[Important Note: We represent many of the leading
Long Term Care Insurance Companies but do not provide online quotes due to the
complexity of such products and legal regulations. Please call
or email us for a personalized quote and recommendations: 800.482.5347
·
Info@LeagueFinancial.com]
Preamble:
A Case
for the Need of Long Term Care Insurance ("LTCi")
Seniors, and
others, have another very serious need to protect against Long Term Care ("LTC")
Nursing Home and/or Home Care confinements and the costs that accompany them.
For many seniors
the annual cost for Nursing Home care (averaging here in CA, in 2005-2006, at
around $50,000 per year, or $140 per day) could cause them to either completely
loose or seriously deplete assets that would otherwise be used and depended upon
for retirement income.
What most do not
understand is that Medicare does NOT cover Long Term Nursing & Home Health Care
unless one is fully impoverished, and it is not at all likely that Government
will ever be able to provide the resources to cover the kind of care most
persons would want under such circumstances.
We offer Tax
Qualified and Non-Tax Qualified LTC Insurance plans, both Private and State
Sponsored, that can help you to effectively address this problem. We strongly
recommend that persons get this type of coverage as soon as possible.
Through an
affiliation with the national firm, Long Term Care Resources, we also offer many
endorsed and discounted LTC Insurance Plans for national Associations and their
Members. Please contact us for details.
Remember that
while it’s true that money pays for these coverage’s only good health actually
buys them; therefore, don’t delay your decision to obtain these types of highly
valuable insurance coverage’s.
California Medi-Cal - Resource Limits & Other Details
for - 2008
The Largest Un-Funded Liability Facing Americans Today
The Article:
Long Term Care (Nursing Home / Home
Care) & Long Term Care Insurance (LTCi) - An Overview
by Paul M. League, QFP, CFP®
Long Term Care ("LTC") refers to a broad spectrum of medical
and support services provided to persons who have lost some or all capacity to
function on their own due to chronic illness or disabling injury.
LTC services are
rendered in a setting other than the acute care center of a hospital. LTC
services are generally necessary for a long period of time since geriatric
injuries and illnesses tend to be progressive and/or overlapping. The primary
caregiver in LTC situations is not a physician, as in hospital/medical
scenarios, but someone less skilled. A Registered Nurse, Licensed Practical
Nurse, Physical, Speech, Respiratory or Occupational Therapist, nurse’s aide,
homemaker, or spouse most commonly renders Long Term Care.
The NAIC
(National Association of Insurance Commissioners), in its ‘Long Term Care
Insurance Model Act of 1986’ defined Long term Care Insurance as:
"Any insurance
policy or rider advertised, marketed, offered or designed to provide coverage
for not less than 12 consecutive months for each covered person on an expense
incurred, indemnity, pre-paid or other basis for one or more necessary or
medically necessary diagnostic, preventative, therapeutic, rehabilitative,
maintenance or personal care services, provided in a setting other than an acute
care unit of a hospital. Such term also includes the policy or rider which
provides for payment of benefits based on cognitive impairment or the loss of
functional capacity."
California’s Definition of LTC Insurance:
"Long-term care
insurance is a form of individual health insurance that has been available in
roughly its present form since the late 1980s. Originally conceived in 1974 as
an extension of Medicare’s skilled nursing benefit, it has, over the last 25
years, become a comprehensive form of coverage meant to relieve the burden of
long-term care expenses, while preserving independence, choice and economic
well-being. It has also expanded well beyond its earlier market of Medicare
eligible seniors and is now regarded as an integral part of financial and
retirement planning.
Long-term care
insurance premiums are level and are determined by the age of the client at time
of purchase. They are payable for life, or for set periods such as five or 10
years, or to a set age such as 65. The contractual form is known as Guaranteed
Renewable, which means that the insurance cannot be cancelled and premiums
cannot be raised for an individual, though they may be raised for all
policyholders if claims exceed the required regulatory level.
The number of
long-term care policies ever sold has risen from 815,000 in 1987 to 2.9 million
in 1992. But the number of policies actually in force is considerably lower,
because of the high lapse rate. Only 4 to 5 percent of elderly have some kind of
private long-term care insurance (Health Insurance Association of America,
Families USA Foundation 74).
"Long-term care
insurance" includes any insurance policy, certificate or rider advertised,
marketed, offered, solicited, or designed to provide coverage for diagnostic,
preventative, therapeutic, rehabilitative, maintenance, or personal care
services that are provided in a setting other than an acute care unit of a
hospital.
