WA LTC INITIAL 8 HOUR COURSE
Chapter 1: Long-Term Care Insurance
Introduction to WA 48.83.130
Selling, soliciting, or negotiating coverage Licensed insurance producers Training Issuers duties Rules (Effective January 1, 2009)
A person may not sell, solicit, or negotiate long-term care insurance unless he or she is appropriately licensed as an insurance producer and has successfully completed long-term care coverage education that meets the requirements of this section.
As of January 1, 2009 licensed insurance producers must obtain specific long-term care education prior to soliciting, selling, or negotiating long-term care insurance coverage. A one-time education course consisting of no less than 8 hours must initially be completed. Thereafter a 4 hour refresher course will be required each license renewal period. The long-term care education must include information on policy coverage, long-term care services, state and federal regulations and requirements, changes or improvements in the services and providers of long-term care, alternatives to purchasing insurance, the effect inflation has on purchased benefits (importance of inflation protection), and consumer suitability standards.
All insurance producers who plan to sell long-term care products in the state of Washington, including those agents who hold their resident license in another state, must complete the initial 8 hour long-term care course that was available as of January 1, 2009 even if he or she has previously completed similar education elsewhere or at an earlier time. This course is required to continue soliciting, selling, or negotiating long-term care coverage in Washington. This course must be completed no later than July 1, 2009. This initial 8 hour course is a one-time requirement.
Every 24 months producers must obtain another four hours of long-term care education in a course that will be titled WA LTC Refresher 4-Hour Course. This refresher course will be a condensed version of the initial 8 hour course and will, as the title implies, refresh the agents knowledge of long-term care services and policies.
It is important to note that these eight and four hours of education are part of the 24-hour requirement for education in Washington, not in addition to the total requirement. However, the refresher course is due within 24 months of the initial 8-hour course so it does not go by license renewal dates but by the date of the first course completion.
Product-specific training supplies by insurance companies will not be allowed for this continuing education requirement. Only courses that have been approved by the state as meeting the required outlines will qualify for this long-term care education requirement. As was previously true, the insurers are required to monitor this, accepting new applications for coverage only from agents who have shown long-term care education compliance. Most insurance companies will require a copy of the agents Certificate of Completion as proof of education compliance. Some insurance carriers might seek approval of a course that they will offer directly to their contracted agents, but most will probably leave it to the agents to achieve compliance, requiring proof prior to accepting new product applications. Insurance companies must show evidence of that verification if the insurance commissioners office requests it.
Long-Term Care Insurance
In order to define long-term care insurance it is necessary to define long-term care. Although definitions have some variation depending upon the application, Medicare defines long-term care as: A variety of services including medical and non-medical care for people who have a chronic illness or disability.[1]
Federal requirements define long-term care as care provided for 90 days or longer. Most long-term care definitions refer to activities of daily living. These activities include eating, toileting, transferring, bathing, dressing, and continence. Non-federal criteria usually include ambulation as a seventh activity of daily living.
Washington defines long-term care insurance as a policy, rider, or contract that is advertised, marketed, offered, or designed to provide coverage for at least twelve consecutive months for a covered person.
Chronic illness is often the basis for needing some form of long-term assistance. A chronic illness is one that is long lasting and unlikely to correct itself. The assistance may be performed in the recipients home or some other location within the community, including a nursing home or assisted living facility.
Nursing home policies were developed by insurance companies to fill a growing need of elderly Americans. There was a time when family members (most often daughters) stepped in to provide the care for their aging family members but with decreasing family size and the necessity of working, fewer family members are available to provide the needed care.
At one time most consumers did not believe they would ever enter a nursing home. This attitude has mostly changed as people acquired first-hand knowledge of friends and family members entering institutions. Today it is common for people to consider the purchase of nursing home policies in their fifties, when pricing is more affordable. Insurance policies offer many choices so applicants make several choices when considering coverage for the nursing home, home health care, and assisted living coverage.
A long-term care policy is issued by an insurance company who completes underwriting prior to policy issuance. Acceptance of the risk is determined by factors related to the likelihood of the applicant needing long-term care services of some type (not necessarily just in a nursing home). Like all types of insurance coverage, underwriting criteria is based upon the risks that lead to receiving benefits under the contract (policy).
Policy issuance begins with the application. As such, the insurance agent is the first person to begin the underwriting process. By correctly answering the health questions on the application the agent provides vital information that will be used by the insurers underwriting department. It is common for the underwriting department to also request information from the applicants doctors or other attending medical personnel. Intentionally incorrect or omitted information on the application will cause policy denial even if they might otherwise have issued the policy. If the policy has already been issued when fraudulent information is discovered it is possible that the issued policy might be rescinded by the insurer, depending upon the level of misrepresentation, and how it might affect claim payments. Claims may be denied if the information provided for underwriting would have affected policy issue.
Once the policy has been in force for two full years only fraudulent misstatements in the application may be used to void the policy or deny claims. All insurance contracts must conform to the laws of the state where issued. If the policy is a tax-qualified policy, they must also conform to federal requirements. If any policy provision conflicts with the state or federal laws, the provision is automatically changed to comply with the minimum state and federal requirements.
Insurance companies work daily with risk factors. Therefore, the earlier an individual purchases a long-term care policy the lower the cost will be since the insurer has more time to work with the premium dollars, accumulating and investing the money. Premiums for long-term care policies can and probably will increase over time. The older the applicant the more he or she will pay than their counterpart who is ten years younger.
There are two ways to price a long-term care policy: by attained age at application and by age banding. Attained age refers to the age of the applicant at the time they apply for coverage. Age banding looks at groups of age, such as age 65 through 69. In this case, an applicant who is 65 years old will pay the same premium as another applicant who is 69 years old. Few companies will issue policies to individuals who are age 80 and older.
