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Long Term Care Insurance

General Information

Long-term care insurance is a type of insurance developed specifically to cover the costs of long-term care services, most of which are not covered by traditional health insurance or Medicare.  These include services in your home such as assistance with Activities of Daily Living as well as care in a variety of facility and community settings.

There is a great deal of choice and flexibility in long-term care insurance policies.  You can select a range of care options and benefits that allow you to get the services you need in the settings that suit you best.  The cost of your long-term care insurance policy is based on the type and amount of services you choose to have covered, how old you are when you buy the policy, and any optional benefits you choose, such as Inflation Protection.  If you are in poor health or already receiving long-term care services, you may not qualify for long-term care insurance, or you may only be able to buy a more limited amount of coverage, or buy coverage at a higher "non-standard" premium rate.

Long-term care insurance policies have either a defined benefit period or a lifetime benefit maximum, which is the total amount of time or total amount of dollars up to which benefits will be paid.  Common benefit periods for long-term care policies are two, three, four, and five years.  There is even a choice of lifetime or unlimited coverage, although this option may be considerably more expensive than the others.  Other options between five years and lifetime/unlimited coverage are also available from many companies.

Most policies translate these time periods into dollar amounts and do not actually limit the number of days for which they will pay for care - just the overall dollar amount that the policy will pay.  With long-term care insurance, you pay premiums in dollar amounts you know in advance, allowing you to be able to budget for your premium payment.  The policy pays - up to its coverage limits - for the long-term care services you need when you need them.  Some policies will waive the premiums during the time you are receiving benefits, and some will not.  You should ask about this waiver of premium feature when you are shopping for long-term care insurance.

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Policy and Benefit Choices

It is important to understand that any benefits you choose to add to your policy will affect the cost of the policy.  The length of the benefit period will also affect the cost of the policy.  Each benefit choice you make will affect how much the policy will cost you.  The following is a summary of policy and benefit choices.

  • You will be asked to select a daily benefit amount (for example, $100/day), which is the maximum daily amount of expenses for care the policy will pay.  Most policies let you choose from $50/day to as much as $500/day.  A growing number of policies specify benefits in terms of a monthly amount so that you have the flexibility to receive more care on some days (for example, when family-provided care is not available) and less care on other days.
  • Often you can choose whether you want the policy to pay the same daily benefit amount for care in all settings, or whether you want the policy to pay less for care in less costly settings, such as care in your own home.  Common choices include a home care benefit of 50 percent or 75 percent of the daily nursing home benefit amount.
  • You will be asked to choose a Maximum Lifetime Benefit or total lifetime amount you want the policy to provide.  Policies typically offer a choice of lifetime dollar amounts - for example, $100,000 or $300,000).  The dollar amounts may correspond to a period of time.  For example, a three-year policy at $100/day of benefits would provide you with a total of $109,500 for care.  Some insurers also sell "Lifetime" or "Unlimited" coverage that has no dollar limit; you receive benefits as long as you continue to need long-term care and receive covered services.
  • Most policies today are comprehensive, but some people prefer to buy "institutional care or facility-care only" policies.  These pay for care in a skilled nursing home or maybe an assisted living facility, but not for care at home or in the community.  These policies may include hospice or respite care but only when those services are provided in a facility.  Facility-care-only policies cost less than comprehensive policies.
  • Many policies offer additional optional benefits or "riders" allowing you to customize your coverage.  One important option is Inflation Protection, which helps protect you from the rising cost of care over time.  It works the same way that an inflation clause on your homeowners insurance works: as the cost of replacing your home increases, so does that amount of insurance coverage that you maintain on the home.  Most people who buy long-term care insurance opt for an inflation protection rider which builds the cost in to the starting premium, so the cost of the policy doesn't increase simply because the value of the coverage increases with inflation.  But there are many different types of Inflation Protection in long-term care insurance.  Be sure to find out more about Inflation Protection options available in any policy you are considering.

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Types of Long-Term Care insurance Policies in Wisconsin

There are three types of insurance policies currently on the market in Wisconsin to cover long-term care expenses.  They are:

  1. Basic Long-Term Care Insurance Policies
    These policies cover both institutional care (nursing home or other facility) and care in the community (home health care or other community-based services).  Only those policies that provide coverage for both institutional and community-based care may be advertised or sold as long-term care insurance policies in Wisconsin.
  2. Nursing Home Insurance Policies
    These policies cover care provided in a nursing home.  These policies may or may not cover care provided in an assisted living facility. 
  3. Home Health Care Insurance Policies
    These policies cover only community care, such as home health care.  These policies may or may not cover community-based services.

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Minimum Standards for Policies covering long-term care expenses

The Wisconsin Office of the Commissioner of Insurance has set minimum standards for each of the three types of policies sold in Wisconsin that cover long-term care expenses.

