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A Consumer’s Guide to....
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This booklet is designed to help consumers compare some of the long-term care policies companies offered in Maine. Eligibility for coverage, the type of benefits offered, and the cost of premiums vary among these companies. Companies also offer more plans than those shown in the comparison chart. Please use this brochure only as a guide. What is Long-Term Care Insurance? Long-term care insurance provides at least 12 consecutive months of coverage for health services received in a place other than an acute care unit of a hospital or similar facility. The services are given to patients who suffer from chronic physical or cognitive impairment. A long-term care policy pays for necessary expenses incurred in nursing, assisted living and retirement homes, community settings such as adult day care centers, in the insured’s own residence, and in hospices. Benefits are available to pay for services received from skilled, intermediate, and custodial caregivers. For benefits to be paid, the services received must be given under a doctor’s written plan of care. The following are some terms that are commonly used in long-term care policies. Elimination Period: the number of days of care that you receive and must pay out-of-pocket before the insurance company begins to pay. Benefit Period: how long your benefits will last. Benefit periods are usually stated in terms of a maximum number of days, months, or years, or for home health care, a maximum number of visits. Pre-Existing Conditions: a health problem you may have had or currently have when you apply for a policy. A pre-existing condition is defined as a condition for which medical advice or treatment was recommended by or received by you within 6 months before the effective date of your coverage. A policy may not exclude coverage for a loss or confinement that is the result of a pre-existing condition unless the loss or confinement begins within 6 months following the effective date of your coverage. Home Health Care: includes services received in your home that may include skilled nursing care, speech, respiratory, physical or occupational therapy, or home health aide services. Assistance with personal hygiene, dressing or feeding may also be included. Adult Day Care: provides supervision for insureds during the day when family members are not at home. Assisted Living Facilities: provide ongoing care and related services to support those needs resulting from a person’s inability to perform activities of daily living. Respite Care: includes services that can give family members a rest or vacation from their caregiving responsibilities. It can be provided in a variety of settings including an individual’s home or a nursing home. Hospice Care: a program of care and treatment either in a hospice care facility or in the home for persons who are terminally ill and have a life expectancy of six months or less. Medical Underwriting: Individual long-term care insurance is medically underwritten. This means the insurance company can refuse your application for a policy if you do not meet its guidelines. Outline of Coverage: To make shopping for a policy easier, the insurer must give you an “Outline of Coverage” when the insurer, either directly or through a producer, first approaches you to buy a long-term care policy. In addition to summarizing the product, the Outline of Coverage must tell you that you may contact the Bureau of Insurance for help to understand the policies you are interested in buying. What if I Change my Mind about Buying the Policy? 30 DAY "FREE LOOK" For the first 30 days after buying a policy, you may return it without cost. If you are not satisfied with the policy for any reason, you can return it to the insurance company and receive a full refund of any premium paid. The basic benefit in a long-term care policy is reimbursement of covered expenses after you satisfy the elimination period up to the maximum amounts provided by the policy. The overall maximum reimbursement may be a dollar amount such as $120,000 or a formula amount such as $200 per day for up to 600 days of nursing home benefit. There is also a maximum daily limit for the other benefits in the policy. Typically, the nursing home benefit is the maximum daily benefit (i.e. $200) and care provided at home or in an assisted living facility may be some percentage of the maximum daily benefit like 50%. If the daily reimbursements of the policy are less than the maximum daily benefit, the benefits under a typical long-term care policy are extended until the overall maximum is reached. Often, a portion of the overall maximum benefit may be reinstated if you recover for a specific period of time. Several options are usually available that provide protection from future increases in long-term care costs. You may not need long-term care until many years after the policy is first issued. From the time you first buy the policy until you actually need to use the benefits, the cost of care is likely to increase. Maine law requires insurers to offer you an option to increase the amount of benefits in your policy to take into account the growing cost of care. These options come in a number of forms and are usually available only when the policy is initially purchased. These options increase the overall and daily maximums in the policy as follows:
