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All long term care insurance policies provide coverage for care in a nursing home. There are usually three levels of nursing home care that can be included in policies:
- Skilled Care
- Intermediate Care
- Custodial Care
Some policies provide benefits for all three levels of care, but many do not cover custodial care, which accounts for the majority of long term care expenses.
Some policies will cover care provided in your home, generally after a hospital or a nursing home stay. This may be limited to skilled nursing care services. The policies that require nursing home stays first are undesirable. The percentage of people who have passed the deductible period and required number of days in a nursing home and then return home is very small.
How much are the daily benefits?
The amount of daily benefits paid varies from policy to policy. Most are indemnity benefits, paying a fixed amount per day of covered nursing home care or per home health visit. The amount paid will vary according to the level of care and service provided. Generally, daily benefits for nursing home care range between $20 and $100; home care benefits can range anywhere between $10 and $50 per visit and are typically a percentage of the nursing home benefit. Applicants may be able to choose the amount of daily benefits when applying for the policy; higher daily benefits result in a higher premium.
In most policies, the benefits provided by the policy will be less than the actual charges for care provided and the policyholder will be responsible for the difference. For example, when a policy pays $40 per day of nursing home care, but the actual daily charge is $80, the policyholder is responsible for a $40 co-payment per day. Benefits will not necessarily be adjusted for inflation, so that the actual daily nursing home or home care charges may increase while the benefit remains the same, resulting in higher out-of-pocket costs for the policyholder. However, some insurers offer the option of upgrading benefit levels to keep pace with rising cost, for a higher premium.
All policies have some limitations on the maximum number of days or total dollars that will be provided. These limits may apply to a particular service or to the dollar total of all benefits. Be sure to check the average cost of nursing home or home care in your area before making a decision.
What types of policy restrictions are there?
Prior institutionalization
Most policies require that the policyholder is hospitalized for three days before entering the nursing home and that the nursing home care be for the same injury or illness that caused the hospitalization. This requirement may limit or obstruct access to coverage for people suffering chronic disease or conditions, such as Parkinson’s or Alzheimer’s diseases, which may not necessitate hospitalization but which may ultimately require confinement in a nursing home or use of home care services.
In addition, policies that offer intermediate or custodial care may require a minimum number of days of skilled care in a nursing home before beginning coverage. Similarly, those policies providing home health benefits may require confinement in a hospital and/or nursing home for a certain number of days before home health benefits begin. These requirements may limit your access to appropriate care if your condition did not warrant prior institutionalization.
Most policies also require that the policyholder be admitted to the nursing home or receive home care within a limited time after discharge from the hospital. In general, watch out for policies that have a more restrictive period than 14 days for nursing home care or 30 days for home care.
Waiting/elimination period
This may work in one of two ways. Either coverage will not begin until a certain number of days (for example, 90 days) after the effective date of the plan, or coverage will begin after the effective date of the plan or after the policyholder has used covered services for a specified number of days. For example, most policies begin nursing home benefits on the 21st or 101st day of a nursing home stay.
Some policies offer a choice in the length of this waiting period; longer waiting periods are less costly than shorter ones. However, when deciding which length waiting period to choose, keep in mind that the policyholder will have to pay for the days of care before benefits begin. For example, a 100 day waiting period, at the rate of $80 per day in the nursing home, means $8,000 out of the policy holder’s own pocket.
Pre-existing conditions
Pre-existing conditions are those health conditions that were treated, diagnosed or manifested before the effective date of the insurance policy. Most policies impose a waiting period before providing coverage for those conditions. This means the policyholder will not receive benefits for these conditions until a certain period after the effective date of the policy.
This waiting period can range from 30 days to two years depending on the policy; six months is the most common waiting period. The time period before the effective date of the policy during which conditions are considered pre-existing also varies, with six months being most common for people over 65. Some policies have longer waiting periods for younger people.
How long do the benefits last?
