Guide to Long-term Care Insurance

By: America's Health Insurance Plans

Guide to Long-TermCare About AHIP Insurance America’s Health Insurance Plans is a national association representing nearly 1,300 members providing health benefits to more than 200 million Americans. AHIP and its predecessor organizations have advocated on behalf of health insurance plans for more than six decades. As the voice of America’s health insurers, our goal is to advance a vibrant, private-public health care system, one characterized by consumer choice, product flexibility and innovation. We support empowering consumers with the information they need to make health care decisions, promoting health care quality in partnership with health care providers, and expanding access to affordable health care coverage to all Americans. AHIP’s mission is to effectively advocate for a workable legislative and regulatory environment at the federal and state levels, one in which our members can advance their vision of a health care system that meets the needs of consumers, employers and public purchasers. www.ahip.org Providing health benefits to over 200 million Americans 1 Contents What is long-term care?..........................................2 Are you likely to need long-term care?....................2 What does long-term care cost? ..............................3 Who pays the bills? ................................................4 Where can I get long-term care coverage? ..............5 What are the types of long-term care policies? ........5 What do policies cost? ............................................6 Will my premiums increase as I get older? ..............8 What do long-term care insurance policies cover? ..8 What is not covered? ..............................................9 What else should I know before I buy? ................10 What about switching policies? ............................12 What should I look for in a policy? ......................12 Before you buy ....................................................13 Long-term care policy checklist ............................14 HIPAA’s impact on long-term care insurance ......16 Tax treatment ......................................................16 Consumer protection standards ............................17 If you need help ..................................................19 America’s Health Insurance Plans 601 Pennsylvania Ave, NW South Building · Suite 500 Washington, DC 20004 (202) 778-3200 · www.ahip.org friends are the sole caregivers for 70 percent of elderly people. A study by the U.S. Department of Health and Human Services indicates that people age 65 face at least a 40 percent lifetime risk of entering a nursing home sometime during their lifetime. About 10 percent will stay there five years or longer. The American population is growing older, and the group over age 85 is now the fastest-growing segment of the population. The odds of entering a nursing home, and staying for longer periods, increase with age. In fact, statistics show that at any given time, 22 percent of those age 85 and older are in a nursing home. Because women generally outlive men by several years, they face a 50 percent greater likelihood than men of entering a nursing home after age 65. While certainly older people are more likely to need long-term care, your need for long-term care can come at any age. In fact, the U.S. Government Accountability Office estimates that 40 percent of the 13 million people receiving long-term care services are between the ages of 18 and 64. What does long-term care cost? Long-term care can be very expensive and the real amount you will spend depends on the level of services you need and the length of time you need care. One year in a nursing home can average more than $50,000. In some regions, it can easily cost twice that amount. Home care is less expensive but it still adds up. Bringing an aide into your home just three times a week (two to three hours per visit) to help with dressing, bathing, preparing meals, and similar household chores can easily cost $1,000 a month or $12,000 a year. Add in the cost of skilled help, such as physical therapists, and these costs can be much greater. The average monthly fee assisted living facilities charge is around $2,000. This includes rent and most additional fees. Some residents in the facility may pay significantly more if their care needs are higher. 2 3 What is long-term care? Insurance is an important tool for protecting yourself against risk. For instance, health insurance pays your doctor and hospital bills if you get sick or injured. But how can you help protect yourself against the significant financial risk posed by the potential need for long-term care services, either in a nursing home or in your own home? Long-term care goes beyond medical care and nursing care to include all the assistance you could need if you ever have a chronic illness or disability that leaves you unable to care for yourself for an extended period of time. You can receive long-term care in a nursing home, assisted-living facility, or in your own home. Though older people use the most long-term care services, a young or middle-aged person who has been in an accident or suffered a debilitating illness might also need long-term care. Beyond nursing homes, there is a range of services available in the community to help meet long-term care needs. Visiting nurses, home health aides, friendly visitor programs, home-delivered meals, chore services, adult daycare centers, and respite services for caregivers who need a break from daily responsibilities can supplement care given by family members. These services are becoming more widely available. Some or all of them may be found in your community. Your local Area Agency on Aging or Office on Aging can help you locate the services you need. Call the Eldercare Locator at 800-677-1116 to identify your local office. Are you likely to need long-term care? You may never need long-term care. But about 19 percent of Americans aged 65 and older experience some degree of chronic physical impairment. Among those aged 85 or older, the proportion of people who are impaired and require long-term care is about 55 percent. In the year 2020, some 12 million older Americans are expected to need long-term care. Most will be cared for at home. Family members and Where can I get long-term care coverage? Although long-term care insurance is relatively new, more than 100 companies now offer coverage. Long-term care insurance is generally available through groups and to individuals. Group insurance is typically offered through employers, and this type of coverage is becoming a more common benefit. By the end of 2002, more than 5,600 employers were offering a long-term care insurance plan to their employees, retirees, or both. Individual long-term care insurance coverage is a good option if you are not employed, work for a small company that doesn’t offer a plan, or are selfemployed. Choosing a policy requires careful shopping because coverage and costs vary from company to company and depend on the benefit levels you choose. What are the types of long-term care policies? Several types of policies are available. Most are known as “indemnity” or “expense incurred” policies. An indemnity or “per diem” policy pays up to a fixed benefit amount regardless of what you spend. With an expense-incurred policy, you choose the benefit amount when you buy the policy and you are reimbursed for actual expenses for services received up to a fixed dollar amount per day, week, or month. Today, many companies also offer “integrated policies” or policies with “pooled benefits.” This type of policy provides a total dollar amount that may be used for different types of long-term care services. There is usually a daily, weekly, or monthly dollar limit for your covered long-term care