Long-term care
insurance includes all products containing any of the following benefits types:
coverage for
institutional care including care in a nursing home, convalescent facility,
extended care facility, custodial care facility, skilled nursing home, or
personal care home;
home care
coverage including home health care, personal care, homemaker services, hospice,
or respite care;
community-based
coverage including adult day care, hospice, or respite care.
Long-term care
insurance includes disability based long-term care policies but does not include
insurance designed primarily to provide Medicare supplement or major medical
expense coverage. Long-Term care policies, certificates and riders are regulated
under this. The commissioner shall review and approve individual and group
policies, certificates, riders, and outlines of coverage. Other applicable laws
and regulations shall also apply to long-term care insurance insofar as they do
not conflict with the provisions of CA Code.
Long-term care
benefits designed to provide coverage of 12 months or more that are contained in
or amended to Medicare supplement or other disability policies and certificates
are regulated under these CA Code provisions."
Whether as an
indemnifying contract paying a specified dollar benefit per day, or as an
insurance plan offering reimbursement for medical expenses and services
incurred, LTC insurance is much different from other coverage’s. Long Term Care
underwriting criteria is more concerned with the applicant’s lifestyle,
cognitive state, and ability to perform ‘Activities of Daily Living’ (ADLs) such
as bathing, dressing, eating, transferring, toileting and continence. The
underwriting intent is to screen out applicants who currently are at risk of
entering a nursing home, are cognitively impaired, or who already have ADL
dependencies.
On the medical
services side, Long Term Care requires less technical and intensive medical
expertise than services for an acute condition requiring hospitalization. The
physician plays a less prominent role and is not usually the primary source of
care. The providers of Long Term Care are usually not the same as those in the
major medical/HMO arena. When needing long term care services, the policyholder
will interact with nurses, nursing aides, rehabilitation specialists, therapists
of all kinds, homemaker service aides, nursing home administrators and social
workers.
The factors that
define which care platform is used are the Level of Nursing Care required and
the Place Where Service Is Rendered.
Levels
of Nursing Care:
Skilled
Nursing Care is the highest level, requiring the greatest professional
expertise, and is generally prescribed for the most severely impaired person who
cannot tend to his/her own needs. Skilled nursing care is 24-Hour care ordered
by a physician and provided by a Registered Nurse (RN) or Licensed Practical
Nurse (LPN).
Intermediate
Nursing Care is similar to skilled care, except the patient does not receive
or need 24-Hour attention. Thus, intermediate nursing care is skilled care
provided on a non-continuous basis.
Custodial Care
is the most basic level of nursing care. Custodial care is usually of a
non-medical nature in which the patient receives assistance with the ‘Activities
of Daily Living’ (ADLs) such as bathing, dressing, eating, transferring,
toileting and continence. Persons providing custodial care need not be
professionally trained nurses or therapists.
Place
of Service:
Long Term Care
can be rendered almost anywhere--in a skilled nursing unit of a hospital, at a
Long Term Care facility, an Alternate Care facility, in the Community, or in a
person’s home.
Long Term Care
Facilities: The most common deliverer of LTC services is the Long Term Care
facility, sometimes known as nursing home, extended care facility, convalescent
care facility, or nursing sanitarium. Depending on the services provided and the
scope of the facility’s license, these facilities usually admit those people
requiring either a constant or semi-constant skilled level of medical care.
Alternative
Living Facilities are additions to the LTC service delivery continuum. They
are generally smaller facilities that provide specialized services directed at
patients with a particular set of needs.
Congregate
housing facilities are dormitory-like settings where people live in the same
building, occupy private rooms or apartments, and share some meals. Care is
usually of a custodial nature, with emergency medical assistance readily
available.
Board and Care
Homes are living arrangements modeled after ‘halfway houses’ for recovering
alcoholics and drug addicts. In a Board and Care Home, a resident is provided
room, meals, help with ADLs, and some degree of protective supervision. They are
not usually certified by Medicaid, but are usually licensed by the state. Board
and Care Homes are sometimes known as domiciliary care homes, personal care
homes, community residence facilities, rest homes, and other similar terms.
In an
Alzheimer’s Care Center, the emphasis of care is more on supervision of the
patient and providing a safe and controlled environment. Medical disabilities in
most Alzheimer’s patients are usually less severe and disabling than for those
persons requiring confinement in a nursing home.
Home Health
Care and Community-Based Care has been considered a lower cost alternative
to LTC Facility confinement, and is becoming more popular as more providers of
this service enter the marketplace.
Since the service
comes to the patient, it can be more economical than nursing home placement and
works quite well for intermediate and custodial levels of care.