These options may be called different names like “guaranteed insurability,” “cost of living coverage,” “inflation protection,” etc. When you first buy your policy, you must be offered the opportunity to include a surrender benefit (sometimes called a nonforfeiture benefit). The surrender benefit gives you a benefit at a later date if you decide that you no longer want to continue the policy by paying the premium. This benefit may be cash or some form of limited long-term care benefit and usually increases with the length of time that the policy is in force. The cost of this benefit can be very expensive. If you don’t accept the offer of a nonforfeiture benefit when you first buy the policy, a company is required to provide a “contingent benefit upon lapse.” This means that when your premiums increase to a certain level (based on a table of increases), the contingent benefit upon lapse will take effect. Here is an Example: If you’re 70 years old and have not accepted the insurance company’s offer of a nonforfeiture benefit, when the premium rises to 50% more than the original premium you will be offered the opportunity to accept one of the contingent benefits upon lapse.” The benefits offered are: 1) a reduction in the benefits provided by the current policy so that premium costs stay the same; or 2) a conversion of the policy to paid-up status with a shorter benefit period. You may also choose to keep your policy and continue to pay the higher premium. Once you are issued an individual policy, the policy is renewable as long as premiums continue to be paid. If premiums are not paid, the insurer can terminate the policy subject to any nonforfeiture benefit that the policy may have. Premiums are lower the younger you are when the policy is issued. Although the policy is guaranteed to be renewable, that does not stop the premium from increasing. However, increases in premiums are allowed only for the entire “class” of persons with the same coverage and only with the prior approval of the Maine Superintendent of Insurance. For example, the premium may be increased for all insureds who have the same policy and who have reached their 68th birthday. Premium increases are based on an increase in the company's claims experience as insureds grow older. The insurer may not raise your premium based only on your claims. The insurer may offer a premium discount if you and your spouse are covered. Some policies offer an additional benefit if your spouse is covered. Some companies offer several options regarding how long the premiums are payable. The typical premium paying period is over your lifetime. For those young enough, the premium paying period may be reduced so that payments are limited to 10 years or to age 65. These limited payment options come with a steep increase in annual premium. However, they could save money over the long-term, especially if there are future rate increases that affect premiums that would have been paid after the reduced premium paying period. Rate increases have become more common on long-term care policies primarily because companies introduced this product when there was no reliable data on which to base their rates and their assumptions were too optimistic. These premium increases have been significant in some instances. Although the insurers’ data has been developed and the revised legal requirements encourage adequate rates, the potential for rate increases is still there. Before a company issues a policy, Maine law requires long-term care insurers to give you information on how often and by how much they have increased premiums in the past. Having this premium information may help you to determine the likelihood of future premium increases from this company. Potential State Income Tax Benefits The amount of money you pay for premiums may be deducted on your Maine income tax return (as well as your federal return). To be eligible to use premiums as a health care expense, your policy must qualify for income tax incentives under Maine law. The policy should have wording that says whether it qualifies under the tax law. If you are not sure about possible deductibility, your agent should be able to help you. The comparison information included in this brochure shows the different available benefit periods (how long your benefits will last) and the different available elimination periods (the amount of time you have to wait before benefits are paid) that each company offers in their long-term care policies. To make premium comparisons as close as possible, companies were asked to quote rates as close as possible to a 5 year benefit period, a 90 day elimination period. For the first table, they were asked to quote rates for a $150 a day benefit. For the second table, they were asked to quote rates for a $250 a day benefit. Your long-term care policy premium will depend on:
Rate Comparison Chart—$150/day benefit
Rate Comparison Chart—$250/day benefit
Maine’s Long-term Care Partnership Program The Maine Long-term Care Partnership Program involves state government and private insurers. Its purpose is to encourage people to prepare for their future care needs by purchasing insurance that pays when a person needs long-term care. Under the Partnership Program, the state will disregard the policyholder’s personal assets equal to amounts paid out under a qualifying long-term care insurance policy in determining the person’s eligibility for Medicaid (MaineCare) assistance. For example, if a qualifying insurance policy pays out $50,000 in benefits to cover a person’s long-term care needs, MaineCare would not count up to $50,000 of the person’s assets when it determines whether the person is eligible for MaineCare assistance with long-term care costs. This means the person may be able to qualify for long-term care assistance through MaineCare without first having to spend all their personal assets on care. It is important to remember that only certain types of long-term care policies qualify for the Partnership Program and the state and federal laws governing the program are subject to change. If you are considering purchasing long-term care insurance, talk with your agent about whether a Partnership Policy is appropriate for your needs. Long-Term Care Partnership Programs in Maine The individual policies and group certificates listed below have been approved for use in the Long Term Care Partnership Program.
Visit http://www.maine.gov/pfr/insurance/LTCPartnership.html for the most up-to-date list.
The Bureau of Insurance, within the Department of Professional and Financial Regulation, regulates the insurance industry for solvency and consumer protection. It does so through its examining and licensing procedures, by reviewing rates and coverage forms, conducting audits, and by sponsoring programs that enhance awareness of and compliance with State laws. The Bureau has statutory authority to enforce the State’s laws and rules pertaining to insurance, and it initiates investigations and holds hearings concerning possible infractions of them.
Eric Cioppa
More information and other publications are available through: Or online at: May 2010
Last Updated: September 27, 2010 |
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