This section has been
provided in its entirety by the California Insurance
Department.
California
Partnership for Long-Term Care
A Program of the State Department of
Health Services
Lifetime Asset Protection Becomes
Affordable
For Consumers with Moderate
Incomes
Introduction
In September 1994, California
implemented a major new program to help people with moderate incomes and assets
purchase high quality long-term care (LTC) insurance. This program, known as the California
Partnership for Long-Term Care (CPLTC), is a partnership between the State of
California and select insurance companies that offer policies containing special
consumer protections.
This program also provides education to
consumers and special support to insurance agents in an effort to help
individuals realize their potential risk of needing LTC, and how high quality
LTC insurance provides a viable option for funding these costs. The program has the unanimous support of
the State legislature, as demonstrated by recent legislation extending this
program until January 1, 2005.
How Does This Partnership
Work?
While the Partnership policy is
attractive to wealthier purchasers who tend to buy lifetime coverage, its
special asset protection feature is important to people who can only afford
policies of shorter duration. The
asset protection feature of this program is its guarantee that the State and
Federal Government will provide a financial back stop should the LTC benefits
provided by a Partnership policy be insufficient to meet the needs of the
purchaser. Individuals who buy
Partnership policies are entitled to keep additional assets equal to the amount
their policy pays out, should they ever need to apply for Medi-Cal for health or
LTC benefits. In the absence of
such protection, single individuals can only retain $2,000 in non-exempt assets
in order to qualify for Medi-Cal benefits.
This special asset protection helps assure consumers who can only afford
premiums for a one or two year policy, that should they exhaust their policy
benefits they wont have to become impoverished before they can receive Medi-Cal
benefits.
Individuals who purchase non-partnership
policies and use up their policy benefits must spend down their assets t
poverty level in order to receive Medi-Cal assistance.
This special asset protection provision,
only available in Partnership policies, provides one dollar of asset protection
for each dollar paid out in Partnership policy benefits. This $-for-$ protection allows for a
variety of product designs ranging from one year to lifetime coverage. The Partnership policies offer everyone
high quality benefits and $-for-$ asset protection against the costs of LTC,
including consumers who can afford lifetime coverage. Most important, however, Partnership
policies provide people with moderate incomes the option of choosing a shorter
duration policy with the high quality protection they need and can afford, and
eliminates the fear they might end up in poverty because their LTC costs used up
their policy benefits.
The purchase of high quality
protection, which includes such provisions as automatic built-in inflation
protection, adequate daily per diem, a monthly rather than a daily cap on
home and community-based benefits, care management, etc., is a major objective
in the design of the Partnership product.
Middle-income individuals with LTC insurance policies without these
protections are at serious risk of depleting their policy benefits, becoming
impoverished, and having to turn to Medi-Cal to pay their ongoing LTC costs, in
spite of having purchased LTC insurance.
The impoverishment protection offered by
partnership policies provides an especially good option for the elderly, who are
often less able to afford longer duration high quality policies of four years or
more. Here are a few examples on
how the Partnerships special asset protection feature
works:
TABLE 1
California Partnership for Long-Term
Care
|
|
Assets |
LTC Insurance Payouts |
Medi-Cal Spend
Down Requirement |
|
Person
A |
$50,000 |
$50,000 |
$0 |
|
Person
B |
$200,000 |
$500,000 |
$0 |
|
Person
C |
$1,000,000 |
$500,000 |
$500,000 |
|
Person
D |
$200,000 |
$0 |
$200,000 |
In Table 1, Person A is an unmarried man
with $50,000 of savings that would have to be spent down to $2,000 to qualify
for Medi-Cal. Without LTC
insurance, this person could quickly wipe out his savings should LTC be
required. Person A, however,
purchased a Partnership plan that would pay out $50,000 of benefits, the average
costs of a nursing home in his community for a year. Person A uses up all $50,000 of
insurance benefits and still needs nursing home care. In applying for Medi-Cal, Person A shows
the eligibility worker a form issued by his insurance company indicating a total
of $50,000 of Partnership insurance benefits were paid out. Medi-Cal will allow Person A to keep
$50,000 in additional savings and still qualify for Medi-Cal, during which time
Medi-Cal paid out $40,000 worth of claims for LTC and other medical costs. At the time of Person As death,
Medi-Cal begins action to collect from his estate. However, once again, Medi-Cal recognizes
that Person A received $50,000 of Partnership insurance benefits, which
protected an equal amount of his estate against Medi-Cal estate collection. Person A is able to pass on $50,000 in
inheritance to his heirs.
