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Long-term care insurance (LTC or LTCI) is an insurance product, sold in the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
,
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and ...
and
Canada Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by to ...
that helps pay for the costs associated with
long-term care Long-term care (LTC) is a variety of services which help meet both the medical and non-medical needs of people with a chronic illness or disability who cannot care for themselves for long periods. Long-term care is focused on individualized and ...
. Long-term care insurance covers care generally not covered by
health insurance Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among m ...
, Medicare, or
Medicaid Medicaid in the United States is a federal and state program that helps with healthcare costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and per ...
. Individuals who require long-term care are generally not sick in the traditional sense but are unable to perform two of the six
activities of daily living Activity may refer to: * Action (philosophy), in general * Human activity: human behavior, in sociology behavior may refer to all basic human actions, economics may study human economic activities and along with cybernetics and psychology may s ...
(ADLs) such as dressing, bathing, eating, toileting, continence, transferring (getting in and out of a bed or chair), and walking. Age is not a determining factor in needing long-term care. About 70 percent of individuals over 65 will require at least some type of long-term care services during their lifetime. About 40% of those receiving long-term care today are between 18 and 64. Once a change of health occurs, long-term care insurance may not be available. Early onset (before 65)
Alzheimer's Alzheimer's disease (AD) is a neurodegenerative disease that usually starts slowly and progressively worsens. It is the cause of 60–70% of cases of dementia. The most common early symptom is difficulty in remembering recent events. As t ...
and
Parkinson's disease Parkinson's disease (PD), or simply Parkinson's, is a long-term degenerative disorder of the central nervous system that mainly affects the motor system. The symptoms usually emerge slowly, and as the disease worsens, non-motor symptoms beco ...
occur rarely. Long-term care is an issue because people are living longer. As people age, many times they need help with everyday activities of daily living or require supervision due to severe cognitive impairment. That impacts women even more since they often live longer than men and, by default, become caregivers to others.


Benefits

Long-term care insurance can cover
home care Homecare (also spelled as home care) is health care or supportive care provided by a professional caregiver in the individual home where the patient or client is living, as opposed to care provided in group accommodations like clinics or nursing h ...
,
assisted living An assisted living residence or assisted living facility (ALF) is a housing facility for people with disabilities or for adults who cannot or who choose not to live independently. The term is popular in the United States, but the setting is si ...
, adult daycare,
respite care __NOTOC__ Respite care is planned or emergency temporary care provided to caregivers of a child or adult. Respite programs provide planned short-term and time-limited breaks for families and other unpaid caregivers of children with a developmenta ...
, hospice care,
nursing home A nursing home is a facility for the residential care of elderly or disabled people. Nursing homes may also be referred to as skilled nursing facility (SNF) or long-term care facilities. Often, these terms have slightly different meanings to i ...
,
Alzheimer's Alzheimer's disease (AD) is a neurodegenerative disease that usually starts slowly and progressively worsens. It is the cause of 60–70% of cases of dementia. The most common early symptom is difficulty in remembering recent events. As t ...
facilities, and home modification to accommodate disabilities. If home care coverage is purchased, long-term care insurance can pay for home care, often from the first day it is needed. It will pay for a visiting or live-in
caregiver A caregiver or carer is a paid or unpaid member of a person's social network who helps them with activities of daily living. Since they have no specific professional training, they are often described as informal caregivers. Caregivers most commo ...
, companion, housekeeper, therapist or private duty nurse up to seven days a week, 24 hours a day up to the policy benefit maximum. Many experts suggest shopping between the ages of 45 and 55 as part of an overall retirement plan to protect assets from the high costs and burdens of extended health care. Other benefits of long-term care insurance: * Many individuals may feel uncomfortable relying on their children or family members for support, and find that long-term care insurance could help cover
out-of-pocket expenses An out-of-pocket expense (or out-of-pocket cost, OOP) is the direct payment of money that may or may not be later reimbursed from a third-party source. For example, when operating a vehicle, gasoline, parking fees and tolls are considered out-of ...
. Without long-term care insurance, the cost of providing these services may quickly deplete the savings of the individual and/or their family. The costs of long-term care differ by region. The U.S. government has an interactive map to estimate the costs by state. * Premiums paid on a long-term care insurance product may be eligible for an income
tax deduction Tax deduction is a reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. Tax deductions are a form of tax incentives, along with exemptions and tax credits ...
. The amount of the deduction depends on the age of the covered person. Benefits paid from a long-term care contract are generally excluded from income. Some states also have deductions or credits and proceeds are always tax-free. * Business deductions of premiums are determined by the type of business. Generally corporations paying premiums for an employee are 100%
deductible In an insurance policy, the deductible (in British English, the excess) is the amount paid out of pocket by the policy holder before an insurance provider will pay any expenses. In general usage, the term ''deductible'' may be used to describe ...
if not included in employee's
taxable income Taxable income refers to the base upon which an income tax system imposes tax. In other words, the income over which the government imposed tax. Generally, it includes some or all items of income and is reduced by expenses and other deductions. ...
. In the United States, Medicaid will provide long-term care services for the poor or those who spend-down assets because of care and exhaust their assets. In most states, you must spend down to $2000. If there is a living spouse/partner they may keep an additional amount. A welfare program, Medicaid does provide medically necessary services for people with limited resources who "need nursing home care but can stay at home with special community care services." However, Medicaid generally does not cover long-term care provided in a home setting or for
assisted living An assisted living residence or assisted living facility (ALF) is a housing facility for people with disabilities or for adults who cannot or who choose not to live independently. The term is popular in the United States, but the setting is si ...
. People who need long-term care often prefer care in the home or in a private room in an assisted living facility.


