Just because your loved one’s long-term care insurance covers nursing care doesn’t mean it will cover assisted living or memory care. Find out what to look for in an effective LTCI policy so you don’t get caught out when it’s time to shop for care.
Long-term care insurance is a tricky topic—do just a little delving and you’ll find well-meaning advice from both wary LTCI opponents and staunch advocates of such policies. Whether you’re for it or against it, it’s out there, and plenty of older Americans have chosen to hedge their bets and buy long-term care insurance in case they find themselves in need. The problem is, not all LTCI policies are alike; they have specific stipulations about what they cover and don’t cover, when benefits are paid out, and how long they will pay for care. And if you’re not fully versed in what a policy covers, you might find yourself caught out when it comes to paying for care.
What Types of Long Term Care Insurance can be used for Assisted living and Memory Care?
Researching long term care insurance is important as you don’t want an LTCI company telling you they won’t cover assisted living and you’ll have to pay out of pocket—even after decades of paying for a costly insurance policy. Yet this is the unfortunate case for many individuals who purchased their insurance in the late 1980s and early 1990s, before the idea of assisted living became widespread, and before insurance policies became more comprehensive in their coverage of different types of long-term care.
Now that many of those same people are claiming their LTCI benefits, they are finding that their coverage doesn’t meet their needs. Their claims might only be partly covered or even denied, says California Health Advocates, “because older policies contain out of date requirements for claiming benefits, and don’t reflect changes in long-term care services and providers.” Here are just a few of the coverage dilemmas described by California Health Advocates in a 2008 report:
- Home care benefits not paid because the person did not meet the additional policy requirements: a subsequent three-day hospital stay and, within 30 days of that hospital stay, at least 14 days of skilled nursing in a nursing home.
- Refusal to pay for assisted living care because it does not meet the insurer’s requirements for design, staffing, or services—some policies, for instance, stipulate that nursing care must be on site for 24 hours, or that a facility have a minimum number of beds.
- Refusal to pay for some types of long-term care even for newer plans with an “alternative plan of care” clause, because enforcement of this clause is at the discretion of the insurance company.
It is important to make sure that your policy is up to date. According to Allison Kern, Business Office Manager for Aegis of Issaquah, “When most of our residents purchased their LTC policies, assisted living communities were not as prevalent as they are today. Many were written for nursing homes, so I find that it is easier to approve someone for memory care than assisted living because of the services offered. Many have to meet a certain care requirement before they will be approved. You can also appeal the decision. I have done so twice and won both times. It does take time, effort and follow up from the Business Office Manager, however.”
What to Look for in a Long-Term Care Insurance Policy
So how can you make sure that your loved one is able to afford long-term care when the time comes? If he or she already has an LTCI policy, look carefully at the benefits covered. What are the restrictions to coverage and payouts? It might be helpful to consult with an expert—you financial planner, an insurance professional, or a member of the American Association for Long-Term Care Insurance. That goes for those shopping for a new policy, too. If you or a loved one is considering buying one, make sure to do your homework. Do some comparison shopping, and ask important questions about what the policy covers:
- Is the cost of the premium worth the investment, and does the policy have a loophole that allows for rate hikes? According to Nolo.com, “Consumer and financial experts generally agree that LTC insurance is a bad investment unless the monthly premium is 5% or less of your monthly income.”
- What is the initial daily benefit, and what is the maximum benefit period? Does the benefit amount increase with inflation, and will that affect your premium?
- How long is the elimination period before benefits are available, and what is the benefit trigger? The National Clearinghouse for Long-Term Care Information notes that “most policies pay benefits when you need help with two or more of six Activities of Daily Living or when you have a cognitive impairment.” Meanwhile, the elimination period is defined as “the amount of time that must pass after a benefit trigger occurs but before you start receiving payment for services”—usually between 0 and 180 days. If you choose a shorter elimination period, it will mean a higher premium.
- What is covered and what is excluded? What percentage is covered for services like home care, hospice, assisted living, memory care, or housekeeping assistance? Can you even use your long-term care insurance for assisted living?
- Does the policy reimburse for actual expenses only, or does it provide cash for you to use at your discretion?
- How does the policy interact with Medicaid coverage?
- What are the future benefits? The AALTCI recommends checking whether the policy has an inflation growth option, and whether that option will cost more in future years. They also advise researching what the benefit level will be in 10, 15 or 20 years.
Most experts seem to agree on two things: long-term care insurance is not necessarily suitable for everyone’s budget or care needs, but at the same time, if you do your research and select a policy that fits, LTCI can potentially be an enormous help when it comes time to pay for senior care. For more detailed information on what to look for, visit these websites:
- American Association for Long-Term Care Insurance
- National Association of Insurance Commissioners
- National Clearinghouse for Long-Term Care Information
We want to hear readers’ experiences with buying long-term care insurance, good or bad. Do you find yourself wishing you’d invested in a policy, or did you buy LTCI and then were disappointed with the coverage? Let us know in the comments.