Long Term Care Insurance is insurance that covers nursing home costs and home health care costs for applicants who have paid premiums for this type of insurance.
Long Term Care Insurance eligibility is contingent on the applicant's health, both present and past. There is a clearinghouse that the insurance companies check to be sure your information on your application actually matches the health conditions you have been treated for in the past,as well as medications you may have purchased in the past. Even if you have no record of a health condition, if you purchased medication for that condition, it will be assumed that at some point in your life you actually did receive treatment, medicine and thus have that diagnosis.
Even applicants that in the past may have had a health condition, if that condition is cured, and the period of the treatment is beyond 5 years, they may still be able to purchase a long term care policy. Some insurance companies that underwrite riskier policies have higher premiums. the cost of the policies depend on several factors that the applicant must contract for at the onset of the application for the LTC insurance.
First, the applicant must decide how many years the policy for long term care is needed once they become ill and need to access either homecare services or nursing home services. The policies may be purchased for 3 years, 5 years or longer. The length of time the policy covers increases the cost of the policy. So a 3 year policy that will cover a 36 month period will be less expensive than a policy that covers 60 months, a 5 year policy. Since Medicaid has a 5 year look back policy, it is not necessary to purchase a policy beyond a 5 year period. Once the policy holder initiates the coverage, they also are advised to move their assets off of their name. After a 5 year period there is no longer a penalty for the transfer of assets, no matter what the amount.
Second, the daily rate of coverage must be decided by the applicant at the onset of the policy application. At the present time, nursing home costs range from $12,000 to $20,000 a month. At the present rate, if an applicant chooses the lowest end of the nursing home cost, and has a projected monthly income at retirement of $5000 a month (social security, pension, interest on investments), then they would need to purchase a policy that would give them $7,000 per month. This policy benefit would cover the $12,000 projected nursing home cost when added to the anticipated monthly income at retirement.
Finally the applicant must decide whether or not to contract for an inflation rider at the onset of the application process. This rider takes into account that the cost of long term care today will not be the same in 10 or 20 years. So adding a 5% inflation rider means that the policy value will increase on an annual basis to keep up with costs of inflation.
Once the applicant is approved for the policy, as long as the premiums are paid, the policy remains in effect regardless of the deterioration in health or aging of the policy holder. However if payment lapses, the policy may be terminated and to access another policy the current health of the applicant must be evaluated again. At this time the applicant may be refused coverage if their health has significantly deteriorated or changed in status. So once approved it is very important to pay the premiums in a timely fashion to keep the policy in place so it can be activated when needed.
Long Term Care Policies are sold up to the age of 84. The younger the applicant is, the less expensive the policy premiums will be. So taking all of this in account, a policy cost is determined by all the above factors: Age of applicant, length of policy coverage, amount of daily benefit contracted, and cost of living rider.
In different states in our country, Long Term Care policies vary. In Florida for example, a long term care policy can be for homecare alone, or for nursing home alone. This often means that the applicant choosing a homecare only policy, when they become infirm, can only utilize the policy for care in the home with a home health aid. If they require nursing homecare, the policy is useless. Unfortunately many elders in Florida have no intention of ever entering a nursing home, so opt for the less expensive home health care policies. The problem is that by the time they meet the health requirements for the home health policy to activate, they may be too ill to remain home and must be cared for in a nursing home.
In NY State, the policy is good for either homecare or nursing homecare services. If the contracted length of time is met, the policy ends. So if a policy holder contracted for $500 a day benefit for a 5 year period, 60 months, the value of the policy is $182,500 per year, times 5 years for a total value of
$912,500. The policies are usual reimbursement policies. The policy holder pays their nursing home bill, and then submits this to the Long Term Care Insurance company and they are reimbursed monthly. After the 5 years of coverage have passed by, the policy ends. So if the policy holder becomes ill, the rule of thumb is to move their assets off of their name, utilize the LTC policy for 5 years, then apply for Medicaid. Medicaid has a 5 year look back on gifts and transfers. So the look back period has passed by at the end of the policy coverage date. These are private policies and can be activated by entrance to any nursing home in the country.
The interesting thing about the policies in NY State, for homecare services the value of the policy may last longer than the 5 year period. If the homecare costs are less than $500 a day, say half that amount, the policy could last twice as long.
Finally NY State offers a Partnership policy. It is approved by NY State and basically no matter what assets are owned by the policy holder, the value does not have to be moved off of the name of the recipient at the time of Medicaid approval. The Partnership policies need only be used for a 3 year period, and after the benefits are exhausted, the policy holder can transition onto Medicaid to pay for the nursing home costs, after their income is applied to the cost of care. So basically the person can retain their assets and still be eligible for NY State Medicaid, but the income generated from the assets must be used towards the cost of nursing homecare. These policies limit nursing homecare to be provided within NY State.
For more information or to apply for a policy, call me anytime at the office, 718-442-2414. Warmly, Holly Gemme, ACSW, CCMC, LA, LSW