Types of policies

Private long-term care (LTC) insurance is growing in popularity in the United States. Premiums, however, have risen dramatically in recent years even for existing policyholders. Coverage costs can be expensive, when consumers wait until retirement age to purchase LTC coverage. As they relate to U.S. policies, two types of long-term care policies offered are: * Traditional policies are the most common policies offered. Traditional policy premiums, like automobile insurance premiums, are paid on a continual basis. If unused, no premiums are returned. However, if the policy has a "return of premium" rider, a death benefit will be paid to a beneficiary if the insured dies at a time when benefits received under the policy are less than the premiums paid to the insurer. The amount of the benefit is equal to the excess of premiums paid over benefits received. * Combination or hybrid policies are a combination of life insurance or an annuity with long-term care insurance. Several varieties of these combinations exist. As they relate to U.S. income tax, two types of long-term care policies offered are: * Tax qualified (TQ) policies are the most common policies offered. A TQ policy requires that a person 1) be expected to require care for at least 90 days, and be unable to perform 2 or more
activities of daily living Activity may refer to: * Action (philosophy), in general * Human activity: human behavior, in sociology behavior may refer to all basic human actions, economics may study human economic activities and along with cybernetics and psychology may s ...
(eating, dressing, bathing, transferring, toileting, continence) without substantial assistance (hands-on or standby); or 2) for at least 90 days, need substantial assistance due to a severe cognitive impairment. In either case, a doctor must provide a plan of care. Benefits from a TQ policy are non-taxable. * Non-tax qualified (NTQ) was formerly called traditional long-term care insurance. It often includes a "trigger" called a "
medical necessity Medical necessity is a legal doctrine in the United States related to activities that may be justified as reasonable, necessary, and/or appropriate based on evidence-based clinical standards of care. In contrast, unnecessary health care lacks su ...
" trigger. This means that the patient's own doctor, or that doctor in conjunction with someone from the insurance company, can state that the patient needs care for any medical reason and the policy will pay. NTQ policies include walking as an activity of daily living and usually only require the inability to perform 1 or more activity of daily living. The Treasury Department has not clarified the status of benefits received under a non-qualified long-term care insurance plan. Therefore, the taxability of these benefits is open to further interpretation. This means that it is possible that individuals who receive benefits under a non-qualified long-term care insurance policy risk facing a large tax bill for these benefits. Fewer non-tax qualified policies are available for sale. One reason is that consumers want to be eligible for the tax deductions available when buying a tax-qualified policy. The tax issues can be more complex than the issue of deductions alone, and it is advisable to seek good counsel on all the pros and cons of a tax-qualified policy versus a non-tax-qualified policy, since the benefit triggers on a good non-tax-qualified policy are better. By law, tax-qualified policies carry restrictions on when the policy holder can receive benefits. One survey found that sixty-five percent of purchasers did not know whether or not the policy they bought was tax qualified."Who buys long‑term care insurance? A 15‑year study of buyers and non‑buyers, 1990‑2005"
,
America's Health Insurance Plans AHIP (formerly America's Health Insurance Plans) is an American political advocacy and trade association of health insurance companies that offer coverage through the employer-provided, Medicare Advantage, Medicaid managed care, and individual ...
, April 2007
Once a person purchases a policy, the language cannot be changed by the insurance company, and the policy usually is guaranteed renewable for life. It can never be canceled by the insurance company for health reasons, but can be canceled for non-payment. Most benefits are paid on a reimbursement basis and a few companies offer indemnity-based per-diem benefits at a higher rate. Most policies cover care only in the continental United States. Policies that cover care in select foreign countries usually only cover nursing care and do so at a rated benefit. Group policies may have provisions for non-restricted or open enrollment periods and underwriting may be required. Group plans may or may not be guaranteed renewable or tax qualified. Some group plans include language allowing the insurance company to replace the policy with a similar policy and to change the premiums at that time. Some group plans can be canceled by the insurance company. To compensate for the higher insurance risk group plans may have higher deductibles and lower benefits than individual plans. Some group plans have a 3 ADL (activities of daily living) requirement for nursing care. The Consolidated Omnibus Budget Reconciliation Act (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. Retirement systems such as
CalPERS The California Public Employees' Retirement System (CalPERS) is an agency in the California executive branch that "manages pension and health benefits for more than 1.5 million California public employees, retirees, and their families".CalPERSFa ...
may offer long-term care insurance similar to a group plan. These organizations are not regulated by the state insurance departments. They can increase rates and make changes to policies without state scrutiny and approval. Long-term care insurance rates are determined by six main factors: the person's age, the daily (or monthly) benefit, how long the benefits pay, the elimination period, inflation protection, and the health rating (preferred, standard, sub-standard). Most companies will offer couples and multi-life discounts on individual policies. Some companies define "couples" not only to spouses, but also to two people who meet criteria for living together in a committed relationship and sharing basic living expenses. The average age of purchasers has dropped from 68 years in 1990 to 61 years in 2005, and the number of purchasers who are under age 65 has increased significantly. Most companies offer multiple premium payment modes: annual, semi-annual, quarterly, and monthly. Companies may add a percentage for more frequent payment than annual. Options such as spousal survivorship, non-forfeiture, restoration of benefits and return of premium are available with most plans. The Deficit Reduction Act of 2005 makes Partnership plans available to all states. Partnership provides "lifetime asset protection" from the Medicaid spend-down requirement. As of March 2014, 41 states had active Long Term Care Insurance Partnership programs.


