What is Long-Term Care?”Long-term care” refers to the type of medical or personal care services you need if you become unable to care for yourself because of chronic illness, disability, loss of functional capacity, or cognitive impairment. Long-term care is different from traditional medical care. Traditional medical care treats physical problems directly in an attempt to permanently cure or control them. Long-term care helps a person maintain his or her ability to function, perform normal daily activities, or maintain a normal lifestyle.
This publication provides information about companies that sell long-term care insurance in Texas, including the rates companies charge. The Texas Department of Insurance (TDI) publishes a separate booklet called Long-Term Care Insurance, which provides more specific information about long-term care insurance.
Companies that sell long-term care insurance in Texas must provide you with a copy of Long-Term Care Insurance before selling you a policy. You can view the publication on TDI´s Web site.
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|To Buy or Not to Buy|
|Long-term care insurance isn’t right for everyone. You should carefully consider whether to buy long-term care insurance. You will need sufficient income to pay premiums for the rest of your life without sacrificing your basic standard of living. Keep in mind that retirement income may not keep up with the cost of living over time. You need to be sure you can afford your premiums and still have a cushion for unexpected expenses or premium increases in the future.
Most long-term care costs are paid by Medicaid, a federal-state assistance program for people who qualify. People with low incomes may already qualify for Medicaid, and those with moderate incomes may be able to “spend down” their assets to qualify. Long-term care insurance is probably not right for people with fixed or low incomes, and may not be right for people with moderate incomes who could spend down their assets to meet Medicaid eligibility.
Since long-term care premiums are based partly on your age and health, it’s more expensive to buy a long-term care policy the older you are or if you are in poor health. That means the cost might be prohibitive for some people.
Shopping for Long-Term Care Insurance
If you have investigated long-term care insurance for yourself or for someone else, you´ve probably discovered a maze of complicated options, unfamiliar terms, and difficult calculations. Long-term care insurance isn´t standardized in Texas. Every policy is different, so it´s difficult to compare policies. In general, however, there are some things you should consider. For each policy you´re looking at, ask the agent:
- What types of care are covered and in what setting? Policies can offer a full range of services, including home health care, adult day care, assisted living facility care, and nursing home care. Policies are required to cover all levels of care from custodial to intermediate to skilled care.
- What are the benefit eligibility requirements? Your policy won´t pay until you´ve satisfied certain requirements, such as being unable to perform tasks called Activities of Daily Living or being properly certified as cognitively impaired. The benefit eligibility triggers may vary from policy to policy.
- How much is the daily benefit amount for each type of benefit? Most policies will pay a maximum daily amount for your care. You choose the maximum daily benefit you want when you purchase the policy. It´s important that you choose your benefit amount wisely. Keep in mind that you do not need to insure the full cost of care. To keep premiums down, you could plan to pay some of the cost yourself.
- How long will benefits be paid? The chances of needing long-term care for more than five years are relatively small. For most people, a policy covering three to five years is appropriate and more cost-effective. However, if your primary concern is protection if you get Alzheimer’s disease, which can last a long time, you may want to consider the more costly option of lifetime coverage.
- Does the policy have a pre-existing condition waiting period? If so, how long is it? Some policies won´t pay until after a certain period of time has elapsed if you have a pre-existing medical condition. Some policies may begin paying for care related to a pre-existing condition immediately if you disclosed the condition on your application. Make sure you know what your policy says about pre-existing conditions.
- What inflation protection is offered? Inflation protection is designed to ensure that you will have adequate coverage in the future. All companies must offer an automatic increase in benefits at the rate of 5 percent compounded annually. You may reject inflation protection in writing. If you do, the company may have other options for protecting you from inflation. Be aware that to beat inflation, you´ll either have to pay a higher premium today, or higher out-of-pocket costs later.
- What is the nonforfeiture benefit? Texas law requires companies to offer you a nonforefieture benefit. If you cancel or lapse your policy after a specified number of years, the insurance company will either return a percentage of the premiums you paid; extend benefits for a period of time equal to the premiums paid, less any claims; or provide a greatly reduced benefit.
- Is the policy tax-qualified? If you buy a tax-qualified policy, you can deduct part of the premiums you paid as a medical expense on your income taxes. Benefits paid from a tax-qualified policy are generally not considered taxable income.
- Can I upgrade the policy later by purchasing more benefits? Some companies will allow you to upgrade your policy after purchase. However, you will likely have to submit a new medical questionnaire.