Premium may be paid monthly, quarterly, semi-annually, or annually. Many industry professionals prefer their clients to use a monthly bank-draft mode since memory loss is common with aging. The wrong time for a policy to lapse due to nonpayment of premium is when the insured is experiencing memory loss.
What Will the Choices Include?
All policies must follow specific guidelines, including those mandated by the federal and state governments where policies are issued. Policies following federal guidelines will be tax-qualified, whereas the policies following state guidelines will be non-tax qualified plans. Washington mandates specific agent education prior to being able to market or sell LTC policies to ensure that the field agents properly represent the products.
All policies offer some options, which may be purchased for additional premium or refused. When refusing some types of options, a rejection form must be signed and dated by the applicant.
When a consumer decides to purchase a long-term care policy, several buying decisions must be made. These could include:
1. The amount of per day benefits if confinement in a nursing home occurs.
2. The length of time the policy will pay benefits. This is likely to range from one year to lifetime. Of course, the longer the benefit period selected, the more expensive the policy will be.
3. Whether or not to include an inflation protection to guard against rising costs.
4. The waiting period, also called an elimination period, must be selected. This is the period of time that must pass while receiving care before the policy will pay for anything. It is a deductible expressed as days not covered. The option can range from zero days to 160 days.
5. The specific type of policy to be purchased. Policies may be federally tax-qualified or non-tax qualified. Partnership long-term care policies are also coming since the passage of DEFRA opened up this type of coverage to all states.
As every field agent knows, clients often prefer to have the agent make selections for them, but this is not always wise. Although the agent will be valued for the advice he or she gives the actual benefit decisions need to be made by the consumer. This means the agent must fully explain each option so that the consumer can make informed choices. In a way, it is similar to the cafeteria insurance plans where employees had an array of choices in benefits. The difference is that the long-term care policies have no limits on the choices that the consumer can make. If he or she is willing to pay the price, absolutely everything available can be selected.
Daily Benefit Options
While there are many policy options, the daily benefit amount is usually the first policy decision, with the second one being, the length of time the benefits will continue. Both of these strongly affect the cost of the policy.
The daily benefit is based upon the type of policy selected. Policies that cover institutional care in a nursing home will have options that may vary from policies that cover only home care benefits. Integrated policies will vary from those that pay a daily indemnity amount. Obviously, the consumer could not select a higher daily benefit than offered by the issuing company. Nor can an insurer offer a daily indemnity amount that is lower than those set by the state where issued. At one time insurers offered as low as a $40 per day benefit in the nursing home. By todays standards, that would be extremely inadequate for nursing home care.
This daily benefit can have variations. Some policies will specify an amount (not to exceed actual cost) for each nursing home confinement day. Other policies (called integrated plans) offer a more relaxed benefit formula. These policies have a "pool" of money, which may be used however the policyholder sees fit, within the terms of the contract. This means that this "pool" of money could be spent for home care rather than a nursing home confinement. Benefits will be paid as long as this maximum amount lasts regardless of the time period. The danger in having a pool of money, however, is that the funds may be used up by the time a nursing home confinement actually occurs. If the funds have been previously used up, there will be no more benefits payable. Since people prefer to stay at home, this may work out well, but it can also quickly deplete funds in a wasteful manner.
While there are not specific figures available across the board (individual insurers most certainly do keep these figures for their company), most policies are probably still written as a set daily benefit amount. The amounts paid will usually vary depending upon whether they are going towards a nursing home confinement, home health care, adult day care, and so forth. The "pool of money" is gaining popularity, however, since consumers see it as a way to make health care choices more freely. Integrated policies are generally more expensive than indemnity contracts.
Expense-Incurred and Indemnity Methods of Payment
When benefits are paid from a specific dollar schedule for a specific time period, they are generally paid in one of two different ways:
1. The expense-incurred method in which the insured submits claims that the insurance company then pays to either the insured or to the institution up to the limit set down in the policy.
2. The indemnity method in which the insurance company pays benefits directly to the insured in the amount specified in the policy without regard to the specific service that was received.
Of course, both methods require that eligibility for benefits first be met.
Determining Benefit Length
While the daily benefit is typically the first choice made, the second choice is just as important to the policyholder: the length of time for which benefits will be paid. This may apply to a single confinement or it can apply to the total amount of time spent in an institution. An indemnity contract offers benefits payable for a specified number of days, months or years (depending upon policy language). An integrated plan pays whatever the daily cost happens to be unless the contract specifies a maximum daily payout amount. When funds are depleted, the policy ends.
While statistics vary depending upon the source, most professionals feel a policy should provide benefits for at least three years of continuous confinement. The average stay is 2.5 years according to federal figures. Of course averages are made up of highs and lows. Some people will only be in a nursing home for three months while others may remain there for five years. Using the average stay, however, is a good medium figure. Since the majority of consumers will not be willing to pay the price for a life-time benefit, three or four year policies are likely to do a good job for them and still be affordable.
Policy Structure
We have seen much legislation by the states directed at long-term care policies. Even the federal government has been involved in this with the tax-qualified plans. It is important to note that tax-qualified plans always come under federal legislation whereas non-tax qualified plans come under state legislation. Each state will have specific policy requirements. The states will assign descriptive names in an effort to identify policies in a way that consumers can comprehend. Such terms as Nursing Facility Only policy, Comprehensive policy or Home Care Only policy will be used. Washington, like many other states, mandates specific agent long-term care education prior to selling them. Even in those states that do not have special continuing education requirements, however, it is necessary for agents to acquire knowledge in this field. Long-term care policies often do not pay benefits for years after purchase. An error on the part of the agent can have devastating consequences.
When an individual is applying for long-term care coverage he or she must make several decisions: the daily benefit amount, the elimination period, maximum benefit periods, adding special types of care (such as home care), and inflation riders that increase policy benefits over time. The benefits selected directly affect the cost of the policy; obviously the more coverage an applicant chooses the more the cost of the coverage.