Person B in Table 1 has $200,000 of
savings and chose to purchase a Partnership policy that would pay out $200,000
worth of benefits, about four years of todays nursing home costs in Person Bs
community. Unfortunately, Person B
ended up receiving services in her home for a year before spending the last 7
years of her life in a nursing home.
The policy benefits of $200,000 were used up after about 6 years. When she applied for Medi-Cal she was
able to keep an additional $200,000 of savings, and this amount was protected
from Medi-Cal recovery in her estate at the time of her death. The money was used to provide for her
granddaughters college education.
Person C anticipated having assets of
$1,000,000 by the time she might need LTC, but chose to protect only a portion
of her assets by purchasing a Partnership policy that would pay out $200,000 in
benefits. Person C did not need her
policy benefits for about 20 years after she purchased the policy. Because of the automatic inflation
protection built into the Partnership policy, both the value of the Partnership
benefits and the amount of asset protection had grown to $500,000 by the time
she went into a nursing home, where she remained for four years before her
policy was exhausted. Person C was
allowed to keep $500,000 of additional assets at the time she qualified for
Medi-Cal. In addition, at the time
she passed away Medi-Cal exempted from recovery $500,000 of her
estate.
Person D in the chart represents an
individual who either did not purchase LTC insurance or bought a
non-Partnership policy. Person
D ended up needing to apply for Medi-Cal to pay his ongoing nursing home
costs. However, he was required to
spend down his non-exempt assets to only $2,000 before becoming eligible for
Medi-Cal. His home was considered
exempt property and was disregarded for the purpose of qualifying for
Medi-Cal. When he died Medi-Cal
placed a lien against his home, in order to recover the value of the Medi-Cal
claims paid during the time he was in the nursing home.
To really appreciate the above examples,
it is important to understand the basics of how Medi-Cal eligibility and estate
recovery works. Under current law,
$2,000 of assets is disregarded as exempt property in determining a single
persons eligibility for Medi-Cal.
The Medi-Cal applicants residence can also be disregarded, as well as
one car and a limited number of other assets. Additional assets can be retained if an
individual is in a nursing home and his or her spouse is living in the
community. (It is important to
understand, however, that less than 11% of persons on Medi-Cal in nursing homes
are married). The asset protection
provided by the Partnership is in addition to any other assets Medi-Cal allows a
person to keep and still qualify for Medi-Cal.
What
Other Policy Provisions Are
Unique
to Partnership Products?
While the Partnership policy offers
excellent protection for everyone, it is specifically designed for individuals
with moderate incomes who are unlikely to be able to afford significant rate
increases or out-of-pocket expenses at the time they need LTC benefits. The following provisions are, therefore,
included in all Partnership policies:
1.
Inflation protection is
set at 5% compounded annually. Persons over 70 years of age have a
choice between a 5% compound or a 5% simple annual inflation adjustment. This inflation protection not only helps
minimize out of pocket expenses due to inflation, but also proportionately
increases the level of asset protection.
2.
Policies cannot be sold
that provide less than 70% of the average daily nursing home costs in the
state. The minimum nursing home
daily amount for calendar year 2003 is $110 a day.
3.
The home and
community-based care benefit in the Partnership Comprehensive policy is capped
as a monthly rather than a daily benefit. As an example, a policyholder buys a
Comprehensive Policy with a home and community-based care benefit of $55 a
day. A person needing home care
seldom uses a fixed amount per day.