Beyond that, there are some things you should consider when shopping for any type of insurance:
- Shop around. Prices can vary substantially from one company to another, even for policies with similar benefits. Get quotes from several companies before buying a policy.
- Buy only from companies that are financially sound. Although there is no foolproof way to assess a company´s financial strength, and especially to be sure that a company will be around if you need benefits in the future, a useful measure is the company´s financial rating by an independent rating service.
- Choose companies that have a good track record for customer service. The number of consumer complaints against a company is a good indication of the company’s customer service record. Your family and friends are other sources of information about a company’s customer service. Ask them if they´ve had any experience with the companies you´re considering.
- Buy only from licensed companies. Licensed companies belong to a guaranty association that will pay your claim if your insurance company goes broke. If you buy from an unlicensed company and have a claim, it might go unpaid.
- Buy from an agent you know and trust. If you buy insurance through the mail or by phone, ask whether the company has a local agent or a toll-free number you can call if you have questions.
- Try to find an agent that specializes in long-term care insurance. Because of the many variables in structuring a long-term care policy, it´s important to have an agent who has the knowledge and experience to guide you through the process and help you choose the appropriate coverage for your individual needs.
- Consider your needs. Although it’s difficult, try to anticipate what services you might need in the future and choose a policy that´s right for you.
You can learn a company’s financial rating, its complaint index, and whether it is licensed by viewing the Company Profiles page on the TDI Web site or by calling TDI´s Consumer Help Line
As with any insurance purchase, it´s important to protect yourself. Follow these tips:
- Read what you are asked to sign before you sign it. Never sign a blank application form.
- If an agent tries to rush you, be suspicious!
- Ask questions and take notes when you talk to an agent. These could help you later if there is a dispute over what you were told about a policy.
- Don’t buy insurance on the agent’s first visit. Invite someone you trust to be present during the second visit. An agent shouldn´t object.
- Answer all questions on the application accurately. Don´t let the agent fill it out for you. If an agent helps you complete the application, make sure the information is correct and complete before you sign. Omitting or falsifying information could cause the company to deny your claims or cancel your policy.
- Do not pay cash or make a check out to an individual agent. Always pay by check or money order so you have a clear record of payment. Make checks payable only to the insurance company or insurance agency. Insist on a receipt signed by the agent on the company´s letterhead.
- Be sure you have the names and addresses of the agent and the insurance company. Know how to contact the agent and the company if you need help.
|How to Use the Rate Guide|
|Rate tables: This guide is organized into tables that list the rates companies charge for sample long-term care policies. Rates for six sample long-term care policies are included. The sample policies each have a $100 maximum daily benefit for nursing home care and a $50 maximum daily benefit for home health care. They have varying elimination periods, benefit periods, and tax status.
Keep in mind that the policies included are only sample policies that allow consumers to make some pricing comparisons. Long-term care policies in Texas are not standardized. Therefore, features and benefits will likely vary from company to company and by policy. And not all companies will offer a policy with the specific features included in the six sample policies. The actual policy contains the specific coverages you’ll get and will describe the policy’s limitations and exclusions.
Also include in the rate guide are rates for an insurance company´s most popular policy. Information on the benefit amounts, elimination period, benefit period, and other features included in the policy are shown. Be aware that making rate comparisons between the “most-popular” policies may be difficult because the benefits and features will vary widely.
A note about rates: Insurance companies can raise the premiums on policies that do not have fixed rates, but only if they increase the premiums on all policies in your “rate class.” Some companies, for instance, may automatically raise rates once you reach a certain age. Individuals cannot be singled out for a rate increase, regardless of the number or amount of claims they have made or any change in their health. Your rate class may be based on your age, where you live, and your health status at the time you purchased your long-term care policy. Once your rate class is established, however, deteriorating health may not change your class or affect your individual premium.
|The following terms are often used in regard to long-term care insurance. Some of the terms are used in the rate tables in this guide. For more information, read the TDI publication Long-Term Care Insurance.
Activities of daily living (ADLs): Activities considered essential to a normal lifestyle. Activities of daily living include bathing, toileting, dressing, transferring (mobility), eating, and continence. Your policy must provide coverage for long-term care services listed in the policy if you are unable to perform the specified number of ADLs or if you require supervision and services due to “cognitive impairment.”