Policy Free-Look Period
When a policy is issued and delivered to the applicant there is a 30-day free-look period that allows the insured to review the issued policy. This will be stated in the policy and may have a heading similar to 30-day Right to Examine Your Policy. If the applicant is not satisfied with the issued policy, or merely changes their mind for no reason at all, the contract may be returned for a full premium refund. This voids all coverage as though the policy was never issued at all (so the insurer would not be liable for any claims). The premium refund must be made within 30 days of cancellation.
Unfortunately most people, including agents, never read the policy in its entirety. Insurance contracts are the number one unread best seller. Even though every issued policy tells the insured to review their policy, few people actually do so. Instead they rely upon their memory of what the agent told them during the sales presentation. That is why it is so important for agents to be complete in their policy presentation and to present the facts in a way the average consumer can easily understand.
A copy of the original policy application will be included with the insurance policy. Both the agent and the applicant should review this for accuracy. Of course the name must be correctly spelled, but the listed medical information must also be reviewed since incorrect medical information could mean a denied claim.
No policy covers everything and that includes long-term care policies. Long-term care policies might be very specific in their coverage, such as coverage only for nursing home admittances. Under the heading Notice to Buyer the insurance company will list the benefits that are provided by the issued policy.
The policy will have several sections to it. The Policy Schedule will list the insureds name and the options that were chosen and purchased at the time of application. Several items may be listed, including:
Most policies issued today are tax-qualified plans. Some professionals feel the non-tax qualified contracts had less restrictive language, so paid claims easier. That may be true since so many insurers have stopped issuing the non-tax qualified plans. On the other hand it may simply be a reflection of what consumers are buying.
When policies are tax-qualified plans this will be stated on the front page of the long-term care contract. It will say something similar to: This is a tax qualified contract. This policy is intended to be a tax qualified long-tem care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986 (as amended by the Health Insurance Portability and Accountability Act of 1996 Public Law 104-191).
There may also be a Caution notice regarding the information provided on the application. It warns the insured that the issuance of the long-care contract was based on the responses to questions in the application and states that a copy of the original application is enclosed. The policy will state: If your answers are incorrect or untrue we may have the right to deny benefits or rescind the policy.
It will also state: This policy is not a Medicare supplement policy.
Guaranteed Renewable for Life
Policyholders may renew their long-term care policy, if it contains a guaranteed renewable clause, for the duration of their life. Although premiums will not increase due to a change in their personal age, premiums may rise if everyone in their premium class receives the premium increase. Premium Class means a population segment classified by the actuaries as having similar characteristics, such as issue age, issue year, policy form number, rate classification or some other selected benefit option or criteria.
Premiums will not increase because the insured experienced a birthday or submitted claims for a covered condition. Of course, premiums must be paid on time; if the insured fails to pay a premium on time (and it is past the allowed grace period) the insurer is not obligated to reinstate the policy. When an increase in premium occurs the insurer will notify their policyholders at least 60 days in advance. Increases typically occur on policy anniversary dates since policies usually give a one year rate guarantee. Rates may increase due to increases in coverage offered under inflation clauses, depending upon the policy language.
LTC Insurance Terms
Every policy will contain a glossary of terms used in the policy. Every insurance policy is a legal contract so terms are an important part of the document. Policies typically capitalize the entire word or the first letter of the word anywhere the term appears in the contract.
Activities of Daily Living: Bathing, Dressing, Toileting, Transferring, Continence, or eating.
Applicant: In the case of an individual long-term care insurance policy, the person who seeks to contract for benefits; in the case of a group long-term care insurance policy, the proposed certificant holder is the applicant.
Bathing: Washing oneself by sponge bath; or in either a tub or shower, including the task of getting into or out of the tub and shower.
Certificate: Includes any certificate issued under a group long-term care insurance policy that has been delivered or issued for delivery in WA.
Dressing: Putting on or taking off all items of clothing and any necessary braces, fasteners, or artificial limbs.
Long-Term Care Insurance: An insurance policy, contract, or rider that is advertised, marketed, offered, or designed to provide coverage for at least twelve consecutive months for a covered person. Long-term care insurance may be on an expense incurred, indemnity, prepaid, or other basis, 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 insurance includes any policy, contract, or rider that provides for payment of benefits based upon cognitive impairment or the loss of functional capacity.
Long-term care insurance does not include life insurance policies that:
Long-term care insurance does include group and individual annuities and life insurance policies or riders that provide directly or supplemental long-term care insurance. Some contracts may be qualified long-term care insurance contracts under federal guidelines.
Long-term care insurance policies are not basic Medicare supplements, basic hospital expense policies, basic medical-surgical expense plans, hospital confinement indemnity plans, major medical contracts, disability income, related income, asset protection, accident only, specified disease, specified accident, or limited benefit health contracts.
Policy: includes a document such as an insurance policy, contract, subscriber agreement, rider, or endorsement delivered or issued for delivery in WA by an insurer, fraternal benefit society, health care service contractor, health maintenance organization or any similar entity authorized by the insurance commissioner to transact the business of long-term care insurance.
Qualified Long-Term Care Insurance Contract or Federally Tax-Qualified Long-Term Care Insurance Contract: means either an individual or group insurance contract that meets the requirements of section 7702B(b) of the Internal Revenue Code of 1986, as amended, or the portion of a life insurance contract that provides long-term care insurance coverage by rider as part of the contract and that satisfies the requirements of sections 7702B(b) and (e) of the Internal Revenue Code of 1986, as amended.
Toileting: Getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene.
Transferring: Moving into or out of a bed, chair or wheelchair.
Continence: The ability to maintain control of bowel and bladder functions; or when unable to maintain control, the ability to perform associated personal hygiene, such as caring for a catheter or colostomy bag.
Adult Day Care: a program of social and health-related services provided during the day in a community group setting for the purpose of supporting frail, impaired elderly or disabled adults who might benefit from care in a group setting outside of their home.
