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2012-06-01 08:24:07

Long-term care is always a matter of risk management – series

A: Thank you for your question. I wrote this article eight years ago. I am honored that you remembered it. I have updated the information. If you already have a condition that forecasts a high likelihood of needing long-term care, you’ve gone a long ways towards answering your question yourself. These conditions might include but not be limited to such things as high blood pressure, heart conditions, arthritis, cancer, memory impairment, etc. But what if you are in good health…how big is the threat then? My answer is…it is always a matter of risk management. Last month we talked about three of the four ways to manage a risk. That of avoiding it, retaining it and reducing it. This month, we will begin to talk about the fourth way…that of transferring the risk to an insurance company by buying a long-term care policy. Long-Term Care insurance is not for everyone. Simply stated.. you only need it if you have something to protect. That “something” may be income, assets, peace of mind, independence, or those of your family. If you are fortunate to have more than enough, ask yourself these two questions: 1. Knowing how I accumulated what I have accumulated, would it bother me to write checks for several thousand dollars each and every month and never know how long I would have to write them? 2. Is it important that I leave anything to anyone when I am gone? If your answer to both of these is “No”…you do not need Long-Term Care insurance. If you’re not sure, or if you answered “Yes” to one or both of the questions, and you have determined you have something you want to protect...then a Long-Term Care policy may be for you. At the very least...it’s something you should consider. The fourth way to manage the long term care risk is to transfer it. When transferring the risk to an insurance company, you pay them a small certain loss every month (the premium...for which you can plan and budget), in return for them paying all or most of the large uncertain loss (the claim...which could be $50,000 to $70,000 or more per year, which would be most difficult or impossible to plan for and budget). If you have income, assets and an estate to protect...if the peace of mind of knowing you have done everything possible to protect these things is important to you...and if you treasure your independence...transferring the risk may make sense. If on the other hand, you do not have that much to protect...and you can qualify for Medicaid under the income and asset guidelines as detailed in last month’s issue…retaining the risk until your resources are exhausted...then applying for Medicaid.. may make the most sense. If you would like to consider transferring the risk to an insuring company...in other words, buying a Long Term Care insurance policy...there are several things you should know... There are not very many companies still in the “individual” long-term care business in the state. There used to be more than 40 with more than 110 different policies. All of them must conform to The Kansas Long Term Care Act of 1988 (“KLTCA88”) and are regulated by the Kansas State Insurance Commissioner’s Office. The KLTCA88 provided for some uniform guarantees from all policies sold in the state. All Long Term Care insurance policies are prohibited from requiring a higher level of care on initial confinement before benefits are provided for a lower level of care. All Long Term Care insurance policies are prohibited from requiring a hospital stay prior to nursing home confinement. All Long Term Care insurance policies may require that care be ordered by a Physician. All Long Term Care insurance policies must be guaranteed renewable. All Long Term Care insurance policies must include a 30-day ‘Free Look’. So, since all policies must conform to these guarantees...they all must be equal, right? No. There are many differences that will make a big difference to you...the Insured...at the time of need. While all companies selling Long Term Care insurance policies in Kansas must pass a rigid initial scrutiny, and ongoing reporting to the Kansas State Insurance Commissioner’s Office...their policies’ benefits, definitions and restrictions can vary greatly. The following are some very important questions, answers and supporting detail you can and should cover with any agent, and consider during the investigation and/or acceptance of a Long Term Care insurance policy. Q- Is it important how long a particular company has offered their policy for sale in Kansas? A- Yes. As you will note from the KLTCA88, all policies must be guaranteed renewable. This means that once the company issues the policy, they cannot increase your premium unless they increase the premiums for all “like” policies in the state. This is a much better guarantee from companies who have many policies in the state, due to the adverse way a premium increase can affect an insurer with many policies. On the other hand, it is not much of a guarantee from a company who has very few policies in the state. Q: How do I qualify for benefits with a Long Term Care insurance policy? A: Each policy may have different requirements, but for the most part, when your family doctor says you need assistance from another person, walker or wheelchair, to perform three or more of the activities of daily living (i.e., eating, bathing, dressing, toileting, ambulation, mobility and continence), for a minimum of 60 consecutive days, you will qualify for benefits. Q- What about Home Care? A- Benefits for care in the home are very important, because the majority of people requiring long term care require a care other than skilled or heavy care. Many times this care can be received in the home, versus going to a nursing home. If you purchase strictly a nursing home policy, it will not pay any benefits unless you go to a nursing home. That is why there are such things as “Home Health and Community” riders, and Comprehensive policies available from some companies. This rider and/or type of policy, for an additional amount of premium, will pay up to 50% or 100% of the daily benefits paid in the nursing home...at home. Some policies pay up to 50% or 100% of the same benefit level at home, for payment of professional services (i.e., nurses, therapists, etc.), as well as basic services (i.e., cooking, cleaning, companionship, shopping, etc.). A comprehensive policy leaves the decision up to the Insured, the Insured’s family and the Insured’s family physician as to whether the nursing home, or the Insured’s home, an Assisted Living residence, or an Adult Day Care Center makes the most sense at the time of need throughout an illness, affliction or injury period, once the benefits have been triggered and approved by the company. There is another way to accomplish the goal of having benefits for care in the home. Many of the better policies have a rider called the “Alternative Plan of Care” rider. The cost for this rider on most policies is included in your premium for the nursing home coverage, making the premium more affordable. It is used as a way for the insuring company to manage its risk when the need arises, all the while allowing the Insured to stay at home, if it makes sense, and if it is what the Insured wants. Here’s how the best Alternative Plan of Care Rider works... If the Insured qualifies for benefits in the nursing home, as detailed previously, and the Insured would rather stay at home, and the Insured’s physician will write and approve a plan of care whereby the cost for this care to the insuring company is less than what the insuring company would pay in the nursing home, the insuring company, under this alternative plan of care rider, will pay for the cost of the care at home for the benefit period, or until the Insured and the Insured’s physician decide the Insured would best be cared for in a nursing home. The Insuring Company, the Insured and the Insured’s doctor must agree and approve this Alternative Plan of Care, before any benefits are paid. The Insured’s use of this rider does not waive any of his/her rights under the policy. With most companies, the Alternative Plan of Care rider can be used going in or coming out of the nursing home. If some major illness, affliction or injury occurs, the Insured would most probably go to the nursing home first, but after recovery, may be able to come home with benefits under this Alternative Plan of Care. Conversely, if the care required initially is such that it could be administered in the home, the Insured could stay at home until his/her condition worsened and required a higher level of care in the nursing home. The Alternative Plan of Care rider can be very valuable in both situations. One of the biggest benefits of the Alternative Plan of Care to the Insured is that it can allow for a choice at the time of need, if approved, which is most important to the Insured and loved ones. There are policies where the Alternative Plan of Care does not present itself as an opportunity until after the Insured has been receiving benefits in the nursing home for a period of 6 months. This is not as advantageous for you, the Insured. Services and benefits under the Alternative Plan of Care may be different from those otherwise covered by the policy itself. For instance, this rider may also pay for such things as wheelchair ramps, railings installed throughout the house for mobility, bathroom remodeling, chair lifts to get someone up and down stairs, different sites of care, etc...items and services that, if provided, could keep the Insured at home where the cost would be less to the company. Remember...the cost for this Alternative Plan of Care rider is included in the premium for the nursing home policy with most companies. Next month, we will talk more about Long Term Care insurance policies and things you need to know.