Long Term Care Insurance

Long Term Care Basics
Long Term Claim Tips
Internet Resources
Ombudsman Resource Center download pdf (158K)
Aged, Frail and Denied Care by Their Insurers

Long Term Care Insurance Basics

In November 2003, Consumer Reports reviewed 47 long term care insurance policies in California, and concluded:

...for most people, long-term-care insurance is too risky and too expensive. As with health insurance, you must keep paying to keep it in force. If premiums rise, you may have to drop the coverage, possibly losing everything that you've paid. The policy's benefits may cover only a portion of the total expense. Many policies are packed with catches that can keep you from collecting. Finally, there's no guarantee that long-term-care insurers, some of which have weak balance sheets, will be around 20, 30, or 40 years from now when you need them to pay.

This is discouraging because California offers what Bonnie Burns of California Health Advocates, calls the "gold standard for long term care insurance." It is highly regulated and a high quality product compared with most other states. But Burns adds that "that doesn't mean we don't have a long way to go. The right buyer can find a good product, but that's only half the problem."

Larry Ginsburg, a Certified Financial Planner and insurance agent in Oakland, CA says it's important to make sure you buy from a reputable company with a strong history of paying claims and a strong balance sheet. He notes, however, even that can't protect you fully. As with mortgages, companies often sell blocks of long term care policies to other companies, so you can't anticipate who will actually insure you.

San Francisco policyholder advocate and attorney Alice Wolfson worries that long term care insurers have underreserved their long term care products. That is, for many years, companies sold policies too cheaply in order to attract customers and gain a share of the long term care market. Once this customer population ages, she says, insurers will face large claims payouts and premiums will be raised dramatically. Some of this has already begun to occur with long term care policies.

The same scenario in disability insurance led some insurers to cut corners paying claims in order to make up the shortfall. Nevertheless, all parties quoted above believe that there can be benefits to long term care insurance.

Tax Qualified Policies

As a result of the federal Health Insurance Portability and Accountability Act of 1996, some insurance companies now offer "qualified policies." Premiums for qualified policies are deductible on federal taxes if they exceed 7.5 percent of adjusted gross income. State tax policies vary.

Generally, qualified policies offer the same benefits as non-qualified long-term care policies, but the eligibility requirements may differ. For example, the insured must be chronically ill or unable to perform at least two activities of daily living, such as bathing or dressing, in order to receive benefits. All policies sold prior to January 1, 1997 are qualified.

For more information about qualified policies:

• Contact a trusted and reputable insurance agent, attorney, accountant or financial planner.
• Most state websites offer detailed comparisons of qualified and non-qualified policies— such as:  New York and California
• The New York Life Insurance website offers a very thorough explanation.

Partnership Project

In four states—California, Connecticut, Indiana, and New York—you can buy a "partnership" plan that protects some or all of your assets from being depleted before you become eligible for Medicaid (Medi-Cal in California). This plan is targeted to the middle-income market.

Partnership insurance policies, identified by their unique program logo, must include, at minimum:

• 3 years of all levels of nursing home coverage,
• 6 years of home care, or
• a combination of nursing home and home care coverage (2 home care days= 1 nursing home day), and
• 5% inflation protection compounded annually, and
• 100-day elimination (or deductible) period, and
• lifetime level premiums; and
• no non-forfeiture benefit.

A Three-State Comparison

Long term care insurance policies and the degree to which they are regulated vary from state to state. So we have provided a comparison of three states—California, Florida, and New York—in order to give some idea of the range. Keep in mind that there may be higher standards than those stated here for tax-qualified policies.
click here for more details

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Long Term Care Claim Tips

1. Protect against post-claim underwriting

In all three example states, an insurer of long term care services cannot post-claims underwrite. This means that, if an insurer fails to ask you questions about your health BEFORE you get coverage, they cannot ask you the health questions AFTER you are accepted and use the information to rescind your policy.

It is important to understand, however, that even though an insurer cannot post-claim underwrite, the insurer may have the right to deny benefits or rescind the policy if the applicant lies or does not include all relevant medical information that the insurer requests on the application. (When an insurer "rescinds" a policy, the premiums paid by the policyholder are returned and the insurer acts as if the policy was never in effect.)