All three types of policies must:

  • Provide at least one year of benefits
  • Provide a minimum $60/day benefit
  • Provide benefits based on the level of care only if the lowest limit of daily benefits is not less than 50 percent of those provided for nursing home care.  If you have a $200/day nursing home care benefit, the home health care benefit could not be less than $100/day which is 50 percent of the daily nursing home benefit.  This keeps the benefit levels high enough to be of value when the time comes to file a claim.  Long-term care policies are purchased, but not necessarily used for several years after purchase.  The value of the benefits, and therefore of the policy itself, will erode over time, if there is not inflation protection built into the policy.
  • Provide coverage whether or not care is medically necessary.  The policy may require that the care be provided in accordance with a plan of care.  Policies can no longer require that the care be based on medical necessity.  We now use the inability to perform three or more activities of daily living as a trigger for benefits to be paid.  Some policies only require two activities of daily living.
  • Pay benefits without requiring you to be in a hospital before getting the covered service.
  • Pay benefits if you are unable to perform three or more activities of daily living (ADLs) or if you have a cognitive impairment.  The assessment of ADLs and cognitive impairment needs to be performed by a licensed or certified professional, such as a physician, nurse, or social worker.
  • Wisconsin long-term care policies must cover Alzheimer's disease and other types of irreversible dementia.  Every policy must pay benefits for "irreversible dementia" (such as Alzheimer's disease) occurring after you purchase the policy provided you have met the waiting periods under the policy and need the type of care covered by the policy.  This does not prevent an insurance company from refusing to accept an application from you if you already have Alzheimer's or a similar disease.
  • Offer an inflation protection option that increases the maximum daily benefit and lifetime benefit amounts in an amount at least equal to 5% compounded annually.
  • Offer a nonforfeiture benefits option that provides paid-up insurance if your policy lapses.  This benefit will prevent you from losing all of the money that you paid in as premiums.  If you have had a policy for 10 years, and you have paid in $10,000 during those 10 years, the nonforfeiture provision requires that the $10,000 you have paid in premiums now becomes benefit dollars.  You are no longer paying for the policy, but it is worth $10,000 in benefits to you.  If you meet the provisions of the policy, the policy will pay claims for you, up to the $10,000 that you have paid into the company as premiums.  If you do not have a nonforfeiture benefit in your policy, when your policy lapses, you no longer have any benefits coming, you no longer have any coverage, and the money you paid for premiums is gone.
  • Describe the benefit appeal procedure.  this procedure requires the insurance company to review any appeal that you might file and make a decision within 30 days.

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What does a typical comprehensive long-term care insurance policy look like?

The majority of policies sold today are comprehensive policies.  They typically cover care and services provided in:

  • Your home, including skilled nursing care, occupational, speech, physical, and rehabilitation therapy, as well as help with personal care such as bathing and dressing.  some policies also cover some homemaker services, such as meal preparation or housekeeping in conjunction with the personal care services you receive.
  • Adult day health care centers.
  • Hospice care
  • Respite care
  • Assisted living facilities (also called residential care facilities or alternative care facilities)
  • Alzheimer's special care facilities
  • Nursing homes

There may be other benefits included in the basic policy, such as:

    • Ambulance
    • Bed reservation
    • Care coordination
    • Caregiver training
    • Emergency response system
    • Hospice care
    • International coverage (30 days)
    • Respite care
    • Waiver of premium
    • Home modification
    • Equipment purchase
    • Adult foster care
    • Spousal discount
    • Restoration of benefits

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Long-Term Care Insurance Partnership Program

The Long-Term Care Insurance Partnership (LTCIP) program is intended to encourage the purchase of private long-term care insurance by allowing policyholders to protect some or all of their financial assets should they apply for Medical Assistance.

The Wisconsin Legislature recently passed legislation that allowed for the creation of a long-term care insurance partnership program in Wisconsin.  Beginning January 1, 2009, insurance companies doing business in Wisconsin have been able to offer long-term care insurance policies that are certified for Partnership Program status.  Long-term care insurance policies that qualify for Partnership Program status are intended to allow you to protect some or all of your assets and still qualify for Medicaid if your long-term care needs extend beyond the period covered by your qualified long-term care partnership insurance policy.  some insurance companies with long-term care policies that qualify for partnership program status may offer existing long-term care policyholders the option of exchanging their current long-term care policy for a qualified long-term care partnership policy.  You are not required to accept the exchange option offer, nor are long-term care insurers required to offer an exchange option.

Long-term care partnership policies must include inflation protection coverage that meets specific minimum standards based on your age at the time you apply for a qualified long-term care partnership policy.  Inflation protection is mandatory for most partnership policies:

  • If you are under age 61 the policy must provide compound annual inflation protection
  • If you are age 61 but less than age 76 the policy must provide 3% annual simple inflation protection or provide compound annual inflation protection
  • If you are at least age 76 the policy may provide the inflation protection identified above but it is not required to do so

All long-term care partnership policies are intended to be federally tax qualified long-term care insurance policies as defined by federal Internal Revenue Code.  Purchasing a qualified long-term care partnership policy does not guarantee that you will be eligible to receive benefits, coverage or asset protection under the Wisconsin Medicaid program.

For example:

Wisconsin Long-Term Care Insurance Personal Worksheet

People buy long-term care insurance for a variety of reasons.  These reasons include avoiding spending assets for long-term care, making sure there are choices regarding the type of care received, protecting family members from having to pay for care, or decreasing the chances of going on Medicaid.  However, long-term care insurance can be expensive and may not be appropriate for everyone.  Wisconsin state law requires the insurance company to ask you to complete a financial worksheet to help you and the insurance company determine whether you should buy this policy.  The personal worksheet is on pages 79-80 of the publication
Long-term Care Insurance Approved Policies in Wisconsin.

For more information on the Wisconsin Long-term Care Partnership Program please visit the Wisconsin Office of the Commissioner of Insurance's webpage.

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Last Modified:   7/26/2016 10:34:53 AM   
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Madison, Wisconsin  53704-4001
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