Adult Day Health Care Center: a facility that is licensed or certified to provide a planned program of adult day health care services by the state in which it operates. Such centers must operate pursuant to the law and meet the following standards:
Assisted Living Facility: a facility that is engaged primarily in providing ongoing care and related services that has the appropriate state licensure and meets all of the following:
An assisted living facility is not a clinic, hospital, or nursing home. Assisted living facilities provides necessary services that prevent an individual from going to a nursing home and this is probably a large reason they have been so well received by the public. If the patient needs special care, such as for alcoholism or drug addition, an assisted living facility may not be the appropriate place for care, and the facility will usually make a health and mental assessment before accepting a resident.
Some facilities have multiple types of care available. For example, one wing may be for assisted living residents, another wing for nursing home care, and yet another wing for special needs, such as patients suffering from Alzheimers disease.
Basic Home Health Care: this means care or services provides in the recipients home. Services include part-time or intermittent services provided by a nurse, support services, and home health aide services.
Chronically Ill: A chronically ill person has been certified by a licensed health care practitioner as:
In order to meet the definition of chronically ill under most insurance policies the individual must have been certified as such by a licensed health care practitioner within the previous 12-month period.
Elimination Period: a period of time that applies to an issued insurance policy. It is the total number of days the insured remains chronically ill and covered under their policy before benefits will actually be payable by the policy. It is often referred to as a deductible expressed as time not covered.
The elimination period begins on the first day the insured is ill and has expenses or receives services that would be covered under their long-term care policy. Each day that would have been covered under the policy terms counts towards the elimination period until the total days selected have been met; then the policy begins paying benefits.
Molly purchased a long-term care nursing home policy. At the time of application she selected a 90-day elimination period. Therefore her long-term care benefits would begin on the 91st day of covered services (the first 90 days are her elimination period the time period not covered). When she becomes ill and goes to a nursing home her elimination period will begin with the first day of covered confinement in the nursing home. On the 91st day of covered services her policy will begin paying benefits on Mollys behalf.
Elimination periods always deal with covered time periods. In other words, the type of care or services received must be covered under the policy that was purchased. The elimination period would not apply to types of care or services that were not covered under the purchased policy. Again, it works just like a deductible, only in terms of time rather than dollars.
Home: the place an individual lives; an independent residence rather than a group home or nursing home. Even if a confinement becomes long-term it never includes a hospital, nursing home, assisted living facility or any other institutional setting where the person is dependent upon other for assistance.
Home Health Care: services performed in an individuals private home:
Hospice Care: care for the terminally ill, typically defined as having six months or less to live. Hospice care provides services designed to provide palliative care and alleviate the individuals physical, emotional and social discomfort associated with the last months of life.
Maintenance Care: also called custodial care or personal care, it is the type of care that is personal in nature, such as helping with the activities of daily living while the person is chronically ill. It does not include services that would come under skilled or intermediate nursing care. A person with no medical training can provide maintenance care, although it is typically still under the supervision of a medical person, such as a nurse or doctor. It is common for a family member to provide maintenance care.
Medical Necessity: care or services that are:
Plan of Care: a written individualized plan of services prescribed by a licensed health care practitioner.
Respite Care: the supervision and care of an individual while the family or other service individuals who normally provide substantial amounts of care take short-term leave.
Severe Cognitive Impairment: a loss or deterioration in intellectual capacity that is comparable to (and includes) Alzheimers disease and similar forms of irreversible dementia. It is measured by clinical evidence and standardized tests that assess mental impairment. Cognitive impairment typically includes such things as memory loss, loss of orientation as to people, places, and time or problems with deductive or abstract reasoning.
Substantial Assistance: either hands-on assistance or standby assistance. Hands-on Assistance is the physical assistance of another person without which the person would be unable to perform the activities of daily living. Standby Assistance means the presence of another person, within arms reach, that is necessary to prevent injury while performing the activities of daily living. This injury is prevented by being physically close enough to the person to provide physical intervention, such as catching the person if he or she begins to fall.
Terminally Ill: having six months or less to live, as certified by a qualified individual, such as a doctor.
Out-of-State Policies
Group long-term care insurance policies may not be offered to a resident of Washington under a group policy issued in another state to a group in this state unless the state of issue has substantially similar requirements. A determination would have to be made to determine that such requirements have been met. 48.83.030
Preexisting Health Conditions
Insurers may not define preexisting condition more restrictively than allowed by Washington. They may define it less restrictively, but not more so. Washington defines preexisting condition as a condition for which medical advice or treatment was recommended by or received from a provider of health care services within the previous six month period (six months prior to application). The exception is a policy or certificate that applies to group long-term care insurance under RCW 48.83.020(6) (a), (b), (c).
A long-term care insurance policy or certificate may not exclude coverage for a loss or confinement that is the result of a preexisting condition unless the loss or confinement begins within six months following the effective date of coverage. In other words, a medical condition that was noted as a preexisting condition is not covered during the first six months of the issued policy. This would include claims that are directly related to the preexisting condition.
Obviously insurers want to have application questions that are designed to elicit the complete health history of an applicant so they may correctly underwrite the policy. Unless otherwise provided under the terms of the policy, and regardless of whether the medical condition was disclosed on the application, a preexisting condition need not be covered until the waiting period expires.
Even though a preexisting condition exists insurers cannot exclude coverage for that condition. It is prohibited whether by policy clause, waivers, or riders. Once the preexisting time period has passed, if the policy was issued the condition must be covered following the preexisting 6 month exclusion period. Coverage also may not be reduced or limited in any way. Again, once the preexisting period has passed, coverage must be the same for that particular condition as for any other medical situation that may develop.
48.83.040
Prohibited Policy Terms and Practices
No long-term care insurance policy may:
48.83.050
Right to Return the Policy
Long-term care insurance applicants have the right, as previously discussed, to a free look at the policy they purchased. Applicants may return their policy or certificate for any reason within thirty days after it was delivered. Their premium must be refunded in full.
