Long-Term Care Insurance Policy Review

If your client is one of the 7.5 million Americans who owns a long-term care insurance (LTCI) policy, they might have purchased their policy many years ago. On average, a policyholder owns their policy for approximately 20 years before they are ready to file a claim. After all that time, they probably have some questions about their policy. Here are some tips to pass along to your long-term care insurance policyholder clients.

Read More: Assisting Your Clients Through a Smooth LTCI Claims Process

Keep Their Policy in a Safe Place

Your client’s family may be responsible for filing a claim when care is needed. Policies should be kept in a safe place that is accessible to family members when necessary. Additionally, an extra copy of the policy should be kept with their attorney or a trusted family member.

Annual Policy Review

Your client should review their LTCI policy annually. Many carriers offer access to policyholders through a portal on their website. Your client should register for their portal to keep track of any changes. Some portals also offer caregiving resources and access to wellness benefits.

Additionally, the third-party designee (a trusted person to receive a reminder of premium invoices if they are not paid timely) and beneficiaries should be reviewed and updated yearly as necessary.

If your client has an automatic inflation rider on their policy, these updated benefits should be calculated by the insurance company and a new policy schedule may be generated annually to be included with their original policy.

Long-Term Care Riders vs. Chronic Illness Riders Benefit Triggers

Your client should understand which type of LTCI policy they purchased. Long-term care riders, typically classified under IRS Code 7702b, offer more comprehensive coverage than chronic illness riders. To qualify for an LTC claim, the policyholder must meet the tax-qualified benefit trigger—either the inability to perform at least two activities of daily living for a period of at least 90 days (certified by a medical practitioner), or the diagnosis of a severe cognitive impairment. This definition allows your client to qualify for a long-term care claim even if they might recover from their condition. For example, conditions like trauma from car accidents, mild strokes, orthopedic repairs, and certain cancer side effects may be covered.

Chronic illness riders, typically classified under IRS Code 101g, are commonly referred to as “Accelerated Death Benefit for Chronic Illness” riders. These riders require a physician to certify that the chronic illness is non-recoverable and likely permanent. Conditions like trauma from car accidents, mild to moderate strokes, orthopedic repairs, and physical complications from cancer recovery would not qualify. Thus, chronic illness riders are more restrictive and less likely to pay claims for recoverable conditions that would otherwise be covered under long-term care riders.

How Does the Elimination Period Work?

The elimination period is like a deductible except defined by a certain number of days instead of a dollar amount. The most common elimination period is 90 days. Some covered services require that your client’s elimination period is met before benefits will be paid. It’s important for your client to keep all care-related invoices so these days can be counted towards the elimination period. This includes facility invoices, home health agency invoices, and Medicare charges. Your client may be able to receive credit for covered services that are paid for by Medicare. They will need to provide copies of the Medicare UB04 forms and submit those for processing. The UB04 form is a document their provider uses to submit charges to Medicare. They may not always receive this documentation, so they should let their provider know right away that they will need copies of the UB04 statements. A Medicare explanation of benefit does not contain the details needed to apply credit to their elimination period.

Questions About Rate Increases

Each client’s situation is different, but if your client is facing a rate increase, they should consult with their original insurance agent. If this agent is no longer available, the insurance carrier can advise them of another agent to provide them with advice on how they should proceed. Your client can reduce benefits to hedge the rate increase that is proposed. This includes reducing the daily/monthly benefit or length of benefit, increasing their elimination period, or removing riders such as the inflation rider. Usually, replacing the policy with a new one is not economically advantageous to your client. Additionally, if your client has experienced any health changes, they may no longer qualify for LTCI.

Read More: Rebounding from LTCI Rate Increases

If your client has a question about their long-term care insurance policy and you would like more information, please contact our team.