All individual policies covering long term care services in New York State must be guaranteed renewable. Guaranteed renewable means that you have the right to continue the policy as long as the premiums are paid on a timely basis. An insurer cannot terminate the policy if your health declines. The insurer also cannot make any change in any provision of the policy while the insurance is in force without your agreement. However, an insurer can change the premium. An insurer cannot change the premium charged for the policy unless it receives the approval of the Department and it applies to all members of a class covered by the policy. All policies covering long term care services place certain limits on benefits and may exclude certain benefits completely. In choosing a policy that will best meet your own personal needs, it is important to understand the limitations and benefit exclusions which are contained in these policies. The most common exclusions and limits that are used in insurance policies covering long term care services are described below: Maximum Policy Benefit: The maximum policy benefit is the period of time or dollar amount limit for which long term care benefits will be paid under the policy. Insurance policies covering long term care services contain maximums of from one to ten years, lifetime benefits, or a dollar amount limit. Most of the maximum policy benefits with dollar amount limits are calculated by multiplying the number of years of benefits chosen, times 365 days, times the daily benefit amount chosen. Once the benefit limit or time limit is reached under these policies, no other benefits will be paid for your continuous need for long term care services. It is important to note that in some long term care policies the maximum policy benefit is not the same for all benefits listed in the policy. For example, some nursing home and home care policies have separate maximum benefits for nursing home and home care. Certain policies also contain a separate benefit limit for each particular period of care (generally successive days of care in a nursing home or while receiving home care without a break in the care for a period of time specified in the policy). Elimination or Waiting Period: The elimination or waiting period is the number of days you must receive long term care services before benefits will be paid under the policy. During the elimination or waiting period you will have to privately pay for the care you receive. A new elimination or waiting period may be imposed for each period of care. Shorter periods increase the cost of coverage. Different policies count elimination periods differently, so please review the policy language carefully. Some policies may require you receive formal long term care services each day in order for the day to count towards the elimination period. Preexisting Condition Limitation: A preexisting condition is a condition for which medical advice was given or treatment was recommended by, or received from, a licensed health care provider within six months before the effective date of coverage of the insured person. Some of the policies covering long term care services contain a preexisting condition limitation. This limitation is the period of time after you buy the policy that benefits will NOT be payable for care related to the preexisting condition. Some policies apply preexisting condition limitations only for medical conditions that are not disclosed on the application. Therefore, it is very important that you answer all questions on the application as completely as possible. Policies covering long term care services may not contain a preexisting condition limitation of more than six months after the effective date of coverage. Policy Exclusions: Specific exclusions are listed in all long term care policies. Some of the more common exclusions in policies covering long term care services are:
Daily Benefit Amount: Most of the policies covering long term care services currently being sold do not cover the full charge for a nursing facility or home health agency. Each indemnity policy limits payment to a daily benefit amount, which is the dollar amount payable per day based on the type of care being provided. Any charges above the daily benefit amount must be paid by you. Many indemnity policies cover provider charges up to the daily benefit amount.