Benefit eligibility and deductibles

Most policies pay benefits when the policyholder needs help with two or more of six ADLs or when a cognitive impairment is present. According to the US Department of Health and Human Services all tax-qualified long-term care insurance plans have the same trigger. Most policies have an elimination period or waiting period similar to a deductible. This is the period of time that you pay for care before your benefits are paid. Elimination days may be from 30 to 120 days after a long-term care incident, such as a fall or illness. Some policies require intended claimants to provide proof of 30 to 120 service days of paid care before any benefits will be paid. In some cases, the option may be available to select zero elimination days when covered services are provided in the home in accordance with a Plan of Care. A policyholder can select a maximum daily or monthly benefit. This is the maximum the insurance company will pay toward care on either a daily or monthly basis


LTC riders in Canada

LTC Insurance riders generally available in Canadian policies include: * ROPD – Return of premium on death. Your premiums are returned to your estate. * Protection from inflation – Policy benefit grows at a set rate of return.


LTCi in Germany

In Germany there are two different kinds of care insurance: mandatory care insurance and voluntary, private care insurance. The German laws oblige the people to have a basic care insurance. It is one of five mandatory insurances, the others are health, accident, unemployment and pension insurance. As usual in the German public insurance system costs are evenly split between employers and employees. There are three types of private care insurance: 1. The most expensive form of private care insurance is like a life insurance. It pays you a monthly pension when the insured needs to be taken care of, no matter what the care actually costs. When making the contract you can choose how much the insurance pays each month, depending on the care level. 2. Another form of private care insurance pays a certain percentage of the actual cost after the mandatory care insurance has paid. Here you can decide on the percentage that is being paid, depending on the care level. The advantage of this type of insurance is that it pays more money when the care costs more, so the risk of raised prices is lower for the insured. 3. The most common type of private care insurance pays a certain amount of money for each day where the insured is being taken care of.


LTCi in the United States

Some 7 million individuals have some form of long-term care insurance. The vast majority have what is referred to as traditional, or health-based, LTC insurance. The opposite is true for new policy sales. Some 350,000 new policies are sold each year with 84 percent being linked-benefit or life insurance policies that include a LTC benefit. In the U.S., the nation's long-term care insurance companies paid out a record $11 billion in claims in 2019 to some 310,000 policyholders.2019 Long-Term Care Insurance Claims,
/ref> A new study projects that th
lifetime chance of long-term care insurance policy usage
Someone purchasing coverage at age 65 has a 50% likelihood of using their policy benefits, especially when there is no elimination period for home care benefits.


See also

*
Activities of daily living Activity may refer to: * Action (philosophy), in general * Human activity: human behavior, in sociology behavior may refer to all basic human actions, economics may study human economic activities and along with cybernetics and psychology may s ...
*
CLASS Act ''Class Act'' is a 1992 American comedy film directed by Randall Miller and starring hip-hop duo Kid 'n Play. An urban retelling of Mark Twain's ''The Prince and the Pauper'', the film was written by Cynthia Friedlob and John Semper from a stor ...
* Continuing Care Retirement Community *
Health insurance in the United States Health insurance in the United States is any program that helps pay for medical expenses, whether through privately purchased insurance, social insurance, or a social welfare program funded by the government. Synonyms for this usage include ...
* Long Term Care Benefit Plan


References


External links


What to look for in a LTC policy from Consumer Reports (February 2011)

U.S. Department of Health and Human Services Long Term Care information

American Association for Long Term Care Insurance - AALTCI

National Institute on Health




* ttps://www.medicaid.gov/medicaid/eligibility/index.html Medicaid Eligibility {{DEFAULTSORT:Long Term Care Insurance Caregiving Elderly care Health insurance Medicare and Medicaid (United States)