Services are
provided by a wide range of providers, from RN’s, LPN’s, therapists and nurses’
aides (CNA’s), to chore persons (HHA’s) and homemakers. Other services include
Adult Day Care, senior transportation services and "meals on wheels."
Private long term
care insurers responded to these criticisms and made substantive changes to
their products to meet the growing demands of consumers. The resulting newer
policies are more comprehensive in scope and contain less restrictive
provisions. Characteristics include:
Home health care
benefits no longer contingent upon prior confinement.
All levels of
care covered upon admission.
Elimination of
prior hospital stay.
Raising of
benefit amounts over time. (Inflation riders such as simple or compound, at a
fixed rate of interest or tied to the CPI.)
More extensive
home health care benefits such as personal or chore services.
Benefit
eligibility based on activities of daily living (ADL) dependencies versus
medically necessary.
ADLs commonly
found in policies are: Eating, Dressing, Bathing, Toileting, Transferring and
Continence.
Benefit
eligibility base on cognitive impairment.
Newer LTC
policies may also incorporate instrumental activities of daily living (IADLs) as
a benefit determination. IADLs were developed to assess the level of cognitive
as well as physical impairment and include such activities as: shopping, using
the telephone, housekeeping, doing laundry, taking medications, and managing
finances. IADLs are not as well understood as ADLs and are more difficult to
assess.
Alzheimer’s/dementia disease specifically named as covered conditions.
Removal of
separate maximums on nursing home and home health care with one overall lifetime
maximum.
REGULATORY CLIMATE:
Guided by
National Association of Insurance Commissioners (NAIC), the state focus on LTC
insurance has been primarily directed toward product design and market practice
issues. Early NAIC models were generally flexible enough to meet the needs of
the marketplace but consumer advocate pressure, mounted in the late 1980s,
prompted the NAIC to add consumer protection policy standards such as:
Prohibition on
prior hospitalization requirements.
Prohibition on
linking one level of care to another level (e.g., predicating receipt of
custodial care benefits upon prior skilled care benefit).
Minimum standards
established for home health care.
Minimum benefit
period of 1 or 2 years.
Certain
post-claim underwriting practices are forbidden. Contestability period may be
shortened from 2 years to 6 months.
Increased
supervision of agent conduct.
Standards set for
products offering long-term care tied into life insurance products.
Mandated benefit
levels.
Regulation of
rates and reserves.
There are also
LTC state ‘partnership’ initiatives funded by the Robert-Woods Johnson
foundation to pursue an alternative of public/private approaches wherein the
first couple of years of long term care are covered by a private plan.
Each partnership
state (New York, Indiana, Connecticut, and California) has created a prototype
LTC policy to encourage consumers to purchase private coverage. In this product
design, the benefits spent under the private policy shelter the policyholder’s
assets on a dollar-for-dollar basis against Medicaid spend down requirements.
The result of this ‘private sector/social insurance hybrid’ is that the State’s
Medicaid Program is not the sole source of funding for Long Term Care services
for its citizens.
TAX
QUALIFIED LONG TERM CARE
On April 23,
1996, the U.S. Senate passed the Health Insurance Portability & Accountability
Act (Kennedy-Kassenbaum Health Insurance Reform Bill) which provides favorable
tax treatment for long term care insurance, effective for tax years beginning
after December 31, 1996. This act allows for individuals who have LTC policies
to receive tax free benefits, subject to conditions, and it allows for
deductions of insurance premiums on itemized tax returns. Any LTC policy, which
was issued on December 31, 1996 and prior will be "grandfathered" to receive
favorable tax treatment ("material changes" to such a policy can cause it to
loose its "grandfathered or protected" status; however, a change in premium mode
would not be considered "material" but a change in benefits or the dollar amount
of benefits would be).
Debate continues
within the long term care industry, consumer groups and state departments of
insurance over whether or not tax qualified plans are best for the consumer. The
following briefly outlines what is different about tax qualified long term care
insurance policies.
What
is different about a Tax Qualified ("TQ") long term care insurance plan?
The government
has set forth guidelines that must be strictly followed before a policy can be
tax qualified:
Benefit Triggers-
Modified for tax qualified policies
Medical necessity
can no longer be utilized as a benefit trigger
Uses NAIC model
of 6 Activities of Daily Living – eating, toileting, transferring, bathing,
dressing, continence
Care received
must be certified by a Licensed Health Care Practitioner* (does not apply to
"grandfathered" LTC policies) as a result of (1) being unable to perform
(without substantial assistance from another individual) at least 2 Activities
of Daily Living "expected " to last for a period of 90 days** due to a loss of
functional capacity, or (2) requiring substantial supervision to protect
yourself from threats to health and safety due to severe
Cognitive
Impairment
*Any physician,
registered professional nurse, or licensed social worker. **This is not a
waiting or "elimination period".
