According to the American Association of Long Term Care Insurance (AALTCI) people who apply for long term care insurance earlier, rather than later, have a better chance of getting coverage. That makes sense. A 40 year old is less likely to have uninsurable conditions than say a 65 year old. In addition, the cost goes up the longer an applicant waits to apply even if there are no underlying conditions that would render someone uninsurable.
In addition, there are “good health discounts” that are available at any age, but the likelihood of being able to get coverage under this type of discount, decreases with age. For example, 51.5% of those between the ages of 50-59 qualified for the preferred or good health discounts. Of those between 60-69 years of age, that number decreased to 42.2%. In those same two age groups, 13.9% and 22.9%, respectively, were declined by the carrier due to health problems.
There are some conditions, such as hypertension controlled with medication, or cancer that occurred many years ago, that will not necessarily disqualify an applicant. Each carrier has their own underwriting standards and as such, although one may deny for a negligible condition, the other may not be so rigid.
There are several conditions, however, that will automatically result in a denial of coverage. Some of these conditions include: AIDS, kidney failure, dementia, Parkinson’s disease and lupus. In addition, if the applicant already needs assistance with activities of daily living, such as walking or dressing, or uses ambulatory devices or oxygen, coverage will be denied.
Types of Policies-Traditional vs. Partnership
There are two types of long term care policies: traditional and partnership policies. Traditional policies can be either of the “expense incurred” type or “pooled benefit” coverage. Expense incurred, also known as indemnity policies, pay a fixed amount for actual expenses incurred. A pooled benefit provides a total dollar amount based on your daily coverage limit to use in what ever way is needed.
Both traditional and partnership policies have a fixed period of coverage, based on what the benefits the insured has chosen, and what the company offers as the maximum period of coverage. The more daily coverage one gets and the longer that coverage lasts, the more expensive the policy.
Asset protection is often considered an important reason to buy long term care insurance. In the worse case example, however, it may not be enough. If policy benefits run out, the insured may have to use his or her assets to continue to pay for their long term care, thereby depriving heirs or beneficiaries.
As described below, partnership policies, which are available in only a few states, act to protect all assets from liquidation to pay for long term care.
How a Partnership Policy Works
What a partnership policy attempts do is share the cost of custodial care between the individual, insurance companies, and the government (Medicaid).
If a long-term care user has a certified partnership policy, after the three (3) year benefit period elapses, he or she can file for Medicaid, the only federal government health care program that pays for long term care. Only the applicant’s income can be used for custodial care. Assets are not considered during the application process. This is important because Medicaid is traditionally a program for the “exceptionally needy,” and requires that the applicant have a very low level of income and assets in order to qualify.
This is how it works: Say, for example, annual nursing home cost is $100,300 a year. A partnership policy will pay $80,300 ($220 day minimal coverage). The out of pocket cost for the insured is $10,000. The insured partially insures.
After the benefits of the policy are exhausted the insured continues to use income to pay for care, but now government will also pick up some of the costs. For example, if an insured has an income of $50,000, the numbers would look like this: Nursing home cost is $100,300. Insured contributes income of $50,000 and Medicaid pays the remaining $50,300. The insured never has to liquidate assets to pay for care.
There are several states that now offer partnership policies. These include California, Connecticut, Florida, Idaho, Indiana, Kansas, New York, North Dakota, South Dakota and Virginia. Partnership and traditional policies are sold through major insurance companies, including but not limited to MetLife, UNUM and John Hancock.
There are several insurance companies that offer traditional long term care insurance policies. The costs will vary according to an applicant’s age and medical condition, and there are some conditions that will result in a denial of coverage. A few states are participating in partnership plan policies. These also sold through major insurance companies. These plans offer absolute asset protection to an insured after exhaustion of the policy benefits.
