There are many long-term care insurance carriers in the market today. The earliest long-term care contracts were designed to provide nursing home coverage only. Further, earlier contracts were very restrictive in their language, not covering Alzheimer’s disease and requiring nursing home placement to occur following a hospital stay. In more recent years, contracts have become much more versatile and will often cover not only facility care, but home care and community care as well.

In our opinion, one of strongest considerations when evaluating a long-term care provider is the length of time they have been marketing the product. There are only a handful of players in the market today that have the experience with pricing the contract appropriately and paying claims. One of the worst possible scenarios would be to purchase an inexpensive long-term care contract today only to find out that you can’t afford the large future increases that will likely occur due to an inexperienced carrier’s under pricing the product at the onset. A worst scenario might be that they quickly get out of the business due to high losses at claims time.

Even the strongest carriers do not guarantee that they will not have to raise the premium at some future date. However, they have a good understanding of how to price the product up front, and future increases will only be tolerated if the carrier can prove that the claims incurred dictate an increase.

As independent agents, Jolles Insurance can represent the majority of carriers available to you in the market place. It is also important to note that the cost to allow us to represent your long-term care needs will be exactly the same as any other agent can provide or, for that matter, the same cost than if you went through the carrier directly. With that in mind, our clients appreciate the added value service in helping select an appropriate carrier and benefit design. We will help you in the underwriting process to secure the best possible offer. We pride ourselves in providing top-level service after the sale and especially at the time you need it the most -- when you need to go on claim.

* Jolles Insurance reviews the leading competitive long-term care contracts available on the market. Although we regularly review the specimen contracts from each of the carriers we represent, we do not guarantee the accuracy of information provided. This information is for general plan comparison purposes only and is presented to facilitate a better understanding of significant plan differences between the leading LTC carriers. Any references are based on the best available information and the actual contract should be consulted as the final authority. All information should be verified before making a decision on a specific policy or plan design. If you are considering replacing a current insurance plan, do not terminate your existing policy until you have received your new policy and verified the provisions and premium

LTC Analysis

Usually under an indemnity contract once you’ve triggered benefits and met the waiting period, the insurer cuts you a check for the daily maximum benefit for each day you have at least one eligible service. This provides you with the flexibility to utilize the payment in any way you see fit, i.e., chores, cleaning, lawn care, shopping, etc. Generally speaking, indemnity plans are more expensive than reimbursement plans.

The next point of comparison is determining satisfaction of the elimination period. Some carriers begin counting days of service following approval of carrier to doctor’s certification that an individual requires assistance for two or more ADL’s or suffers cognitive impairment. Other carriers require that the individual or some form of insurance is paying for assistance in order for a day to qualify towards the elimination period. There are also various differences in how days are qualified. For example, if one day requires assistance within a week, some companies count it as a week satisfied. There are some contracts on the market that will waive the elimination period for home care if the carrier’s approved case manager agrees the care is needed and appropriate.

Almost all carriers state that once the elimination period is satisfied, it is satisfied for life. An even better definition shared by some companies goes one step further in stating that each elimination day satisfied is satisfied for life. An additional point that needs to be understood when comparing plans that require satisfaction of the elimination period is that most carriers require that the elimination period be satisfied within a defined period of time, such as one year or 18 months. If it is not satisfied in that period, a new elimination period would need to be satisfied. Avoid contracts that require a new waiting period when you move from home care to nursing-home care.

Long-Term Care Plan Design

The younger you purchase a long-term care policy the more realistic it will be for you to design a policy that will give you the peace of mind your coverage will do an effective job for you in the future, when you need it. Properly designing your long-term care contract can be the difference between throwing away years of premiums or having your policy be the effective insurance that you intended it to be: protecting your assets, your choices, and your dignity in the distant future.

You have to use vision when you design your policy. Think about how far we have come over the past 20 years in our advances in health care, medicine, and longevity. The pace of advancement does not slow down. What will seniors face 20 or 30 years from now in terms of long-term care needs? Those of us who market long-term care often say, “the longer you live, the more likely that you will need long-term care insurance.” Would it be smart to look at today’s statistics which state that the average length of time an individual requires long-term care is between 2-1/2 and 3 years? Long-term care is insurance we buy today for a need that will likely not present itself until we are 80, 90, or even older. Many of the provisions that you consider when designing your policy need to take this into account. For example:

Benefit Period: Remember that the industry average of 2-1/2 years is just that, an average. 50% of the individuals spend less time requiring long-term care assistance and 50% of the individuals spend more time. If you consider what is pointed out above, it is very easy to visualize a future where the oldest members of our population are receiving higher levels of personal care, medical care, and nutritional care. It would be interesting to know the effect that today’s assisted living facilities have had in increasing the longevity of individuals who require assistance.

Inflation Protection: Long-term care inflation has been rising at a much higher rate than general inflation. Most sources use 5% as a benchmark for long-term care inflation. For younger policyholders 65 and under it is highly recommended that a 5% compound inflation rider be included in the contract. If inflation continues at 5% a year, a 60 year old with an initial daily benefit of $150 and reaching age 80 in 20 years would need a benefit of $397.99/day. How good will your policy be if it only provides $150/day?

