Long Term Care Insurance
The State of Utah, Department of Human Services, Division of Aging and Adult Services, Health Insurance Information Program, is committed to making available as much information as possible to ensure beneficiaries make informed choices about their health insurance.
The Health Insurance Information Program does not determine eligibility for, or administer any of the services mentioned in this web site. Please contact the appropriate agencies directly for your individual determination of eligibility and services.
We are living longer and the insurance industry is acknowledging the changing requirements of the public for Long Term Care by developing innovative insurance products to meet the needs of people requiring long term care.
If you do not find the information you need from this web site, please contact us directly at our toll free number: 1-800-541-7735
General Information Included on this Web Page
- Long Term Care Costs
- Long Term Care Insurance Policies
- Long Term Care Insurance Policy Benefits
- Choosing a Long Term Care Insurance Policy
Long Term Care Costs
Not many older adults can afford the cost of Long Term Care for very long.- he cost of a year in a nursing home varies from $25,000 to $50,000 or more.
- By the year 2001, the average annual family income for an elderly household is estimated to be $19,566.
- The number of frail elderly will probably double within the next 15 years and the need for long-term care goes up as one gets older. It is estimated that over 25 percent of those people who live to age 65 will eventually need some kind of long-term care. About one-half of those will stay less than 90 days.
- Medicare Payment for Long Term Care
- Medicare payments are based on skilled nursing care following an approved hospital stay, provided the patient meets other stringent criteria.
- Even if the patient is qualified, Medicare pays only 20 days in full and 80 more days in part. Part A pays for all covered services for the first 20 days and in part for the 21st through the 100th day.
- Medicaid Payment for Long Term Care
- Medicaid is the government program now covering the bulk of nursing home costs. It is designed to subsidize financially the individual who cannot afford the cost of the nursing home.
- Privately Funded
- All nursing home expenses are paid out-of-pocket by individuals and their families.
- Life Insurance with Accelerated Death Benefits
Life insurance with accelerated death benefits is life insurance which allows policyholders to obtain some or all of the benefits prior to death under certain circumstances.Accelerated death benefits are usually offered in the form of policy riders, which are special provisions that can be added to policies to expand the benefits otherwise payable.
Four Types or Conditions under which accelerated benefit payments are made:
- Terminal Illness - The insured is diagnosed by one or more doctors that death is expected within a specified period.
- Long-Term Care - The insured is covered for home health care expenses, as well as for confinement in a long-term care facility. (This type of rider/policy meets the statutory definition of long-term care insurance.)
- Dread Disease - The insured becomes ill from a specific disease named in the policy, (e.g., stroke or life-threatening cancer), which, in the absence of extensive or extraordinary medical treatment, would result in a drastically limited life span. Some policies cover major organ transplants.
- Confinement to a nursing home - The insured is permanently confined to a nursing home and is usually expected to live less than 6 months. Some companies use less than 12 months to live.
Remember, this is a life insurance product with a long-term care benefit. This is not a health insurance product.
- Private Long Term Care Insurance
- Long-term care insurance is generally defined as any policy or certificate advertised, marketed, offered, or designed to provide coverage for not less than 12 consecutive months for each covered person on an expense incurred services, provided in a setting other than an acute care unit of a hospital.
- Long-term care insurance is usually a modified indemnity type which pays up to a maximum daily fixed dollar amount, (i.e., $50 per day).
Long Term Care Insurance Policies
Advantages- Could pay substantially if insured meets policy requirements.
- Usually not limited to coverage in "Medicare-certified" facilities.
- Usually does not limit coverage to "Medicare-approved" stays or levels of care.
- Most have waiver of premium, (premium waived once beneficiary has been in the nursing home for a few months).
- Usually cover skilled, intermediate levels of care, and in Utah, must cover custodial levels of care, (with restrictions).
- Premiums could be tax deductible.
- May cover additional home health and adult day care, (with restrictions).
- Must cover Alzheimer’s disease, or any other mental or nervous disorder of organic origin.
- Generally, do not keep pace with inflation, (unless an inflation option is attached to the policy).
- Many companies define level of care differently; if your physician says you received "skilled care," it may not meet the policy's definition of "skilled care."
- May exclude coverage for specific conditions like mental illness and nervous disorders.
- Stringent health underwriting, which means the company can turn an individual down at application if their health is bad.
- Premiums tend to be very expensive, especially at older age.
- Most cover a stay only for a specific period of time and/or up to a specific dollar amount.
- Benefits may be taxable.
- In Utah, policies are required to cover custodial care, which is when the policyholder has lost the ability to perform certain activities of daily living such as bathing, dressing, transferring, continence, toileting, and feeding.
- Policies can not exclude Alzheimer's disease, or any other mental or nervous disorder of organic origin.