The notice of the right to return the policy for a full refund must be prominently printed on or attached to the first page of the policy. It must state that the applicant may return the policy or certificate within thirty days following delivery and receive their refund without question. The refund must be made within a thirty day period. Denials of refund must also be made within thirty days of the applicants request. This would not apply to group policies. 48.83.060
Outline of Coverage
An Outline of Coverage is given to the consumer prior to presenting an application or enrollment form. The outline must prominently direct the applicants attention to the document and its purpose. The commissioner will prescribe the standard format, including style, arrangement, overall appearance, and the content of an outline of coverage.
An issued policy will have an Outline of Coverage with the policy in addition to the copy that was presented at the time of application. Once the policy is approved it must be delivered within 30 days of approval. A policy summary will be delivered with the policy that provides long-term care benefits within the policy or rider. 48.83.070
Policy Summary
A policy summary is delivered to the applicant with their issued policy or rider. The summary will include an explanation of how the long-term care benefit interacts with other components of the policy including deductions from any applicable death benefits. An illustration of the amounts of benefits, the length of benefits, and the guaranteed lifetime benefits, if any, for each covered person. Exclusions, reductions, or limitations on policy benefits will also be listed. There will be a statement in the summary if any long-term care inflation protection options required by RCW 48.83.110 are not available under the policy.
If applicable to the policy type, the summary must also include a disclosure of the effects of exercising other rights under the policy, a disclosure of guarantees related to long-term care costs of insurance charges and current and projected maximum lifetime benefits. The provisions of the policy summary can be incorporated into a basic illustration or into the policy summary that is required under the rules adopted by Washingtons commissioner. 48.83.070
Acceleration of Death Benefits
Life insurance policies sometimes have language allowing benefits to be paid towards a long-term care confinement. When a long-term care benefit is being funded through a life insurance policy (by the acceleration of the death benefit) a monthly report must be provided to the policyholder. The report must include a record of all long-term care benefits that were paid out during the month and an explanation of any charges in the policy that resulted from the long-term care payment. For example, it must show if there is a change in the death benefit or cash values due to the long-term care payment. The report must also show any long-term care benefits that remain. 48.83.080
Denied Claims
All long-term care denials must be made within 60 days from receipt of the written request for benefits. All denials of long-term care claims by the issuer must provide a written explanation of the reasons for the denial and make available to the policyholder all information directly related to that denial. 48.83.090
Policy Rescission
In relation to the numbers of policies issued, very few are rescinded but agents must be aware that it can happen under specific circumstances. Insurers have a two year window for policy rescission and claim denial on the basis of misrepresentation that pertains to whether or not the policy would have been issued. If information on the original application is omitted or incorrect insurers may rescind the policy or deny an otherwise valid claim for benefits. Even if the information was given to the agent but not forwarded on to the insurer this may be true. That is why it is so important for the insured to review the copy of the original application for complete and accurate information in the newly issued policy.
After two years from policy issue the insurer cannot rescind or deny an otherwise valid claim on the basis of misrepresentation alone. It could be contested only if the insured knowingly and intentionally misrepresented relevant facts relating to his or her health.
If the insurance company paid some claims, then rescinded the policy or denied a claim it may not recover any previous benefit payments from the insured. 48.83.100
Nonforfeiture Benefit Option
A long-term care policy may not be delivered or issued for delivery in Washington unless the policyholder or certificate holder has been offered the option of purchasing a policy that includes a nonforfeiture benefit. The offer may be in the form of a rider that is attached to the policy. If the policyholder declines the nonforfeiture benefit the issuer must provide a contingent benefit upon lapse that is available for a specified period of time following a substantial increase in premium rates.
If a group long-term care insurance policy is issued, the nonforfeiture benefit option offer must be made to the master certificate holder, typically a business that is providing coverage to their employees. In some cases, if the policy is issued as group long-term care insurance the nonforfeiture option must be made to each proposed certificate holder.
The commissioner will adopt rules specifying the type or types of nonforfeiture benefits to be offered as part of long-term care insurance policies and certificate, the standards for nonforfeiture benefits, and the rules regarding contingent benefit upon lapse, including a determination of the specified period of time during which a contingent benefit will be available upon lapse, and the substantial premium rate increase that triggers a contingent benefit upon lapse. 48.83.120
Suitability Standards
While long-term care insurance products make sense for many people, such products are not necessarily right for every individual. Agents must determine whether a potential client can assume the premiums for many years, for example. Holding a policy only a year or two is simply not beneficial in most cases.
As of January 1, 2009, Washington law states: Issuers and agents must determine whether issuing long-term care insurance coverage to a particular person is appropriate, except in the case of a life insurance policy that accelerates benefits for long-term care.
48.83.140
An insurance company must develop and use suitability standards to determine whether the purchase or replacement of long-term care coverage is appropriate for the needs of the applicant or insured. Furthermore, they must train their contracted agents in the use of the issuers suitability standards and maintain copies of its suitability standards, making them available for inspection upon request.
In the past agents merely needed to appropriately explain the recommended policy and get the individuals signature on the dotted line. It is no longer that simple. Now agents must consider many elements of the applicants financial situation to determine if such a policy represents a good buy for the consumer. The agent must consider:
The sale or transfer of any suitability information provided to the agent or the insurance company is prohibited.