If you have purchased health insurance, you likely understand that you are guaranteed coverage. Health care reform law allows you to buy health insurance regardless of having a pre-existing medical condition. Long term care insurance (LTCI) does not fall under that rule. LTCI carriers assess the risk that an applicant will likely live with a condition that may impact their ability to function independently later. If you have a pre-existing condition, a LTCI carrier will take that into consideration when making a decision. There are certain conditions you may be declined coverage for with long term care insurance. Some of these reasons are if you are currently needing help with any of the 6 activities of daily living (ADL), use a walker, have Alzheimer’s, certain forms of cancers, or Parkinson’s Disease, among other things. There are also more common illnesses that, if occurring in combination with others, would make a person ineligible for coverage. For example, an applicant with diabetes in combination with an increased height to weight ratio, or tobacco use, not only has two diseases to manage, but these combined increase the risk of being chronically ill. An applicant’s height to weight ratio or their use of tobacco almost always has a direct effect on other medical conditions increasing the possibility of becoming “chronically ill,” and therefore would be declined. You may be thinking, “There is no chance I can get coverage!” Don’t count yourself out just yet. Every carrier looks at health information a bit different, just because one may not grant you coverage, another may consider you. The key is to apply with your best bet first, as a large portion of insurance companies will not consider you if another company has already declined your request for coverage. That is why we recommend speaking to our consumer specialists about your specific needs, health, and situation. Request information today and see if you qualify for long term care insurance. LTC Consumer is an independent, free online service to help consumers understand what long term care insurance is, how it works, and how to evaluate coverage options. Our mission is to provide an educational, no-pressure resource for learning about long term care planning, with the opportunity to speak with specialists who can help them. It might be hard to imagine now, but chances are you’ll need some help taking care of yourself later in life. The big question is: How will you pay for it? Buying long-term care insurance is one way to prepare. Long-term care refers to a host of services that aren’t covered by regular health insurance. This includes assistance with routine daily activities, like bathing, dressing or getting in and out of bed. A long-term care insurance policy helps cover the costs of that care when you have a chronic medical condition, a disability or a disorder such as Alzheimer’s disease. Most policies will reimburse you for care given in a variety of places, such as:
Considering long-term care costs is an important part of any long-range financial plan, especially in your 50s and beyond. Waiting until you need care to buy coverage isn't an option. You won't qualify for long-term care insurance if you already have a debilitating condition, and long-term care insurance carriers won’t approve most applicants over the age of 75. The majority of people with long-term care insurance buy it in their mid-50s to mid-60s. Whether long-term care insurance is the right choice depends on your situation and preferences. Before you shop for coverage, it’s important to learn more about the following topics: Nearly 70% of 65-year-old people will need long-term care services or support, according to 2020 data from the Administration for Community Living, part of the U.S. Department of Health and Human Services. Women typically need care for an average of 3.7 years, while men require it for 2.2 years. Regular health insurance doesn’t cover long-term care. And Medicare won't come to the rescue, either; it covers short nursing home stays or limited amounts of home health care when you require skilled nursing or rehab only. It doesn't pay for custodial care, which includes supervision and help with day-to-day tasks. If you don’t have insurance to cover long-term care, you’ll have to pay for it yourself in most states. You can get help through Medicaid, the federal and state health insurance program for those with low incomes, but only after you’ve exhausted most of your savings. Starting in 2025, Washington state will provide long-term care insurance to eligible residents, funded by a payroll tax that begins in 2022. Washington workers may opt out of the program if they buy a private long-term care insurance policy before November 1, 2021. Visit the WA Cares Fund website for more information. People buy long-term care insurance for two reasons: 1. To protect savings. Long-term care costs can deplete a retirement nest egg quickly. The median cost of care in a semiprivate nursing home room is $93,072 a year, according to Genworth’s 2020 Cost of Care Survey.
