The Essentials of Long-Term Care Insurance

Table of Contents

Introduction
Chapter 1: What is Long-Term Care?		1
	Defining Long-Term Care	1
	A Changing Market	2
	Protecting Assets	2
	Where Do You Go for Long-Term Care?	4
	Understanding the Need for Long-Term Care	8
Chapter 2: Policy Options		9
	What is a Long-Term Care Policy?	9
	Policy Issue	9
	Medicare Benefits	10
	Looking at Medicare benefits in detail 1-4	11
	Looking at Medicare benefits in detail 5 & 6	12
	Part A Skilled Nursing Care	13
	Part B (Outpatient Care)	14
	Part B provides the following services 1 – 57	14
	Medigap Insurance Policies	21
	Protecting Assets	22
	Medicaid Benefits	23
	Relying on Insurance for LTC Payment	27
	State Requirements	27
	Age and Premiums	27
	The Underage Market	28
	Increasing Premiums	29
	Insurance Pricing	29
	Premium Mode	29
	Reducing Benefits to Save Premium	29
	Example	30
	Policy Renewal	30
	Policy Review: 30 Day “Free Look”	30
	Number One Best Selling Unread Document	31
	“Notice to Buyer”	31
	Policy Schedule	31
	Policy Terminology	32
	Elimination Periods in Policies	34
	Policy Termination	35
	Hospitalization Requirements	35
	Home and Community Based Benefits	36
	Bed Reservation Benefit	36
	Waiver of Premium	36
	Selecting Other Types of Care	37
	No Policy Covers Everything	37
	Age Misstatement	38
	Forgetfulness: Notifying a Third Part of Premium Due	39
	Reinstatement of a Lapsed Policy	39
Chapter 3: The Evolution of a Major Industry		40
	Born of Need	40
	Children as Caregivers	40
	Can Families Make it Through?	41
	Paid Home Care	42
	Better Health Equates to Longer Life	42
	The Early Policy Years	42
	Policy Benefits Improve Over Time	43
	Remaining at Home	43
	Qualifying for Medicare-Funded Home Care	44
	How Does Medicare Decide What is a Covered Service?	44
	Finding a Home Care Provider	45
	Recognizing the Need and the Market	45
	Insurers Figure Out the Risks of LTC Insurance	46
	The LTC Marketplace	47
	Dramatic Policy Improvement, But Also Rising Premium Rates	48
Chapter 4: Who is at Risk?		49
	The Loss of Family Members as Caregivers	49
	Who Will Need Long-Term Care?	49
	A Graying Nation	50
	Frailty a Major Issue	50
	Considering Insurance	51
	Women are Especially Vulnerable	51
	Earning Retirement Benefits	52
	Medicaid is the Major Payer of LTC Benefits	52
	Medicare Drug Legislation	52
	Encouraging HMO Coverage	53
	Health Care for those not yet on Medicare	53
	Preventing Impoverishment	54
	Family History can be a Guideline	55
	Activities of Daily Living	56
	Following the Statistics	56
	Case Managers	57
	Are Premiums Affordable for a Number of Years?	57
	Who Buys LTC Insurance?	58
	HIAA determined who would purchase LTC	58
Chapter 5: Comparing Qualified and Non-Qualified Plans		60
	HIPAA	60
	Existing LTC Policies	60
	Benefit Triggers	60
	Activities of Daily Living (ADL)	61
	Six ADLs that are included under HIPAA	62
	Understanding the Difference in Benefit Triggers	62
	Federal Criteria	63
	Definitions IRS Notice 97-31	63
	State Laws May Vary	64
	Chart	65
	Policy Conversions Were Offered	65
	Who Will Benefit?	66
	Defining “Chronically Ill”	66
	Qualifying Contracts for Tax-Favored Status	66
	Accelerated Death Benefits	67
	Purchasing Contracts for Financial Protection	67
	Pre-1997 Long-Term Care Policies	67
	The Treasury Responds With Exceptions	67
	Alternate Plan of Care	38
Chapter 6: Designing a Personal Policy		69
	What Will the Choices Include?	69
	Daily Benefit Options	70
	Expense-Incurred and Indemnity Methods of Payment	70
	Determining Benefit Length	71
	Policy Structure	71
	Home Care Options	71
	Inflation Protection	71
	Simple and Compound Protection	72
	Required Rejection Forms	72
	Elimination Periods in LTC Policies	72
	Policy Type	73
	Home Modification Benefit	73
	Rental of Medical Devices	73
	Caregiver Training	74
	Restoration of Policy Benefits	74
	Preexisting Periods in Policies	74