The commissioner may adopt forms of consumer-friendly personal worksheets that issuers and their agents must use for applications for long-term care coverage. Current insurer forms of suitability standards and personal worksheets may need to be filed with the commissioner. 48.83.140
Any person engaged in the issuance or solicitation of long-term care coverage may not engage in unfair methods of competition or unfair or deceptive acts or practices. This would include (but is not limited to) misrepresentation of facts or figures regarding existing policies or recommended policies. 48.83.150
Violations and Fines
A company or agent who violates a law or rule relating to the regulation of long-term care insurance or its marketing will be subject to a fine of up to three times the amount of the commission paid for each policy involved in the violation or up to $10,000, whichever is greater. 48.83.160
Rules (Effective January 1, 2009)
The commissioner must adopt rules that include standards for full and fair disclosure setting forth the manner, content, and required disclosures for the sale of long-term care insurance policies, terms of renewability, initial and subsequent conditions of eligibility, non-duplication of coverage provisions, coverage of dependents, preexisting conditions, termination of insurance, continuation or conversion, probationary periods, limitations, exceptions, reductions, elimination periods, requirements for replacement, recurrent conditions, and definitions of terms. The commissioner must adopt rules to promote premium adequacy and to protect policyholders in the event of proposed substantial rate increases and to establish minimum standards for producer education, marketing practices, producer compensation, producer testing, penalties, and reporting practices for long-term care insurance.
The commissioner will adopt rules establishing standards protecting patient privacy rights, rights to receive confidential health care services, and standards for an issuers timely review of a claim denial upon request of a covered person. The commissioner may adopt reasonable rules to effectuate any provision of this chapter. 48.83.170
If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected. 48.83.900
Receiving LTC Benefit Payments
Long-term care policies pay benefits when the terms of the insurance contract are met. It is important to read any policy that is purchased and become familiar with all the requirements in the contract. Certainly any agent recommending a policy needs to have done this prior to recommending any type of contract. While there may be variances (although all policies sold in Washington will meet state requirements) typically policies will state several conditions that must be met, which might include:
The amount of insurance benefit received will depend, of course, upon the terms of the policy. The policy must be currently in force and there must be benefits available under the contract.
Any elimination period, as previously discussed, must be met. In other words, if the insured chose a 30-day elimination period that period of time must pass before benefits are payable. In addition, the insured must be receiving care that would have qualified under the policy during the 30-day elimination period. The 30-day period just discussed is an example only. The actual elimination period may be anywhere from zero days up to 120 days, depending upon the period of time selected by the applicant at the time the policy was purchased. A zero day elimination period will understandably cost more than a 30-day to 120-day elimination period. Many people chose their elimination period based upon the cost of the policy, but the decision should be based upon multiple reasons, not just cost. The length of the elimination period selected will be shown in the Policy Schedule in the long-term care contract.
If Medicare pays their skilled care benefit during the policy elimination period those days still apply. It is not necessary that the initial days of confinement be paid for by the insured; merely that the care received during that period of time qualifies for benefits under the issued policy. Of course, if Medicare paid benefits, the policy would not duplicate Medicares payment. Only when Medicare ceased paying would the policy typically begin.
Not all policy benefits are subject to the elimination period selected for the policy. Some benefits will be available without first satisfying it. For example, such things as respite care, hospice care or caregiver training benefits may be available without regard to the elimination period selected. As always, it is important to refer to the issued policy for details.
In some cases, multiple benefits will be available in a single day under the long-term care policy. These multiple benefits might include:
Care Coordination Services
Some policies will contain a care coordination benefit with the goal of identifying specific care needs. At one time, policyholders were concerned that this service was an effort to prevent benefit payment but that is seldom the case. Rather utilizing care coordination services allows the most efficient use of policy benefits. These services identify the specific needs of the insured and the services available in the area that can meet those needs.
Care coordination services will help the insureds family members by providing an individual with knowledge and training who can help them determine the best way to care for their insured member. Generally these services are advisory only and are provided at no additional cost to the insured or their family. The insured is not required to follow their advice or use the providers they suggest or identify as able to provide the type of care required. However, some policies will not provide some specific benefits, such as additional home health care benefits or alternative care benefits, unless they are recommended by a care coordinator. The policy elimination period will not apply to the services provided by a care coordinator. Neither will using a care coordinator reduce the benefits available under the long-term care policy.
Once policy benefits have been exhausted, the care coordinator may recommend a transition plan specifying how needs might be met after policy benefits end.
Nursing Home Benefits
Most long-term care insurance policies are specifically designed to cover costs in a nursing home. They may contain other types of benefits, such as assisted care and home health care but the primary purpose is to cover the catastrophic costs associated with care in a nursing home. Catastrophic is the key word. Care in a nursing home is very expensive, although costs do vary depending upon where one lives. In 2006 the average cost for a semi-private room in a nursing home, based on the average of all 50 states, was $171 per day. In Washington the 2006 average rate was $210.66 per day or $6,319.80 per month.[2] Obviously this is an expensive form of care and rates continue to rise.
A long-term care facility is an institution which:
In order for a long-term care policy to pay for care in a nursing home there must be a certified medical necessity for the care. In other words, it might be more convenient for the family if the insured was admitted to a nursing home, but unless it is medically required the policy will not cover the confinement.
If the insured meets the eligibility requirements of his or her policy, benefits will be paid after the elimination period has been met. Covered expenses typically mean room and board, ancillary services, and patient supplies provided by the nursing home for the care of their residents. Covered expenses will not generally include prescription or nonprescription drugs. The policy will not pay for charges for comfort and convenience items, such as television, personal telephone service, beauty care, or entertainment, unless these are provided as part of the general per-day room rate. Such things as guest meals most certainly will not be covered by the policy even if the guest meals are for the insureds visiting spouse.
The policy will pay based on the benefits purchased. If the policy covers a per day rate then they will pay up to that specified amount, but never more than actual charges. For example, Mildred has a long-term care policy that pays a daily benefit of $300 per day in a covered nursing home. She has met all policy requirements, including her elimination period. When her policy begins paying it will pay only actual charges. Her daily room rate is $210 so that is the amount her policy will pay, even though she has a daily benefit of $300 in her policy. As rates rise, her policy will still pay the daily rate as long as it never goes over the $300 per day stipulated in Mildreds contract.
