For more information, visit our section on Long-Term Care Insurance.
What is Long-Term Care?
Individuals suffering from prolonged physical illness, disability, or cognitive impairment often require long-term care, which may be provided by family, by paid in-home assistants, or by staff in various types of facilities.
Potential sources of payment for individuals needing long-term care may include:
- Personal resources including income, savings, investments, or assets that are sold to pay for ongoing care,
- Medicare may pay for some related intermittent care, but you should not count on Medicare to pay your long-term care costs. Contact Medicare at www.medicare.gov or (800) 733-4227 for more information.
- MaineCare (Medicaid) pays qualifying nursing home and some community-based costs for low-income individuals who have spent most of their assets. Contact the Maine Bureau of Elder & Adult Services at (207) 287-9200 for more information.
- Long-term care insurance purchased before care is needed.
Long-Term care insurance provides a minimum of 12 consecutive months of coverage for health services received somewhere other than in an acute care unit of a hospital or similar facility. An LTC policy will pay for covered expenses incurred through nursing homes, assisted living facilities, retirement homes, adult day care centers, in-home care, and hospices. Benefits are available to pay for services received from skilled, intermediate, and custodial caregivers. For benefits to be paid, the services received must be given under a doctor's written plan of care.
The decision to buy long-term care insurance is based on many factors, including your age, health, retirement goals, and income and assets. Generally, if your only source of income is from Social Security, or Supplemental Security Income (SSI), it may not make sense to purchase LTC insurance, as the cost is likely to be too expensive. However, certain long-term care policies can protect some of your assets. You should only buy a policy if you are confident you can pay the premium and any rate increases that may be applied to the policy.
For long-term care insurance, it is the number of days that you pay out-of-pocket before the insurance company begins to pay benefits.
Before July 1, 2009, insurers offered only traditional long-term care insurance policies. Now insurers can sell partnership policies as well. A list of Bureau approved partnership policies is posted. If you have a long-term care partnership policy that pays out benefits, you may be able to keep assets of a greater value than normally allowed for enrollment in MaineCare (Medicaid). MaineCare cannot recover this higher asset value from your estate.
For you to be accepted by MaineCare, you also must meet income eligibility limits. The Partnership Program does not affect income eligibility.
The Consumer's Guide to Long-Term Care Insurance & Maine's Long-Term Care Partnership Program provides additional information, including a list of insurance companies currently selling long-term care policies in Maine. If you prefer to receive this publication by mail, please call our Consumer Health Care Division at 1-800-300-5000 (in Maine) or 207-624-8475, or e-mail us at email@example.com.
The basic benefit in a long-term care policy is the payment of benefits for covered services after you satisfy the elimination period, up to the maximum amounts provided by the policy. The maximum lifetime benefit may be a dollar amount such as $120,000 or a formula amount such as $200 per day for up to 600 days of nursing home services.
There is also a maximum daily limit for the other benefits in the policy. Typically, the nursing home benefit is the maximum daily benefit (e.g., $250) and care provided at home or in an assisted living facility may be some percentage of the maximum daily benefit, such as 50%.
Most long-term care insurance provide "expense-based" or "indemnity payments". Expense-based policies reimburse the insured for actual costs of covered services up to a stated limit (e.g., $250/day), whereas indemnity policies pay a specified, or flat, amount daily if the insured is receiving covered care, regardless of the provider charges.
From the time you first buy the policy until you actually need to use the benefits, the cost of care is likely to increase. Maine law requires insurers to offer you an option to increase the amount of benefits in your policy to take into account the growing cost of care. These options come in a number of forms and are usually available only when the policy is initially purchased. These options may be called different names like "guaranteed insurability", "cost of living coverage", "inflation protections", etc. These options increase the overall and daily maximums in the policy as follows:
- An automatic built in percentage increase each year with no change in premium. The cost of this option may significantly increase the premium.
- An automatic offer to increase benefits each year at the then-current price for the increase in benefit, subject to you periodically using this option. The cost of this option causes premium increases in future years when you choose it.
Rate increases have become more common on long-term care policies, primarily because when companies introduced this product there was little reliable data on which to base rates. These premium increases have been significant in some instances.
Before a company issues a policy, Maine law requires long-term care insurers to provide you with information on how often and by how much they have increased premiums in the past.
Although the policy is for renewable for life, this guaranty does not prevent the premium from increasing. Increases in premiums, however, are allowed only for the entire "class" of persons with the same coverage and only with the prior approval of the Maine Superintendent of Insurance. For example, the premium may be increased for all insureds who have the same policy and who have reached their 68th birthday. Premium increases are based on an increase in the company's claims experience as insureds grow older. The insurer may not raise your premium based only on your claims.
The insurer may offer a premium discount if you and your spouse are covered, and some policies offer an additional benefit if your spouse is covered.
Some companies offer several options regarding how long premiums are payable. The typical premium payment period is your lifetime. For those young enough, the premium paying period may be reduced so that payments are limited to 10 years or to age 65. These limited payment options come with a steep increase in annual premium. They could save money over the long-term, especially if there are future rate increases after the payment period ends.
Once you are issued an individual policy, the policy is renewable as long as premiums continue to be paid. If premiums are not paid, the insurer can terminate the policy subject to any nonforfeiture benefit the policy may contain. Premiums are lower the younger you are when the policy is issued.
When you first buy your policy, you must be offered the opportunity to include a surrender benefit (sometimes called a nonforfeiture benefit). The surrender benefit gives you a benefit at a later date, if you decide that you no longer want to continue the policy by paying the premium. This benefit may be cash or some form of limited long-term care benefit and usually increases with the length of time the policy is in force. The cost of this benefit can be very expensive. If you don't accept the offer of a nonforfeiture benefit when you first buy the policy, a company is required to provide a "contingent benefit upon lapse." This means that when your premiums increase to a certain level (based on a table of increases), the contingent benefit upon lapse will take effect.
Example of a contingent benefit upon lapse:
If you are 70 years old and did not accept the insurance company's offer of a nonforfeiture benefit, when the premium rises to 50% more than the original premium, you will be offered the opportunity to accept one of the following "contingent benefits upon lapse" options:
- A reduction in benefits provided by the current policy so that premium costs stay the same; or
- A conversion of the policy to paid-up status with a shorter benefit period.