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 What
is long term care (LTC) insurance and why is it receiving so much attention and publicity today?
Long
term care (LTC) insurance policies may differ in terms of their coverage of skilled
nursing care, intermediate nursing care, custodial care and home care. What are the
differences in these levels of care?
Why
is it that most employers do not currently provide their employees with long term
care (LTC) insurance along with medical expense insurance, group life insurance
and other employee benefit plans?
In
addition to the premium cost, what other important factors should be considered
when purchasing long term care (LTC) insurance?
What
benefit choices are typically offered by insurers marketing long term care (LTC) products?
What is long term care (LTC) insurance and
why is it receiving so much attention and publicity today?
Long term care (LTC) insurance provides coverage for the cost
of custodial and other types of extended care provided in a nursing home. Coverage
also is frequently provided for selected medical care and personal services
delivered in the insured's home. LTC policies provide important protection to
the insured because, currently, neither Medicare nor the typical medical expense
insurance policy covers custodial-type care. The aging of the U.S. population,
coupled with continuing medical advances, will likely lead to significant growth
in the demand for custodial and related care. This increased demand, together
with costly nursing home stays (now estimated at $35,000-plus per year), will
likely create an environment where much publicity and attention remain focused
on the need for LTC insurance.
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Long term care (LTC) insurance policies may
differ in terms of their coverage of skilled nursing care, intermediate nursing
care, custodial care and home care. What are the differences in these levels
of care?
Skilled nursing care is the highest level of nursing care
and consists of round-the-clock care, ordered by a physician and usually provided
by a registered nurse or a licensed practical nurse. Intermediate nursing care
is similar to skilled nursing care except that the care is usually not provided
round-the-clock. Custodial care consists of help in carrying out the activities
of daily living (ADLs). Since it does not consist of any medical treatment,
custodial care can be delivered by persons who are not medically trained. Home
care consists of both medical care and personal services (e.g., cooking and
cleaning) provided at the patient's home.
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Why is it that most employers do not currently
provide their employees with long term care (LTC) insurance along with medical
expense insurance, group life insurance and other employee benefit plans?
A primary reason is the uncertainty that exists currently as to
the federal income tax treatment accorded employer-provided LTC insurance. Although
considerable debate has taken place, Congress has yet to clarify the tax treatment
surrounding employer-provided LTC insurance. A second reason may relate to the
premium cost for this coverage. Because it is expected that as much as 40 percent
of the over-65 population will need care in a nursing home, the premium for
LTC insurance can be relatively high.
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In addition to the premium cost, what other
important factors should be considered when purchasing long term care (LTC)
insurance?
Because LTC insurance is still an evolving product, there may
be considerable variation among LTC products marketed by different insurers.
Some of the more important factors that should be carefully examined when comparing
LTC policies include: (1) whether the policy is issued on a guaranteed renewable
(insurer cannot cancel the policy but can increase the premium) or noncancelable
(insurer cannot cancel the policy or increase the premium) basis; (2) the nature
of any preexisting conditions exclusion; (3) whether skilled nursing care, intermediate
care, and home care are covered in addition to custodial care (and the extent
to which benefit amounts vary according to the level of care); (4) the policy's
definition of activities of daily living (ADLs) and the minimum number (e.g.,
2) of ADLs that the insured must be unable to perform in order to qualify for
custodial care; (5) whether a prior hospitalization is required before coverage
is provided in an extended care facility; (6) whether there is a required 30-day
wait, for example, between a hospital discharge and admission into an extended
care facility; (7) the extent to which coverage is provided for persons suffering
from mental illness, Alzheimer's and senile dementia; and (8) whether the policy
coordinates its coverage with the skilled nursing care and home health care
benefits provided under Medicare.
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What benefit choices are typically offered
by insurers marketing long term care (LTC) products?
Insurers frequently offer prospective insureds: (1) the choice
of length of the elimination (waiting) period prior to the commencement of benefits;
(2) a choice as to the maximum daily benefit (e.g., $100, $150) that can be
purchased; (10) the choice of maximum benefit period (e.g., 2, 5, or 10 years
or lifetime); and (11) an inflation protection option. Given the rapid pace
of change in product design, other options may be offered in the future.
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