If Mildred bought an integrated long-term care policy there will not necessarily be a daily nursing home rate stipulated. Some integrated policies do still have a maximum daily rate that will be paid, while others do not include any maximum daily rate. Once again, it is necessary to refer to the issued policy for exact details. Integrated long-term care policies work with a pool of money. Once that pool is exhausted, all benefits end. In Mildreds case, if she had purchased an integrated long-term care policy, her benefits would continue until she used up all the benefits that had been purchased. If no daily payout amount was stipulated it may not matter what the per-day cost is, but she will still have to use some common sense to prevent using up all her nursing care benefits prematurely.
No policy pays for everything. There are nearly always some items that remain unpaid, whether it happens to be a personal telephone in the room for Mildred, prescription drugs, or just a new pair of pajamas.
Policy benefits will end when the eligibility for payment is no longer met or the maximum lifetime benefit has been reduced to zero.
Assisted Living Facility Benefits
Assisted living facilities are perhaps one of the best things to come from the increased need for nursing home care. Generally people tend to respond better to assisted living confinements since they offer a more home-like setting. Not everyone qualifies since some types of care cannot be provided in assisted living facilities. In many cases, however, use of assisted living facilities prevents the need for a nursing home confinement.
If an individual meets the eligibility requirements of their policy, the contract will cover qualified benefits in an assisted living facility. The policy will pay for room and board for a one-bedroom or studio unit (depending upon policy terms), ancillary services, and patient supplies provided by the assisted living facility for care of its residents. Again, the contract will not pay all costs, just as it will not for nursing home care. The policy will probably not pay for prescription drugs, comfort or convenience items, or beauty care, such as having ones hair washed and styled.
The policy will pay the covered expensed that are incurred for assisted living facility care up to the maximum benefit stated in the policy. As it was for nursing home benefits, the exact maximum daily benefit will be stated in the policy on the Policy Schedule page. The benefit will end when the insureds eligibility for payment ends or when the maximum lifetime benefit has been reduced to zero.
Some policies will continue to pay for the room and board, reserving the bed, when the patient is absent for a short period of time (for example, if Mildred went to the hospital for a few days). This is called a bed reservation benefit. Policies will state a maximum period for which they will do this, often 31 days per calendar year. Unused bed reservation days cannot be carried over into the next calendar year. The elimination period must have been previously met to receive this benefit.
Home Health Care Benefits
Some policies will contain a Home Health Care benefit. If the insured meets the eligibility requirements of the policy for either basic home health care or professional home health care, a daily benefit will be paid by the policy. The policy will cover home health care services, maintenance or personal care services, homemaker services, and care in an adult day health care center, and sometimes transportation to and from the adult day health care center.
Covered expenses for home health care benefits refer to fees charged by a home health care agency or an independent provider of some type; seldom would it pay the insureds family members for such care unless they were specifically trained to provide it. Covered services include:
The policy will pay actual charges for covered expenses up to any maximums stated in the policy. Benefits will end when the insured no longer qualifies under the policy or when the maximum lifetime benefit has been reduced to zero.
Caregiver Training Benefit
Insurance companies and other professionals have recognized that a family member is often the best person to provide an individuals care. If the insured meets the policys eligibility standards one of their family members may be trained to care for the insured individual, with the cost of that training covered by the policy. Often this benefit is available only if the insurers care coordinator recommends such training. Therefore, the insured is wise to make use of the care coordinators availability.
Caregiver training would not apply to all situations. For example, it would not apply to care provided in a hospital setting (the insured is not going to send a spouse to nursing school, for example). It would apply only to caregiver training in the proper use and care of therapeutic devices or other appropriate procedures for a chronically ill person. There will generally be a maximum benefit amount for caregiver training specified in the policy. The elimination period would not apply to this benefit.
Alternate Care Benefit with Care Coordination Services
Alternate care benefits are not automatic; generally they must be approved by the issuer of the long-term care policy. Issuers will approve an alternate care plan when it makes sense to do so from both a patient-care perspective and a financial perspective. The care coordinator must identify the alternate services, devices, or types of care that would be generally acceptable under current medical practices, in a written alternate plan of care for which no benefits would otherwise be payable under the terms of the policy. This would include new types of care. Assisted living facilities were often covered in past years by use of the alternate care benefit clauses in policies when that type of care first emerged. Since companies never know when another new type of care might emerge it makes sense to put such clauses in long-term care policies. When assisted living facilities first emerged it became clear that such care was less expensive than nursing home care and better received by their policyholders. For those who needed some type of care, but not necessarily the high degree offered in nursing homes, the option was acceptable from a medical standpoint and certainly acceptable from a financial standpoint.
Generally the care coordinator, the insured or their representative, the insureds physician, and the insurer must all agree that the alternative service or treatment is appropriate to meet the patients needs and are determined to be a reasonable alternative. When alternative care is appropriate the maximum lifetime limits of the policy will still apply and eligibility under the policy is still applicable. The alternate care benefits may be discontinued at any time without affecting the insureds rights to other coverages in their policy.
Hospice Care Benefit
Hospice care benefits refer to an insured that is terminally ill, usually with six months or less to live. When an individual enters hospice care policies will typically cover room and board, ancillary services provided by the Hospice Care facility, assisted living facility, or nursing home and patient supplies provided by the facility for the care of their residents. The elimination period does not apply to this type of care in most cases.
Prescription drugs will not be covered in hospice care. Nor will convenience items or other non-medical services be covered. Policies are likely to have maximums as well. Benefits will end when the insured is no longer eligible under the policy or when the maximum lifetime benefit has been reduced to zero.
Respite Care Benefit
Respite care is provided when normal caregivers need a break from their duties. If the insured meets the eligibility requirements of their policy their caregiver may receive temporary, short-term relief. The policy will only pay the person who takes their place; it will not continue to pay the normal caregiver while they are on break from their duties. Policies usually cover expenses in a nursing home, an assisted living facility or home health care if the individual can remain at home during this time. The elimination period will generally not apply.