With a monthly cap, the policyholder has a $1,650 bucket of money to be
used for home care ($55 X 30 days in the month). This provides a flexible way for the
policyholder to combine the availability of informal care with formal care, and
reduce or avoid out of pocket expenses while maximizing the policy
benefits.
4.
Care Management/Care
Coordination provides all policyholders with the benefit of having a qualified
licensed health care professional evaluate their need for care, and, with the
policyholders input, develop a plan of care which list informal and formal
services necessary to help them maintain as much independence in the most
efficient way possible. All
treatment plans must include a non-inclusive list of providers in the community
appropriate to provide the necessary care.
Policyholders can also choose to have the care manager/coordinator help
them access the care and monitor the appropriateness of that care. This benefit helps maximize the value of
the policy benefits, as well as provide assistance to an individual and most
often a family during a time of crisis.
Care Management Agencies providing services to Partnership policyholders
must be approved by the Partnership to assure they have staff with the
appropriate experience and credentials, as well as methods to assure the quality
of their services. The State of
California has no regulatory oversight of care management organizations other
than those that provide services to Partnership
policyholders.
5.
Prior to 2002 the
Department of Insurance (DOI) policy approval process only included the review
of policy premiums and actuarial memorandums for Partnership policies. Subsequently, the DOI reviews all
policies premiums and actuarial memorandums. There are requirements that any request
for Partnership rate increases be based on the entire pool of Partnership
purchasers, and be subject to a rate cap.
Partnership regulations provide for the DOI to disapprove a Partnership
policy filing by a company with a history of rate increases.
6.
Provisions related to
protecting the policyholder against possible lapse were championed by the
Partnership, and are now required in all policies being marketed in
California.
7.
All Partnership policies
have the benefit of a stringent review by expert staff at the Department of
Health Services (DHS). In addition,
a review is completed on all policies by DOI to help assure provisions are
accurately described in a way that is most understandable by the
consumer.
What Else
Is Unique?
1.
The DHS requires agents
to take specific continuing education (CE) training to be authorized to market
Partnership policies. The training
consists of an initial 8 hours of classroom CE on the Partnership, and
thereafter an additional 8 hours of classroom CE on the Partnership every
two-year license approval period.
Regulations provide that agents who fail to comply with this CE
requirement shall not sell Partnership policies, and companies are required to
enforce this requirement or jeopardize their relationship with the CPLTC. Also, Partnership course instructors
must pass an exam before they are allowed to teach.
2.
The State Department of
Health Services (DHS) provides services to help agents expand their
understanding of the Partnership product, the importance of these quality
consumer protections, and ways they can better serve their clients. These services include agent seminars,
educational material, agent flyers and newsletters, and a comprehensive Website
(www.dhs.ca.gov/cpltc).
3.
DHS collaborates with
its insurer partners in finding ways to reach Californians with information that
will help them become aware of the risks of needing LTC, the benefits of LTC
insurance and the availability of the Partnership policy. Some of the current consumer education
and outreach efforts include a consumer website, consumer education videos,
educational pamphlets, Public Service Announcements on radio and television,
participation on radio and television talk shows and other media events, print
advertising, and publication of articles in magazines and newspapers
participation in health forums, and presentations to consumer
groups.
What Types of Coverage Is
Offered?
Two types of policies are available: a
Nursing Facility and Residential Care Facility Only policy and a
Comprehensive Policy. The
comprehensive policy covers care in a nursing home and residential care
facility, as well as the full range of home and community care services. All Partnership Policies are Tax
Qualified.
Benefits
and Limitations
While Partnership policies, like all
private LTC insurance policies, are transportable throughout the United States,
if a policyholder exhausts the policy benefits or otherwise needs to apply for
Medicaid benefits for LTC, he or she will have to return to California in order
to take advantage of the special Medi-Cal asset
protection.
Partnership policies are only available
to California residents.
REVISED
07/01/2003
End
of Chapter Six