Long-term Care Insurance: In Case of a Prolonged Illness or Injury
While none of us likes the idea of being a burden to our families, often we don't make plans ahead of time to avoid such a situation. This is due to a reluctance to invest money now toward comfort and care we may or may not need in the future.
But as baby boomers discover the considerable resources it takes to care for their infirm parents and other loved ones, the business of long-term care insurance is growing. These policies cover major expenses such as in-home healthcare, assisted living facilities, and nursing homes for those who are ill for long periods of time—regardless of age.
With the price of nursing home care averaging at more than $70,000 a year in most places, and as the cost of supplies and the wages of home health workers rise, long-term care plans can seem appealing. Because these policies haven't been on the scene long enough to be evaluated on a large scale, you'll want to take great care before purchasing a plan. Check your calculations and carefully consider the future reliability of the company administering the policy. Even better, consult with an insurance agent you trust before signing on. You want to feel safe that the company will be in business when you need it.
Here are some of the basics of long-term care insurance.
Where to Buy It
The US government and some other employers make long-term health insurance an optional benefit, requiring employees to pay all or part of the premium. But most people buy this type of insurance from major insurance companies, generally through an insurance agent. While it is currently possible to find "discount" car insurance and other types of insurance for which there is great competition, long-term care insurance is not yet at that point, and you'll want to proceed carefully and remain skeptical of deals that seem too good to be true.
What It Covers
Long-term care insurance policies vary a great deal from one to the next. However, during the past few years state insurance commissioners and other government agencies have made strengthening long-term care insurance rules a priority; they have issued licensing guidelines and regulations to encourage insurers to offer coverage that’s uniform, and to protect consumers who buy it.
These policies generally pay for the help you may need during a prolonged period of disability due to physical or cognitive impairments, such as convalescence from a stroke or Alzheimer's disease . This may include standard home care, adult day care, nursing homes, assisted living, and management services that help monitor and arrange for care. The plans may also cover adult day care and "respite" care when your regular caregivers need time away.
The insurance usually covers both "skilled" and "unskilled" care. Skilled care refers to health professionals—doctors, nurses, licensed therapists, etc. “Unskilled” care generally refers to untrained individuals hired to help with dressing, eating, going to the toilet, and other activities of daily living (also known as ADLs).
Policies can be specific about what they cover. The ADLs most insurers list are bathing, continence, dressing, eating, toileting, and transferring, and most don't start payment until the patient is limited in several capacities.
What It Doesn't Cover
Most policies don't cover mental disorders other than dementia. They will not cover addictions or disabilities caused by acts of war or self-inflicted injuries.
Some insurers won't offer private policies to high-risk individuals who are more likely to need long-term care at some point than the average person. Patients with chronic diseases or unhealthy lifestyles may find it more difficult to obtain coverage. With some effort, however, many of these patients can find coverage if they are willing to pay a higher premium.
Additionally, insurers may sell long-term care policies to older people with health problems, but they will initially withhold coverage for any pre-existing conditions during a period ranging from 90 days to six months.
Many group policies through employers have no restrictions on who is eligible for coverage.
Long-term health insurance premiums can cost from a few hundred dollars to several thousand dollars a year. Like any other kind of insurance, the cost of a long-term health policy depends on how much coverage you buy and what stage of life you buy it in. Logically, the premiums are less expensive when you are younger because the underlying assumption is you'll pay for them longer.
Generally, insurers put a dollar and a time limit on what they will cover. Some, for example, will pay $100 a day for five years in a nursing home. Others will pay perhaps $250 a day for a longer period of time. Often they will pay less for other types of care, and most have a maximum amount they will pay in a lifetime.
Most states require that plans be renewable—meaning when the premium expires, you can buy another plan. Under this regulation, if you become ill and have paid your premiums, a company cannot shut you off because it appears you will need reimbursement for services in the future. Nor can they charge you more because you have become ill.
However, your fees will go up when rates are raised across the board. There is no such thing as long-term health insurance that remains the same over the course of a lifetime, as in the case of some life insurance policies. When it’s time to renew your long-term heath policy, you can bet on an increase in rates.
If you never need to use your policy, some plans will return a portion of your accumulated premiums to your beneficiaries. These plans cost more to begin with. Also, some plans give you the option of decreasing your coverage if the policy becomes considerably more expensive over time.
Questions to Ask Before Purchasing a Plan
When signing a legal document such as a long-term care policy, it’s a good idea to have an insurance expert look it over. But there are always things to look for and questions to ask. Some of the details to consider are:
- What conditions are required so that the company won't cancel the policy?—Two conditions are always required to maintain your policy: you must answer all questions about your health truthfully, and you must pay your premiums on time. If either of these conditions are not met, the company can cancel your policy.
- What health conditions aren't covered?
- What does the policy pay for?
- Is there a waiver of premium?—This waiver means you won't have to pay the monthly premium when the insurance is paying for your care.
- Does the policy pay more as prices increase?—Policies that have this feature may cost more.
- What is the waiting period, if any, before the insurance company begins paying?
- Do you get money back if you don't use the policy or cancel?
- Which facilities are covered?—Some plans are specific.
- What will the policy mean for your taxes?—Generally, the government does not permit health insurance payments to be taxed, and depending on how much you spend on medical care each year, your premiums can reduce what you pay in taxes. Check with your accountant or other qualified person.
- How is the insurance company rated?—There are many services that look into the finances of insurance companies. Some are online. Your local librarians can help you find them.
- Are you already covered for some kinds of care under another policy or plan?—Compare what you have with what you are buying and try not to duplicate coverage.
Where to Go for Help
The law is quite clear on certain aspects of long-term care insurance. There is always a period of time during which you can change your mind after you agree to buy the insurance. And insurers may not refuse to pay benefits because of information found in your medical record after you file a claim. Every state has rules for insurers, methods for filing complaints, and an office to help consumers. Check with your state’s department or division of insurance; you can find their contact information through the National Association of Insurance Commissioners.
America's Health Insurance Plans
National Association of Insurance Commissioners
Guide to long-term care insurance. America's Health Insurance Plans website. Available at: http://www.ahip.org/content/default.aspx?bc=41|329|450 . Accessed April 26, 2008.
A Report by the Superintendent of Insurance to Gov. George E. Pataki and the Legislature on The Implementation of Legislation Permitting Approval of Certain Long Term Care Health Insurance Plans by Gregory V. Serio, Superintendent, Dec. 31. 2003. State of New York Insurance Department website. Available at: http://www.ins.state.ny.us/acrobat/ltcrpt03.pdf. Published December 2003. Accessed April 26, 2006.
A shopper's guide to long-term care insurance. National Association of Insurance Commissioners website. Available at: http://www.ltcfeds.com/about/resource_library/documents/NAIC_Shoppers_Guide.pdf . Accessed April 26, 2006.
Last reviewed June 2008 by Rosalyn Carson-DeWitt, MD
Please be aware that this information is provided to supplement the care provided by your physician. It is neither intended nor implied to be a substitute for professional medical advice. CALL YOUR HEALTHCARE PROVIDER IMMEDIATELY IF YOU THINK YOU MAY HAVE A MEDICAL EMERGENCY. Always seek the advice of your physician or other qualified health provider prior to starting any new treatment or with any questions you may have regarding a medical condition.
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