Restoration of Benefit
In policies that restore previously used benefits, specific conditions will apply. Following a period of time during which the insured had been paying benefits some of the benefits will restore (up to the remaining maximum lifetime benefit) after the insured meets the qualification free period. The restored amount will not exceed the maximum lifetime benefit that is payable, subject to inflation protection increases if they apply.
In many cases, restoration of benefits may occur more than once, but never past the policys stated maximum lifetime benefit. If the coverage is being continued in accordance with the terms of any nonforfeiture benefit restoration of benefits provisions may not apply.
Waiver of Premium Benefit
The waiver of premium benefit allows an insured to cease paying their long-term care policy premiums at a specified time following institutionalization. Elimination periods must be satisfied and typically do not apply towards the time periods required for waivers of premium. Insurers waive the payment of premium that become due while the policy is in force and the insured meets the eligibility for payment of benefits under their contract. It is important to note the words become due. The waiver of premium benefit will not refund previously paid premiums. Only those premiums that become due are waived.
Inflation Protection Riders
Perhaps one of the most important considerations when applying for long-term care policies is the inflation protection benefit. It is common for an individual to maintain a long-term care policy for many years before needing the benefits it provides. During this long period of time something happens: the cost of care rises. A policy purchased ten years ago may have seemed more than adequate at that time but ten years later it is far from adequate. Adding an inflation protection rider increases the amount of benefits at set intervals, usually policy anniversary dates.
Industry professionals generally recommend inflation protection, but the cost can be high. Those who purchase at younger ages are especially encouraged to add this feature since the cost of long-term care is certain to increase over time. The cost of providing long-term care has been increasing faster than inflation. At older ages, the consumer will need to weigh the cost of the additional premium option with the amount of increase in benefits that will be produced.
The rising cost of institutional care surpasses the increase in the Consumer Price Index. Over the next 30 years, we expect nursing home care to reach around $117,000 per year. Many areas will see higher rates. For retired people on a fixed income, such costs will probably be beyond their means.
Many in the health care field state that the amount of increase is not adequate, but it will help to offset the rising costs of long-term care. The inflation protection, usually a 5 percent yearly increase, may eventually become part of all policies, but currently it is most likely to be just an option that the consumer must accept or reject. Some states require the consumer to sign a rejection form as proof that the agent offered the option.
Simple and Compound Inflation Protection
Inflation protection is offered in one of two ways: simple increases in benefits or compound increases in benefits. Like interest earnings, the benefits increase based on only the original daily indemnity amount or on the total indemnity amount (base plus previous increases). Some states mandate that all inflation protection options offered must be compound protection; others allow the insurers to offer both types. Under a simple inflation benefit, a $100 daily benefit would increase by $5 each year. Under a compound inflation benefit the protection increases by 5 percent of the total daily benefit payment. This is called a compound inflation benefit because it uses the previous year's amount rather than the original daily benefit amount. This is the same basis used with interest earnings on investments. Compound interest earnings are always better than simple interest earnings. The following graph more clearly illustrates how compounding works with the inflation protection riders.
|
|
Year 1 |
Year 5 |
Year 10 |
Year 15 |
Year 20 |
|
Base Policy |
$100 |
$100 |
$100 |
$100 |
$100 |
|
Simple |
$100 |
$120 |
$145 |
$170 |
$195 |
|
Compound |
$100 |
$121 |
$155 |
$197 |
$252 |
Required Rejection Forms
The individual state insurance departments generally recommend inflation protection riders to their citizens. Inflation protection plans must continue even if the insured is confined to a nursing home or similar institution. Many states are now requiring a signed rejection form if the insured does not accept the inflation protection option. Although this is intended to be consumer protection, it is also agent protection. It assures that the family of the insured will not later try to sue the agent for failing to sell the inflation protection.
Partnership Long-Term Care Policy Inflation Protection Requirements
Partnership programs mandate inflation protection in their policies; there is no consumer choice.
Inflation protection has gained recognition for its value as costs have sharply risen so those who determined Partnership requirements felt it must be included in all issued Partnership plans. An inflation provision stipulates that benefits will increase by some designated amount over time. Inflation protection ensures that long-term care insurance products retain meaningful benefits into the future. Because policies may be purchased well before they are needed, and long-term care costs are likely to continue to increase, inflation protection can be a key selling point for consumers interested in purchasing private LTC coverage.
The DRA requires that Partnership policies sold to those under age 61 provide compound annual inflation protection. The amount of the benefit (e.g., 3 percent or 5 percent per year) is left to the discretion of individual states. Policies purchased by individuals who are over 61 but not yet 76 must include some level of inflation protection, and policies purchased by those over 76 may, but are not required, to provide some level of inflation protection.
There are two main types of inflation protection used in long-term care insurance plans: future-purchase options (FPO) and automatic benefit increase options (ABI). Under FPO protection the consumer agrees to a premium for a set amount of coverage. At specified intervals (such as every two years, for example), the insurance issuer offers to increase existing coverage for additional premium. If the consumer declines the increased benefits (or cannot afford to buy them) policy benefit levels remain the same, even though costs for long-term care services may be increasing. A policy purchased to pay a $100 daily benefit may not be adequate ten years later. On the other hand, it may be better to have a $100 per day benefit than none at all.
With ABI, the amount of coverage automatically increases annually by a contractually specified amount. The cost of those benefit increases are automatically built into the premium when the policy is first purchased, so the premium amount remains fixed. Policies that have ABI protection are generally more expensive up front, but are more effective at ensuring that policy benefits will be adequate to cover costs down the road.
Consumer advocacy organizations and some members of Congress maintain that the intent of the language in the DRA was to require automatic compound inflation protection for those under age 61, but some insurers believe that future-purchase option protections can also satisfy the requirement. As of this writing, the Centers for Medicare and Medicaid Services (CMS) have not issued guidance on this matter.
End of Chapter 1
United Insurance Educators, Inc.