Therefore, protect yourself against this when you apply for the policy. Make sure the information you provide in your application is true. And later, when and if you file a claim, be sure you have a good explanation if you answered any of the application questions incorrectly. Often, an inconsistency between your application and your medical history is because you misunderstood a question on an application, or, your agent miscommunicated its meaning, or, you did not know, at the time you filled out or signed to the truth of your answers that you had a condition that would have required a different answer. None of those qualify as fraud.

2. Read your policy, ask questions.

There are many facets to long term care insurance policies, but insurance regulations in all three example states provide reasonable safeguards to make sure that policy details are clearly described. So read your policy, ask questions, and know what our policy covers before you need to know. Which sources of care are eligible for insurance reimbursement? What are the "triggers" that make you eligible for coverage? How much of a waiting period (elimination period) will there be before coverage kicks in? What is the maximum benefit (in dollars and/or in time)? What is the daily benefit? Is there a new waiting period required each NEW time you use long term care? If so, how much time must pass between periods of care in order to activate a new waiting period?

3. Be polite but assertive if a claim problem arises and get help.

Insurance companies are profit-driven corporations. If you or someone you know faces an unfair long term care claim decision or denial, and is not physically or mentally up to fighting back, get help. Seek assistance from family or another healthy, able person who is in a position to negotiate with the insurance company. If the insurance company is still reluctant to pay, don't be intimidated—get help, and make sure there is no post-claim underwriting involved. If informal dispute resolution efforts fail, file a complaint the insurance regulator in your state and seek help. Sources of help include elder law and policyholder attorneys, and advocates employed by non-profit organizations. And again, review your policy before you need it, so you are not left uninformed when you are the most vulnerable.

4. Make sure you know claim-filing requirements.

Check your long term care policy to find out the deadline for filing a claim and how frequently you need to verify disability in order to get benefits. Knowing the rules is critical in getting your claim paid. Failing to adhere to the rules can give an insurer an excuse for denying your claim.

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Long Term Care Insurance Internet Resources

Long term care insurance is a relatively new product (less than 20 years old) and most consumers still know little about it. Generally, it provides some combination of coverage for nursing home, assisted living, and home care. Some of these are covered by Medicaid, but only after other assets are depleted. Therefore, one's income and asset level is an essential factor in deciding whether it's a wise investment. But there are reasonable arguments on both sides regarding whether it's a good product for anyone at all, and UP thinks the jury is "still out."

It is difficult to get educated about long term care products for a number of reasons:

• Aging and the possibility of needing long term care is an emotional issue that many people would simply rather avoid than understand.
• The industry is still in a state of flux, with new products and regulations appearing regularly.
• Regulations vary from state to state.
• There is so much information out there from so many different sources, it is difficult to know what information can be trusted.

In seeking long term care information on the internet, it is critical to be able to identify who is sponsoring the website. If the sponsor isn't clearly identifying itself, it probably has something to hide. Very often a website will purport to provide "consumer information," but when you dig below the surface, you find it is sponsored or supported by insurance companies or sales agents.

To this end, we have segregated Internet resources into three categories:

1. Government
2. Commercial (insurance industry or other commercial interest)
3. Other—i.e., private non-profit/legal services/media

It is easy to see how sites with insurance industry sponsors would provide biased information. But this might be less obvious: the US federal government has embarked on a concerted campaign to encourage consumers to buy long term care insurance in order to minimize dependence on public funding. (See description of Long-Term Care Consumer Awareness Campaign Project below.) In fact, tax incentives have been established for this purpose.   Therefore, one cannot assume that federal government website information is impartial. State agency sites, such as the one sponsored by the California Department of Insurance are not part of the campaign.

GOVERNMENT or GOVERNMENT-RELATED SITES

COMMERCIALLY SPONSORED SITES

OTHER SITES (private non-profit/legal services/media)

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United Policyholders is a non-profit organization founded in 1991 and dedicated to educating the public on insurance issues and consumer rights. UP publishes educational materials and serves as a resource for individual and business policyholders and residents of communities with insurance problems. UP’s Amicus Project provides information to courts of law to support policyholders’ legal rights. UP unites policyholders and their advocates by sharing information. Write to UP at 110 Pacific Ave., PMB 262, San Francisco, CA. 94111, call us at (510) 763-9740, or visit our website at www.unitedpolicyholders.org.

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The information presented in this Site is for general informational purposes, and should not be taken as legal advice. If you have a specific legal issue or problem, United Policyholders recommends that you consult with an attorney. United Policyholders does not sell insurance or certify, endorse or warrant insurance products or vendors. United Policyholders is not a referral service.