- Ability to Renew Policy and Premium:
- Policies must be guaranteed renewable in Utah. This means that the company will not cancel the plan and the plan will remain in effect as long as the insured pays the premiums on time.
- Premiums are almost never guaranteed for life. Most plans' premiums are based on the age of the person at the time of purchase and stay the same after that. All companies reserve the right to raise premiums due to inflation, if losses justify a price increase, or whenever changes in the law increase the costs to the insurance company.
- Policies must allow buyer to cancel a policy without penalty during the 30 days after receiving the policy.
- Insurance companies must notify a third person designated by the insured individual before terminating a policy for nonpayment of premium. This requirement is designed to avoid accidental lapse of coverage.
- A copy of "The Shopper's Guide to Long-Term Care Insurance" (or other shopper's guide developed or approved by the Insurance Commissioner) must be provided to all prospective applicants.
- If a policy has been in effect for six months, but less than two years, an insurer may rescind coverage for material misrepresentation on the application (make the coverage null and void as of its effective date) only if misrepresentation pertains to a condition for which benefits are sought.
- Insurers who offer Long-Term Care Insurance must offer non-forfeiture benefits to defaulting or surrendering policyholders or certificate holders in event of termination of coverage.
- Long-Term Care insurance may not exclude coverage for a loss which is the result of a preexisting condition unless such loss or confinement begins within six months following the effective date of coverage.
- The cost of long-term care insurance is determined by the options selected, the sex and age of the person at the time of issue.
- Females usually pay higher premiums because they tend to live longer.
- The younger individual pays less than an older person. A 25-year-old might buy certain policies for $8 per month, while that same policy for a 75-year-old might cost $250 - $350 per month.
- Length of the benefit payment and daily payment amounts represent the most expensive features in long-term care insurance.
- Waiver of premium, ancillary benefits such as home health and the inflation feature will also increase the cost though not as severely. The same is true of short or "0" days elimination periods.
- Only the insurance company, or their agent, can quote an exact price after the applicant has selected his/her options and features
Long Term Care Insurance Policy Benefits
Long-term care insurance is usually a modified indemnity type which pays up to a maximum daily fixed dollar amount (i.e., $50 per day).Daily benefits range from $10 per day to $150 per day. Obviously, the higher the desired daily benefit, the more costly the insurance.
Range of Benefits and Features- Length of Benefit Coverage
Most plans are purchased for a specific period of time; for example 1, 3, or 5 years. This means that the insurance company will pay its daily benefit for up to the number of years the individual chooses for any period of confinement. Some policies provide benefits for the lifetime of the insured.
- Elimination/Waiting Period
- This term applies to the number of days the individual must be in a nursing home before the Long Term Care insurance product will begin paying its benefits.
- LTC plans offer many different elimination and waiting periods to choose from.
- The elimination period amounts to the same as a deductible and must be met before the plan will pay. This is important to understand because the policy holder might have to pay, for example, the first 100 days at possibly $70 per day before the insurance company will begin paying its benefits.
- Remember that about one-half of nursing home residents stay in a nursing home less than 90 days. If a consumer buys a plan with a 100 day elimination period he/she may be out of the nursing home before the insurance company begins paying its benefits.
- Underwriting and Health Questions
- This is one of the ways companies try to control levels of risk.
- Most companies ask detailed health questions before deciding to insure the applicant. They are especially sensitive to such risks as heart problems, leukemia, rheumatoid arthritis, Alzheimer's, Parkinson's and those people already bedridden or with mental or physical disorders.
- The companies would rather decline your business than assume a bad risk.
- Waiver of Premiums
- Most companies have a "waiver of premium" feature which states that after an insured is confined under a covered nursing home benefit for a minimum number of days, no further premiums will be due while the confinement continues. Premiums will resume when the patient leaves the nursing home.
- The typical waiver of premium feature will take effect after 90 days of a covered confinement.
- Inflation Adjustment
- Due to inflation, a policy that pays a flat amount, without a provision for increase will not be sufficient to cover the same portion of the cost in 10 years.
- Utah requires companies to offer a 5 percent inflation benefit increase as a choice at application, in order to protect against the rising costs of long-term care.
- Other companies may offer the policy holder the right to purchase more daily benefits (dollars per day) in later years without regard to any changes in the health of the individual.
- Inflation adjustments can be helpful but will cause the premiums to be higher.
- Miscellaneous Benefits
- Some policies cover medications, x-rays, and physical exams while in the nursing home.
- Some policies also cover such extras as hospice, co-payments, some ambulance charges, adult day care and home health care services.