Policy
Caps, Benefits & Tax Deductibility Issues - Per Diem or Reimbursement Policies
Tax
Advantages for Premium Payments:
Premiums paid by
individuals are deductible, subject to limitations. The amount deductible is
based on their age at the end of the year. This amount will change each year due
to inflation. The deductible limits under Section 213(d)(10) for eligible
long-term care premiums includable in the term ‘medical care’ are as follows:
|
Age at
year-end |
|
Deductible Amount - 2009 |
Deductible Amount - 2010 |
|
40 or
less |
|
$320 |
Pending |
|
41 but
not yet 51 |
|
$600 |
Pending |
|
51 but
not yet 61 |
|
$1190 |
Pending |
|
61 but
not yet 71 |
|
$3180 |
Pending |
|
71 or
0ver |
|
$3980 |
Pending |
|
Source: IRS
Revenue Procedure 2007-66 (2007-2009 limits) |
In order for an
insured to itemize their LTC premium as a tax deduction, their total medical
expenses must exceed 7.5% of their adjusted gross income.
Employers who pay
LTC premiums for their employees and self-employed individuals are also entitled
to tax advantages.
Effect on
Benefit Payments:
Effective January
1, 1997, every insurer will be required to report all benefit payments made to
the IRS. All benefit payments made to an insured that has a LTC policy which
reimburses expenses incurred (a reimbursement benefits policy)
will not be considered taxable income.
All LTC policies
which pay a "per diem"* benefit, verses a reimbursement benefit, have
guidelines set by the federal government. All "per diem" benefit payments up to
certain caps are not considered taxable income; however, any amount above the
following caps is considered as "taxable income"; however, the taxpayer may
exclude from income the "excess benefits" to the extent of the individual’s
actual un-reimbursed Tax-Qualified Long-Term Care expenses:
|
Daily
Benefit, Non-Taxable Cap |
2008 Cap |
2009 Cap |
|
|
$270 |
$280 |
(*A
pre-determined benefit amount which is payable regardless of the amount of
expenses incurred).
A Non-forfeiture Benefit
provides protection if you cancel your coverage for a period of time that it
would take to exhaust the benefits value for long term care needs.
Non-forfeiture provides limited benefits, typically based on the amount of time
you’ve had the coverage and the amount of premium payments you’ve paid.
Coordination with Medicare:
All tax qualified
policies coordinate with Medicare. This means that if Medicare pays for
services, the insured can not receive payment for the same services from their
LTC policy. Additionally, benefits from their LTC policy can be used as
"co-insurance" or to pay Medicare deductibles. It is now a federal offense to
consciously commit Medicare fraud and if convicted, the offender is subject to a
prison sentence.
California Medi-Cal - Resource Limits & Other Details for - 2009:
Spousal
Impoverishment Limits - Community Resource Allowance (CRA):
$109,560
Minimum Monthly
Maintenance Needs Allowance (MMMNA): $2,739
The
Average Private Pay Rate (APPR) for Nursing Facility Care is:
$5,698
California Partnership Policies:
The minimum Daily
Benefit for CA Partnership LTC Policies is equal to 70% of the above APPR rate,
with 70% of this amount for Residential Care & Assisted Living Benefits.
Please contact us directly for a personalized proposal and
rate quote as Long Term Care Insurance plans, whether private or through the
California Partnership for Long Term Care, are too complex to be discussed and
quoted over the Internet: 800.482.5347.
Disclaimer: The material discussed herein
is meant for general illustration or informational purposes only and is
not to be construed as financial advice. Although the information has been gathered from sources believed to
be reliable, it is not guaranteed. Please note that individual situations
can vary; therefore, the information contained herein should be relied upon only when
coordinated with individual professional advice. We are not licensed for
and therefore do not provide tax or legal advice.
About
the Author: Paul M.
League, QFP, CFP® is the Founding Principal of both League Financial & Insurance
Services (www.LeagueFinancial.com) & League Financial Services (www.LeagueFS.com),
which are privately held companies
located in Palm Desert, CA.
Paul and his companies specialize in assisting clients to
create, expand & preserve assets. Contact Information: Paul M. League, QFP, CFP®, P.O. Box
11800, Palm Desert, CA 92255-1800 · 800.482.5347 ·
Info@LeagueFinancial.com.
©Paul M. League. All Rights Reserved.
