Loren WhiteSenior 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? • Have you insured your home? • Have you insured your car? • Do you have medical insurance? • Do you have a plan to pay for long-term care expenses?
Walls of Protection 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
What is Long-Term Care?(LTC) * Insurance is an important tool for protecting yourself against risk. A person may need this care if they suffer from: prolonged illnesses disabilities, or cognitive impairment (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.
What is Long-Term Care Insurance? 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.
What are your Options for Long-Term Care? Family and Friends as Caregivers Pay Out of Your Pocket for Care Medicaid - “Spend Down” to Poverty Level Purchase a Long-Term Care Policy
Common Assumptions • Medicare will cover all of my long-term care expenses. • When Medicare payments end, I can rely on Medicaid. • I’ll give away my assets and become eligible for Medicaid.
Where Can I Get Long-Term Care Services? • Your Home • Assisted-Living Facility • Adult Day Care Facility • Nursing Home
Costs of Long-Term Care Insurance • Variables: • How many years of coverage • Daily benefit • Length of elimination period • Inflation protection • Non-forfeiture benefit ** See page 27 of the Shopper’s Guide to Long-Term Care Insurance for premium examples. **
Factors Affecting Premiums 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.
Eligibility for Benefits 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.
Create your own policy 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.
Requirements for Long-Term Care Insurance Policies Issued in Virginia 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.
Requirements for Long-Term Care Insurance Policies Issued in Virginiacontinued… 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.
Health Insurance Portability and Accountability Act (HIPAA) 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”.
What Does Long-Term Care Insurance Cost? 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**
Choosing a Company • Large companies with experience in long-term care and/or life insurance. • Good ratings with independent rating companies (page 33, Shopper’s Guide) • Compare 2 or more policies or outlines of coverage. Use chart on page 29 of Shopper’sGuide to compare policies. • Use the 30-day free-look period to review policy carefully.
Who Will Need The Care ? • By 2030, when the last of the Baby Boomers are retiring, the number of people age 60 and older will have doubled to 70 million. By 2025 there will be 2 million Virginians in this age range.
What are your Long-Term Care experiences? • Who? • 60% of people who may need long-term care are 65 or older. • Who provided the care? • Among 22.4 million families in the United States, nearly one forth of all households provide care to elderly relatives.
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.
A Shopper’s Guide To • Long-Term Care Insurance
Is Long-Term Care Insurance Right For You? 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 important needs 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 Pg. 7
Tips for Buying Insurance 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!
Tips for Buying Insurance 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.
Tips for Buying Insurance 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.
KNOWLEDGE IS YOUR BEST POLICY