How do you go about selecting the long term care policy that is best for you?
As with in choosing any other product, you always need to compare several long-term care policies to find the one that best suits your parent or loved one’s needs. You may need to contact your state insurance department to find out which companies provide long-term care policies in your area. Another option may be to add a rider onto a current health insurance policy. Several companies offer free quotes through the mail or over the Internet. You may do a search on the Internet using “long-term care insurance” to find some of these companies.
It is not easy to compare long-term care policies. They vary in so many ways- when they come into effect, what they cover, how benefits are paid etc… You should ask to see an “outline of coverage” detailing a long-term care policy’s benefits, costs, restrictions, and limitations.
When reviewing long-term care policies, you should be sure that any special features are worth the price paid in higher premiums. Additional coverage of any type will add substantially to the cost. You should not simply consider what your parent or loved one wants and then get quotes. You should compare the basic packages with the more expensive policies, see what each item adds to the price of the policy and then determine if it makes sense to pay the higher premium.
A growing number of employers are now offering long-term care policies to employees, retirees, and sometimes employee’s parents as well. Usually this means discounted premiums (they’re often paid for with pretax dollars). The federal government is now offering long-term care policy options to most federal and U. S. Postal Service employees, active and retired members of the uniformed services and their spouses, and adult children (employees can also get insurance coverage for their parents, parents-in-law and step parents). For more information about the federal program for long-term care policies you should go to www.ltcfeds.com or call 1-800-582-3337.
Even if your employer offers a long-term care policy option, look at other plans and compare. Just because the company has a group plan that includes long-term care policies doesn’t mean it’s the best option for you or your parent.
What do you look for in a long term care insurance policy?
You should look for the following features in shopping for a long-term care insurance program:
A solid company. You should look for a well-known, stable company with a good reputation. Buying from a strong company is absolutely essential because the long-term care insurance field is still young and companies have little history in which to base their underwriting assumptions. A strong long-term care insurance company will be better able to absorb errors in estimates.
It is also a pretty good idea to check the company’s rating with Standard & Poor’s (www.standardandpoors.com) Moody’s (www.moodys.com ) or A.M Best (www.ambest.com). You should look for one that falls within the top two categories related to their financial strength.
You should ask the company how long they’ve been providing long-term care health insurance. A company who has been in the market for a while (perhaps 10 years or more), will be more experienced and their rates will be more stable.
It’s also worthwhile to call the state insurance department, which may have information about complaints that have been made against particular insurance companies.
You should always be especially suspicious if a salesperson tells you that the state will guarantee coverage if the company goes into default. The premiums may be higher for these long-term care insurance policies, and if the company fails you can count on the fact that the coverage offered by the state will not be as generous as the original policy.
Tax qualified. Most long-term care insurance policies are qualified, but you should still check and make sure that they are. “Tax qualified” means that a policy conforms to the 1996 Health Insurance Portability and Accountability Act, or HIPAA. What this actually means to you is that the benefits cannot be taxed, also, a long-term care insurance policy must be qualified if someone wants to deduct the premiums as “medical expenses” from their taxes. (These expenses must be greater than 7.5% of a person’s adjusted gross income).
Comprehensive coverage. “Facility-only” policies cover only one type of care, usually nursing homes. Most long-term care insurance policies, however, offer “comprehensive” coverage. These policies should cover care in a nursing home or assisted-living facility, as well as care provided at home, adult day care, hospice care, and even respite care. It makes more sense for most people to buy a comprehensive policy, which gives them more and broader options in their long-term care insurance coverage.
Some other important features of a good long-term care insurance plan include:
Early eligibility. It is important to look at when a policy holder becomes eligible for long-term care insurance benefits. You must find out what the “benefit triggers?” are. Most long-term care insurance policies kick in when a person cannot handle two or more “activities of daily living” or ADL’s. These include bathing, dressing, eating, getting from a bed to a chair, toileting and being incontinent of bowel and bladder. A good policy should also cover issues related to memory or cognitive impairment such as different forms of dementia, that will necessitate some level of supervision. Some will cover care which is deemed “medically necessary” such as when an individual with congestive heart failure may require home care.
A reasonable deductible period. Most long-term care plans have a waiting period (called a “deductible” or “elimination”period), which means that the policy does not really go into effect until a person has paid for care themselves, for a certain number of days. The longer the waiting period, the cheaper the long-term care policy.
A waiting period of less than 20 days will usually make a policy much more expensive. On the other hand, waiting periods of more than a hundred days, greatly reduce the chance that an individual will ever put the policy to use. A reasonable amount of days to wait is usually between 30 and 40 days.
Adequate reimbursement. Most long-term care policies pay a fixed amount for each day of long-term care, and then you pay the remainder. The benefits usually run in a range of between $50 and $300 a day. Of course, the higher the amount of the benefit per day, the higher the cost for premiums.
Home health care is usually covered at a rate of about 50% – 60% of the rate that it will cost your loved one to be in a nursing home or assisted-living facility. So in effect, a policy that pays $100 a day for nursing home care will usually pay about $50 a day for home health care.
In order to determine how much long-term care coverage your parent needs, figure out how much they can afford to spend on long term care (or is willing to pay). Now find out the average cost per day of nursing homes in your area. If a nursing home costs $160 a day and your loved one has an average of $70 of daily discretionary income, then they need a policy that offers at least $90 a day in coverage. Also, you need to keep in mind that nursing home rates will continue to climb, while your parent or love one’s income may not. Finally, it’s always important to remember that the rates paid for nursing home care do not include some expenses, such as drugs and supplies and the cost for additional services such as professional mental health and medical services.
By Paul Susic Ph.D. Licensed Psychologist