Each policy establishes its own duration of coverage. Within any particular policy, the duration of coverage for one level of care may differ from the duration provided for another level of care. As a general rule, skilled and intermediate nursing home care is covered for two, three or four consecutive years. Custodial care and home care benefits may last for 60 days or as long as 5 years.
What types of facilities are covered?
Policies may require that nursing care be provided in certain types of facilities. Some policies may pay benefits only if the policyholder is confined in a Medicare approved nursing home, a very limiting feature, as less than one-third of nursing homes are Medicare certified.
Others will pay only if care is provided in a nursing home that meets the policy’s definition of a skilled, intermediate or custodial care facility and some may pay for a variety of levels of care, but only in a skilled nursing facility. Still others will pay benefits for care in any facility licensed by the state, thus not distinguishing between levels of care. A good policy will be flexible in terms of where care can be provided.
What health information will the insurance company want?
The insurer may wish to know about your past or current health status (often referred to as health screening). Insurance companies will ask applicants a number of questions about current health status, recent nursing home and/or hospital stays or use of home care services as a means to screen out individuals at high risk of using benefits immediately. This does not necessarily exclude everyone who has recently been sick.
Nevertheless, some applicants who have recently suffered a serious illness or been confined to a hospital or nursing home either may be denied coverage or charged higher premiums. Each insurance company has its own system of evaluating an applicant’s health history, determining eligibility and obtaining an appropriate spread of risks.
What is specifically excluded from coverage?
It is standard practice for long term care policies to exclude coverage for expenses outside the United States; expenses due to war; dental treatment unless due to accidental injury; expenses from intentional, self-inflicted injuries; and expenses caused by non-organic psychoneurotic disease and disorder.
The language in the policy relating to the last exclusion is significant. Most long term care insurers will cover mental diseases and disorders only if their origin is physiologic or organic. Make sure your policy covers care associated with Alzheimer’s disease and other organic mental conditions.
How much will a policy cost?
Annual premiums will vary in cost depending on purchaser’s age at initial purchase, deductibles, the waiting period before benefits begin, length of time benefits are paid, the type of health screening and the amount of daily benefits. The older a purchaser is or the more generous the benefits, the higher the annual premium will be. Once a policy is issued, however, many companies guarantee the premium will remain the same for life regardless of deteriorating health, claims filed or increasing age, except for across-the-board increases for all policyholders in a state. Nevertheless, some companies do automatically increase premiums as the policyholder ages.
Because almost all policies are sold on an individual rather than a group basis, and because long term care is so expensive, premiums tend to be high. A 65-year-old in good health can expect to pay somewhere between $300 to $1,500 a year for a policy that includes skilled, custodial and home care. Some policies also contain a waiver of premiums. This means that after entering a nursing home and receiving benefits for a certain period of time, usually three to six months, the policyholder no longer has to pay premiums but will continue to receive insurance benefits.
At what age can I obtain long term care insurance?
Many insurance companies do not offer long term care insurance to people younger than age 50, mainly due to lack of interest by younger consumers. Most also stop offering coverage to people 80 years of age or older.
Policies may be non-cancelable, guaranteed renewable, conditionally renewable or renewable at the option of the company. A policy that is renewable at the company’s option allows the insurance company to refuse to renew for any reason, on an individual basis. This is a very undesirable feature. It would be possible to pay premiums for 20 years, and then suddenly be cancelled. Companies that issue conditionally renewable policies can only decline to renew if they do so for everyone in a particular class or geographic area.
A guaranteed renewable provision means that the policy cannot be cancelled by the company for any reason except non-payment of premiums although rates can be raised on a class basis. A non-cancelable policy cannot be cancelled by the insured’s company for any reason except non-payment of premiums and the rates cannot be raised without the insured’s approval.
This is one provision potential buyers should be on the lookout for, but one which insurance companies may try to bury within the policy, since it describes the policy holder’s rights. The company should never have the option of canceling the policy.
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