to stay independent of the support of others
Determine the motivation and/or need for long-term care insurance by asking certain questions.
Do I have enough income to pay my own way without insurance?
Is it reasonable to spend my own money, deplete my assets and then be eligible to apply for Medicaid?
Is there any reason to preserve my assets for heirs or are there no heirs?
Would I prefer to make a long-term care decision now rather than to leave such for my family?
Do I have enough income to pay a portion of the nursing home costs and then rely on a small long-term care policy for the remainder?
Have I bought enough LTC insurance? Buying too little means only delaying the time when assets will need to be used anyway!
Once the reason for long-term care insurance is ascertained, then it is important to be careful to select features which are appropriate for you. Consider these facts as follows:
Don’t buy a $100 a day policy if you only need $50 per day.
Remember that nursing home costs increase yearly. Remember, too, that there are charges in the nursing home besides room and board. Supplies, medications, linens, and hairdressing are extra.
The younger you buy, the better!
Medical necessity clauses may be important. Most people are institutionalized at the custodial level first which is essentially non-medical.
Consider your very long-term care goals. Most people who enter a skilled facility, for instance, eventually go home.
Remember that only 22-30% of population over 65 ever use a nursing home for an extended length of time, i.e., several months or more.
The large majority of people over 65 cannot afford long-term care insurance anyway because of their fixed and limited incomes. If purchasing such insurance straps the budget, it should not be considered. Remember, the odds are on your side - approximately half of all people who reach age 65 will use a nursing home, but only 17 to 22 percent will ever use a nursing home for long-term care (meaning more than 90 days) stay.
Dealing with agents
Do not submit to high pressure.
Do not rely on the information orally submitted by the agent. Read the policy and all solicitation material yourself.
If you are dissatisfied, return your policy to the company, not the agent.
Always make checks, not cash, payable to the insurance company, not the agent.
Compare several policies before buying and READ THE SMALL PRINT.
Get the agent’s name, address and telephone number. Be sure the insurance company’s product is approved for sale in Virginia, contact the Bureau of Insurance.
YOUR BEST POLICY