Benefit: The services and items covered by a long-term care policy. Common benefits in long-term care policies in Texas include nursing home services, home health services, and adult day care. Long-term care policies are not standardized, so benefits can vary from policy to policy. And even though benefits may have the same or similar names, one company may define a particular benefit different from another. It´s important that you read your policy carefully to understand exactly what your policy covers.
Benefit amounts: The amount a policy will pay for a covered service or item. Usually benefit amounts are expressed as the maximum amount a policy will pay per day for a particular covered service.
Benefit eligibility triggers: The conditions that must occur before the policy pays benefits. Generally, for long-term care policies, benefit eligibility triggers are the inability to perform a specified number of ADLs or if you require supervision because of cognitive impairment.
Benefit period: The length of time a specific benefit will be paid under the policy. For the sample policies included in this guide, benefit periods of two years, five years, and lifetime were used.
Cognitive impairment: A long-term care policy must pay for services when a loss in your intellectual capacity requires you to have substantial supervision to maintain the safety of yourself and others. The loss can be due to Alzheimer’s disease, senility, an accident, or other causes. A doctor or other health practitioner licensed to make such a diagnosis in Texas must certify your cognitive impairment.
Combination policy/Comprehensive policy: A long-term care policy that includes benefits for both nursing home care and home health care.
Daily benefit: The amount a policy will pay per day for a covered service.
Elimination period: A type of deductible; the length of time you must pay for covered services before the insurance company will begin to make payments.
Home health care policy: Pays for skilled care or personal assistance in your home. Home health care services must be provided by a licensed home health agency. Covered services may include part-time skilled nursing care, physical therapy, and assistance with activities of daily living.
Medically necessary: A benefit eligibility trigger in some policies. These policies pay if a doctor or other health practitioner certifies that you have a medical condition that requires you to receive long-term care services.
Non tax-qualified/Tax-qualified plans: Tax-qualified plans allow you to deduct your long-term care premiums as medical expenses on your income tax return, up to a specified amount. You cannot claim deductions for long-term care premiums on non tax-qualified plans.
Nursing home policy: Pays for care in a licensed nursing facility.
Outline of coverage: An agent or company is required to give you an outline of coverage when offering a long-term care policy. This outline is a short description of all the policy’s features, benefits, limitations, and exclusions. If you are offered a policy that includes coverage with benefits based on three ADLs, the policy will include a description of the benefits payable for two ADLs, three ADLs, and cognitive impairment. The company must also include this description in its marketing materials and applications for these types of policies. Use the outline of coverage to help you compare policies.
Payment disbursement method:
The way in which the policy pays benefits for covered services. There are two types of payment disbursement methods:
|Policy form number: The policy form number is a unique identifying number for the long-term care policies a company is approved to sell. One policy form number often is used for policies with several combinations of benefits and features. Therefore, some tables may have policies with the same policy form number, even though the benefits included in the policies are different.
Pre-existing condition: A condition for which you received treatment or medical advice or recommendation from a physician within six months before the effective date of coverage. Pre-existing conditions may be excluded for a specific period of time, as stated in the policy, but may not exceed six months.
Tax-qualified/Non tax-qualified plans: Tax-qualified plans allow you to deduct your long-term care premiums as medical expenses on your income tax return, up to a specified amount. You cannot claim deductions for long-term care premiums on non tax-qualified plans.
|The following rate tables show the annual rates companies charge for long-term care policies for people of various ages. Rates are listed for people purchasing policies between the ages of 40 and 80 in five-year increments. To learn what you would pay at age 45 for a policy with the benefits listed on a particular sample policy, look under the column with the heading “45.” If you are 50 years old, look under the column with the heading “50,” and so on.Also included is information on the elimination period and pre-existing waiting condition period for each policy and a policy form number. The policy form number is a unique policy identification number.
If you find a policy with the benefits you like, tell the company the specific policy form number you´re interested in. Keep in mind that the sample policy tables only include policies with common benefits. This is not an exhaustive list of the long-term care policies available. Companies my have other combinations of benefits and features in addition to the sample policies shown here. Also remember that some policies may have additional features or discounts. For instance, one policy may offer a discount if both you and your spouse have policies, while another policy with the same benefits may not. The outline of coverage contains a brief description of the features of the policy.
|For More Information|
|TDI offers a variety of insurance-related publications and services. Publications are available in alternate languages and formats and on the TDI Web site.|