	Is Hospitalization First Required?	74
	Choosing Federal Tax-Qualified or State Non-Tax Qualified Policies	75
	Nonforfeiture Values	75
	Waiver of Premium	76
	Unintentional Lapse of Policy	76
	Bed Reservation Option	77
	Policy Renewal Features	77
	Guaranteed Renewable	77
	Non-Cancelable	77
	Items Not Covered by the Lont-Term Care Policy	77
	Extension of Benefits	78
	Partnership Policies	78
	Partnership Plans Protect Assets, Not Income	78
	Partnership Benefits Are Not Necessarily Portable	79
	Partnership Commissions	79
	Robert Wood Johnson Foundation	79
	Affordability of Contracts	79
	Dollar-for-Dollar Asset Protection	80
	Standardized Definitions	81
	Minimum Partnership Requirements	81
	Benefit Duplication	81
	Partnership Publication	81
	Partnership Continuing Education Requirements	81
	The Deciding Factors in Designing a Personal Policy	82
	Who is Most Likely to Buy LTC Insurance?	82
	Ongoing Long-Term Medical or Personal Care	83
	States Often Requiring Specific PLTC Education	84
	Limited Benefits in Early Products	84
	No Durational Coverage Under Medicare	85
	Remaining at Home	85
	Home Care Insurance Policies	86
	Home Care Benefits Under Medicare	86
	Medicare Qualification	87
	Assessing Care at Home	88
	Gaps and Gatekeepers	88
	Protecting Against Catastrophic Costs First	88
	Knowing Industry Terminology	89
	Receiving the Benefits Expected	91
	The Buying Decision	91
	Selecting a Suitable Company	92
	An Ethical Obligation to the Consumer	92
	Assets = liabilities + owner’s equity	93
	Guaranty Funds	95
	Signs of Company Trouble	96
Chapter 7: Alternatives to Purchasing Insurance		98
	Assessing the Need	98
	Realistically Speaking	98
	Asset Inventory	100
	Liabilities	101
	Estate Planning Tools	101
	Asset Transfer	102
	Reverse Mortgages	102
	Paid Family Members	104
	Accelerated Life Insurance Benefits	104
	The Largest Payer of LTC: Medicaid	105
	Asset Transfers for Medicaid Eligibility	106
	Examples	107
	Trust Shelters	108
	Catastrophic Coverage Act of 1988	109
	Information Required When Applying to Medicaid	110
	Viatical Settlements	110
	Any Income Available	111
Chapter 8: Insurance Ethics		112
	According to Webster (definition of ethics)	112
	Establishing Insurance Ethics	113
	Linking Risk Management and Ethics	116
	Adequate Underwriting is an Ethical Duty	117
	Unethical Practices Over the Years	119
	Due Diligence	120
	Long-Term Care Due Diligence	122
	Product Suitability	125
	Agent’s Long-Term Care Insurance Suitability Sample Worksheet	125
	Suitability Determination/Personal Suitability Worksheet	127
	Long-Term Care Insurance Suitability Letter	129
	Insurance Dilemma	130
	Confidentiality	132
	Simultaneous Representation	132
	Common Sense	132
	Promoting Ethical Conduct	132
	Presenting Insurance Benefits	133
	Minimizing Misunderstandings	134
	The Ethical Path	135
	Professional Ethics	135
	Establishing a Code of Ethics	136
	Mandated Education	137
	Keeping track of CE (chart)	138
	Principles Versus Rules	139
	Legal Issues	139
	Integrity	141
	Objectivity / Competence	141
	Example	143
	Fairness / Confidentiality	143
	Professionalism / Diligence	144
	Express and Ostensible Authority	144
	Example	144
	Ethics and Risk Control	145
	Agent Liability	146
	Company Insolvencies	146
	Third-Party Liability	146
	Hidden Costs of Litigation	146
	Documenting Procedures for Self-Protection	146
	Unwritten, Invisible, or Implied	147
	Honesty – A Moral and Legal Obligation	148
	Churning Policies	149
	A Personal Choice	149
	The Exceptional Man	150
	Taking the Moral Path	151
	Developing a Work Ethic	152
	Acting in the Best Interest of the Majority	152
	Listening Our Way to Success	153
	Fulfilling Our Obligation to the Client	153
	Policy Presentations	154
	Duty to Represent Insurers Fairly	154
	Acknowledging Our Moral Obligations	155
	Agents Are Also Clients	155
	Is It Too Good to be True?	156

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