Long-Term Care Insurance Claim Articles

Get Back To School - Long-Term Care Insurance 101

By Jeffrey L. Greyber, Esq.

Many folks I speak with are unaware of the existence of long-term care insurance. I have found that the folks who are aware of the existence of long-term care insurance know precious little about same. So, today’s blog offers any and all such folks a legislative / legal overview and a practical considerations overview of long-term care insurance.

Regarding the legislative / legal history of long-term care insurance, here is a nice, slightly abridged article from a legal treatise:

According to the Long-Term Care Insurance Model Act, long-term care insurance is ‘any insurance policy or rider … designed to provide coverage for not less than twelve (12) consecutive months for each covered person … for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, provided in a setting other than an acute care unit of a hospital.’

Long-term care (LTC) insurance was initially offered in the late 1970s. Since its inception, the growth of the LTC insurance market has been boosted by congressional action. Congress mandated the development of a Task Force to conduct a comprehensive examination of how to promote the development of private LTC insurance, generate consumer confidence, provide direction to states on the appropriateness and sufficiency of consumer protections related to LTC insurance, and ensure reasonable market value.

Concurrently with the activity of the Task Force, the National Association of Insurance Commissioners (NAIC) developed a Long-Term Care Insurance Model Act (Model Act). The congressional Task Force recommended that states be encouraged to adopt the NAIC Model Act. However, the Task Force stopped short of recommending federal regulation of LTC insurance in the same manner in which Medigap insurance is regulated. Most states now regulate LTC insurance policies and much of this regulation is based on the Model Act or some form of it.

Generally, LTC insurance policies pay a daily indemnity rate for care in nonhospital settings – usually for custodial, intermediate, or skilled care in nursing homes – or for supportive or home health care services. Some policies also cover respite and adult day care. Premiums for LTC policies are typically fixed, based on the insured person’s age at purchase.

The Health Care Portability and Accountability Act (Act) of 1996 establishes uniform federal guidelines for ‘qualified long-term care insurance’ and provides limited tax deductions for premiums paid for such insurance. The Act, effective January 1, 1997, draws heavily on the National Association of Insurance Commissioners (NAIC) Long-Term Care Insurance Model Act (Model Act) and Model Regulation. Among the features that constitute a ‘qualified long-term care insurance contract’ eligible for the tax deductions are requirements that the contract offer long-term care insurance coverage only, and that the contract must be renewable. The Act includes prohibitions, a ‘qualified long-term care insurance contract’ must not: pay expenses ordinarily reimbursable under Medicare, including co-payments and deductibles; allow for surrender for cash or assignability as collateral (there is an exception for refund of premiums at cancellation or death of the insured); or pay dividends (any dividends and refunds must be applied to payment of future premiums or increased value).

Under the Act, long-term care insurance benefits provided by employers to employees are treated as non-taxable fringe benefits, and any premiums paid by the individual insured are tax deductible to certain limits dependent on the age of the insured taxpayer. The 2013 figures [were]:

Finally, it is time to provide an overview of practical considerations for the long-term care insurance consumer; but, understanding that reader fatigue may have by now set in, I do so via reference to the American Association for Long-Term Care Insurance website.

Long-Term Care Insurance Claim Articles