Choosing a Long Term Care Insurance Policy
Long Term Care Insurance Policy Comparison FormAlso included on this web site is a simple form designed to help you sort through the complexities of comparing up to three Long Term Care Insurance policies, and help you to determine the best policy for your needs. Long Term Care Insurance Comparison Form (pdf)
Tips for Buying Long-Term Care 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 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, i.e., a $30 per day policy.
- 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 the following:
- Don't buy a $100-per-day policy if you only need $30 per day.
- Remember that nursing home costs will increase in future years.
- Will premiums of the policy change due to increasing age?
- Consider your very long-term care goals. Most people who enter a skilled facility, for instance, eventually go home.
- Remember that one half of all people using a nursing home stay less than 90 days.
- Remember that only about 12 percent of the population over 65 ever uses 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: Premiums that are affordable now may increase to amounts you can't afford later.
- Dealing with insurance agents:
- Do not submit to high pressure tactics.
- Do not rely only on the information orally submitted by the agent. Read the policy yourself.
- If you're dissatisfied, return your policy to the company, not to the agent, unless specifically stated otherwise in the policy.
- Always pay by check, (not cash). Make checks payable to the insurance company, not to the agent.
- Compare several policies before buying and READ THE SMALL PRINT.
- Write down the agent's name, address, and telephone number.
Some states have programs, generally called "partnerships," which allow persons to purchase certain qualified long-term care insurance policies and receive full or partial protection against the normal Medicaid spend down of assets. THERE IS NOTHING IN UTAH INSURANCE CODE WHICH ADDRESSES THIS ISSUE.
There is now Federal legislation to give tax advantages for the purchase of qualified Long-Term Care Insurance. Premiums paid for Long-Term Care Insurance may be a consideration in reducing taxable income. Eligible Long-Term Care Insurance premiums means the amount paid during a taxable year for any qualified Long-Term Care Insurance contract covering an individual, to the extent such amount does not exceed the limitations determined under the following table:
| In the case of an individual who has attained the following age before the close of the taxable year: | The limitation would be: |
| 40 or less | $200 |
| More than 40 but not more than 50 | $375 |
| More than 50 but not more than 60 | $750 |
| More than 60 but not more than 70 | $2,000 |
| More than 70 | $2,500 |
The requirements for a Long-Term Care Insurance policy being a qualified plan eligible for tax advantages is very complicated and is mentioned here ONLY to make you aware of possible options.
There is also new legislation regarding tax advantages for Long-Term Care insurance premiums in Utah tax laws.
The individual desiring more information should check with the issuing insurance company to determine if a particular plan is a qualifying plan, and they should check with their tax person, the IRS or State Tax Commission for specific tax advantage information.
Do's and Don'ts in Purchasing Long Term Care InsuranceDO insist on a simple outline of the policy which describes the benefits offered. Under law, this outline must be given to a person when he or she applies for health insurance and before paying or when you receive the policy if purchased through the mail. Read it carefully, paying special attention to the title, benefits and limitations. A signed and completed copy of the application for insurance must be left with the applicant at the time of application.
DO compare the costs and benefits of plans offered by several insurance companies before buying any health insurance policy.
DO read the policy carefully. If for any reason the insured wishes to cancel the policy, he or she should return the policy to the agent or insurance company by registered mail within 30 days of receipt. ALL money must be returned to the applicant.
DO call the Utah State Insurance Department if an agent has used unfair or dishonest sales practices.
DO check with friends and relatives who have submitted claims to their insurance company to find out how the company is about paying claims.
DO complete a Long Term Care Policy Comparison Form for the plans of several companies to determine which plan is best for you.
We have included in this site, a simple form designed to help you sort through the complexities of comparing one insurance company to another. Long Term Care Policy Insurance Comparison Form (pdf)
DON'T listen to an agent who says the policy pays for everything. No such policy exists.
DON'T believe the agent who says that a policy offers coverage not listed in the outline of coverage.
DON'T be pressured into buying. Take your time to decide.
DON'T be influenced by an agent who tries to scare you into switching policies because of that company';s "rating." Call the State Insurance Department for information on the proper use of ratings and other information about insurance companies.
DON'T drop an existing insurance policy until the new policy is issued.
DON'T keep poor policies simply because you have had them a long time.
DON'T pay cash for insurance; write a check or money order payable only to the company, NOT to the agent.
DON'T buy from unsolicited door-to-door salespersons until at least checking out the agent's credentials.
DON'T buy from an agent who gives the impression that he or she is from a government agency. NO insurance agents are affiliated with any government agencies. If an agent gives you this impression, contact the state insurance commissioner, since it is an illegal practice. Utah State Insurance Department Web Site
DON'T buy or sign anything you don't understand.
Included in this site, is a simple form designed to help you sort through the complexities of comparing one insurance company to another. Long Term Care Insurance Policy Comparison Form (pdf)