Does your company’s insurance policy offer long-term care? Research shows that today’s average 65-year-old has a nearly 70% chance of one day needing paid long-term care (LTC) — and paying out of pocket can be taxing. One way to mitigate these costs is with an LTC insurance policy. Only an estimated 7.2 million Americans have LTC insurance. You can increase that number by offering LTC insurance to your employees. Here are seven questions to ask that will ensure you choose the best policies.
What does the policy cover?
Long-term care insurance is designed to offset the cost of care, whether that’s in the form of a nursing home, assisted living, caregivers or in-home care. But these options aren’t necessarily interchangeable. When deciding on a policy, know which services your employees are likely to use so you can ensure those services are covered.
I find that in many cases, families are surprised when it comes time to make a claim on the policy and they find out that the only services offered are things they don’t want, like skilled nursing or nursing home only coverage. It’s important that employers provide a few options so that employees can choose the specific plan that meets their needs. Individuals and families should then check their policy every three to five years to make sure it is still in line with how they want to age.
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How long is the elimination period?
The LTC insurance policy you choose will come with an elimination period. This means the insurance company will require a specific amount of time to pass between the beginning of your employees’ injury/illness and the beginning of their benefits. These periods can last up to 15 days and are either based on calendar days (three days of caregiving in one week can count for seven days of elimination) or actual days of care. At the time of purchase, many people will opt for a longer waiting period because it often results in a lower premium.
Take time to understand the definitions of your plan’s elimination period. Some policies have a one-time elimination period, meaning that once patients have met that elimination period, they never have to meet it again. I find that people who have a skilled nursing or nursing home benefit can use their days in a skilled nursing facility as part of their elimination period even if Medicare paid for that stay.
During the elimination period, your employees will be paying out-of-pocket expenses before benefits kick in. Medicare previously has paid for up to 100 days, but in my experience this is often no longer the case. If possible, choose a policy with a zero to 30-day elimination period or less. Your employees may consider using skilled nursing days or using a caregiver a few days a week and having family members supplement care on other days.
How much is the maximum daily benefit?
The standard LTC insurance policy covers $50 (four hours) to $250 (8-10 hours) per day. You may also be able to choose a plan with an inflation rider. This will compensate for increased costs in care due to inflation over time.
Before your employees activate their policy, they should ask their insurance company about the current maximum daily benefit. Many companies will tell you your original maximum daily benefit, which doesn’t take inflation riders into account. More on that later.
How much is the maximum lifetime benefit?
The Federal Long Term Care Insurance Program will pay for charges the policy owner incurs for covered services. But that amount is only so flexible. To determine the maximum lifetime benefit, take the benefit period (in days) offered by the policy and multiply it by the daily benefit amount.
What is the inflation rider?
Though your employees are opting for an LTC insurance policy now, they (hopefully) won’t actually need it for years to come. But the prices won’t sit still during that time. From 2016 to 2017, the annual median cost of LTC services increased, on average, 4.5%. For reference, the U.S. inflation rate is around 1.8%.
To combat inflation, many policies come with inflation riders. As a general rule, look for a policy offering a minimum of 3% compound inflation protection. Otherwise, you may find that when your employees need it the most, their policy is behind the times.
Is there a waiver of premium?
Many policies will come with a waiver of premium. In general, the waiver states the conditions under which the policyholder won’t be responsible for paying fees. Specific to an LTC insurance policy, these conditions include those that would put your employees in need of long-term care. In other words, once they need the policy to kick in, they stop paying.
A waiver isn’t free, though. Your employees may be required to pay a higher premium. But that’s money they won’t be responsible for later on when they need it most.
What are add-on policy benefits?
Many policies offer valuable add-on options. These can include:
• Restoration Of Benefits
If employees need to start using their benefits but quickly no longer need them, they may have their maximum lifetime benefits fully restored.
• Spouse Riders
Rather than buying separate policies, some policies will cover employees and their spouses together.
If you are looking at choosing a LTC policy for your employees, make sure you understand these benefits and the value they can provide. Analyzing and understanding policy options is a big undertaking, but one that is worth the work. Preparing now with these questions will ensure that when your employees need help recovering or caring for themselves, the money will be there.
Date: May 24, 2019