2. To give you more choices for care. The more money you can spend, the better the quality of care you can get. If you have to rely on Medicaid, your choices will be limited to the nursing homes that accept payments from the government program. Medicaid doesn't pay for assisted living in many states. Buying long-term care insurance might not be affordable if you have a low income and little savings. The National Association of Insurance Commissioners says some experts recommend spending no more than 5% of your income on a long-term care policy. The number of insurance companies selling long-term care insurance has plummeted since 2000. Slightly more than 100 insurers were selling policies in 2004, according to 2020 data from the National Association of Insurance Commissioners. About a dozen are selling policies today. The uncertain cost of paying future claims as well as low interest rates since the 2008 recession led to the mass exodus from the market. Low interest rates hurt because insurers invest the premiums their customers pay and rely on the returns to make money. The market is continuing to change. Genworth, one of the largest remaining carriers, suspended sales of individual long-term care insurance through agents and brokers in March 2019. The company sells policies to groups and directly to individual consumers through its own sales department. To buy a long-term care insurance policy, you fill out an application and answer health questions. The insurer may ask to see medical records and interview you by phone or face to face. You choose the amount of coverage you want. The policies usually cap the amount paid out per day and the amount paid during your lifetime. Once you're approved for coverage and the policy is issued, you begin paying premiums. Under most long-term care policies, you're eligible for benefits when you can’t do at least two out of six “activities of daily living,” called ADLs, on your own or you suffer from dementia or other cognitive impairment. The activities of daily living are:
When you need care and want to make a claim, the insurance company will review medical documents from your doctor and may send a nurse to do an evaluation. Before approving a claim, the insurer must approve your plan of care. Under most policies, you'll have to pay for long-term care services out of pocket for a certain amount of time, such as 30, 60 or 90 days, before the insurer starts reimbursing you for any care. This is called the "elimination period." The policy starts paying out after you’re eligible for benefits and usually after you receive paid care for that period. Most policies pay up to a daily limit for care until you reach the lifetime maximum. Some companies offer a shared care option for couples when both spouses buy policies. This lets you share the total amount of coverage, so you can draw from your spouse’s pool of benefits if you reach the limit on your policy. The rates you pay depend on a variety of things, including:
A single 55-year-old man in good health buying new coverage can expect to pay an average of $1,700 a year for a long-term care policy with an initial pool of benefits of $164,000, according to the 2020 price index from the American Association for Long-Term Care Insurance. Those benefits compound annually at 3% to total $386,500 at age 85. For the same policy, a single 55-year-old woman can expect to pay an average of $2,675 a year. The average combined premiums for a 55-year-old couple, each buying that amount of coverage, are $3,050 a year. A caveat: The price could go up after you buy a policy; prices aren't guaranteed to stay the same over your lifetime. Many policyholders saw spikes in their rates in the past several years after insurance companies asked state regulators for permission to hike premiums. They were able to justify rate increases because the cost of claims overall were higher than they had projected. Regulators approved the rate increases because they wanted to make sure the insurance companies would have enough money to continue paying claims. Long-term care insurance can have some tax advantages if you itemize deductions, especially as you get older. Federal and some state tax codes let you count part or all of long-term care insurance premiums as medical expenses, which are tax deductible if they meet a certain threshold. The limits for the amount of premiums you can deduct increase with your age.
Only premiums for tax-qualified long-term care insurance policies count as medical expenses. Such policies must meet certain federal standards and be labeled as tax-qualified. Ask your insurance company whether a policy is tax-qualified if you’re not sure. You can buy directly from an insurance company or through an agent. You might also be able to buy a long-term care policy at work. Some employers offer the opportunity to purchase coverage from their brokers at group rates. Usually when you buy coverage this way, you’ll have to answer some health questions, but it could be easier to qualify than if you buy it on your own. Get quotes from several companies for the same coverage to compare prices. That holds true even if you’re offered a deal at work; despite the group discount, you might find better rates elsewhere. The American Association for Long-Term Care Insurance advises working with an experienced long-term care insurance agent who can sell products from at least three carriers. In its 2019 price comparison, the association found that rates varied widely among insurers. Most states have “partnership” programs with long-term care insurance companies to encourage people to plan for long-term care. Here’s how it works: The insurers agree to offer policies that meet certain quality standards, such as providing cost-of-living adjustments for benefits to protect against inflation. In return for buying a “partnership policy,” you can protect more of your assets if you use up all the long-term care benefits and then want help through Medicaid. Normally in most states, for instance, a single person would have to spend down assets to $2,000 to be eligible for Medicaid. If you have a partnership long-term care plan, you can qualify for Medicaid sooner. In most states, you can keep a dollar that you would normally have had to spend to qualify for Medicaid for every dollar your long-term care insurance paid out. To find out whether your state has a long-term care partnership program, check with your state’s insurance department. As you make a long-range financial plan, the potential cost of long-term care is one of the important things you’ll want to consider. Talk to a financial advisor about whether buying long-term care insurance is the best option for you. |
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