Elimination Period: When you select your elimination period, you have to understand the impact that inflation will have on your policy as well. Let’s assume that you feel you can handle a 90-day elimination period (that means that you will pay the daily benefit for the first 90 days that you need services). Based on a $150 daily benefit, you would expect to pay $13,500 before your benefits kick in. Imagine that long-term care inflation continues at 5% over the next 20 years. You might find out you will need to pay $35,819.10. This is based on the average daily cost of care increasing to $397.99/day.

There are a number of other features to weigh before selecting the most appropriate benefit design to meet your specific needs.

LONG-TERM CARE CONTRACT DEFINITIONS

Maximum Daily Benefit (MDB)

Let’s begin with the Maximum Daily Benefit or MDB. The MDB is the maximum amount your policy will pay for expenses incurred on any one given day. If you choose a fully integrated policy, it will be the maximum benefit paid on any given day for services received in a Nursing Home, Assisted Living Facility, Hospice Facility, or Respite Care.

Home Care Benefits are paid on a Monthly Maximum Benefit (MMB). In other words it is the maximum amount paid for home care services or community service received in any one calendar month. This monthly benefit is determined by multiplying your maximum daily benefit times the number of days in the month.

The current average cost for nursing home stay in Maryland is about $150 per day. However, if you telephone several homes in your area, you can get an exact cost for your geographical location. At $150 per day you’re looking at over $50,000 per year for care. (Note: based on 2003 costs.)

Policy Maximum

Next we need to consider Policy Maximum. This is the maximum amount that your contract will pay over the entire term of your policy. The policy maximum can be thought of as a pool or bucket of money available for benefits. Your bucket is determined by multiplying your MDB x the period you select. Options might include a 2,3,4,5,6,10 or Unlimited period. For example, if you used a 5-year factor with a $100 MDB, your bucket of money would start with $182,500.00 worth of benefits.

5 Years x 365 days per year = 1825 days x $100 = $182,500

If you select a benefit increase rider, that amount will grow each year. The policy will pay benefits as long as there is money in your bucket. If you select an unlimited or lifetime option, then the policy will pay the MDB as long as you qualify for care.

Elimination Periods

Now we can look at the elimination period. The elimination period works like the deductible on any other liability insurance. Instead of using dollars, long-term care insurance uses days. It is the number of days you are responsible for paying before your policy begins to pay benefits. Options might include 0,15,30,60,90 or 100 days. So, if you had a 60-day elimination period and the cost of care was $100 per day, you would have to pay $6,000 out of pocket before the policy would begin to pay.

You need to select an elimination period that you are financially comfortable with, keeping in mind that the cost of care will most likely continue to rise with inflation.

Benefit Increase Riders

One of the most important considerations should be adding a benefit increase option to your policy. This rider will allow your MDB to increase each year, helping you keep up with future increased costs in care. There are 3 options available: simple, compound or Guaranteed Purchase Option Rider (GPOR) which is based on the Consumer Price Index.

The GPOR provides an automatic increase of the Daily Benefit every three years, based on the Consumer Price Index. The amount of the increase is generally not less than 15.76% (5% compounded over 3 years). In most cases, the purchase option will be offered to you every 3 years. If you decline a total of 4 increases, the rider will terminate, and no additional offers will be made. All increases will be purchased at your attained age or your age at the time the offer is extended.

The Simple Benefit Increase Rider provides an automatic increase in your Daily Benefit on each policy anniversary. The increase will be 5% of the original Daily Benefit. For example if you had a $100 Daily Benefit on your 1st policy anniversary, the benefit would increase to $105 per day. On the 2nd anniversary it would increase to $110 per day etc. With the Simple Benefit Increase Rider, your Daily Benefit would double in 20 years.

The Compound Benefit Increase Rider provides for an automatic increase of the Daily Benefit on each policy anniversary of an amount equal to 5% of the previous year’s Daily Benefit. For example, if you had a $100 Daily Benefit on your 1st policy anniversary, your benefit would increase to $105 per day. On the 2nd anniversary it would increase 5% of $105 to $110.25 per day. The benefit would continue compounding over the life of the policy. With the Compound Benefit Increase Rider your Daily Benefit would double in 15 years.

Activities of Daily Living

Activities of Daily Living (ADLs) are activities you perform everyday. The ADLs most companies use are:

Bathing: Your ability to wash yourself by sponge bath or in either a tub or shower, including the task of getting in and out of the tub or shower.

Continence: Your ability to maintain control of your bowel and bladder function, or when unable to maintain control of bowel or bladder, the ability to perform associated personal hygiene (including caring for catheter or colostomy bag.

Dressing: Your ability to put on and take off all items of clothing and any necessary braces, fasteners or artificial limbs.

Eating: Your ability to feed yourself by getting food into your body from a receptacle (such as a plate or cup or table) or by a feeding tube or intravenously.

Toileting: Your ability to get to and from the toilet, to get on and off the toilet and to perform associated hygiene.

Transferring: Your ability to change positions such as moving from bed to standing, chair to standing, bed to chair and the reverse of these activities.

Additional Benefit Definitions

Substantial Human Assistance means either actual hands-on physical assistance or standby or supervisory assistance by another individual, without which you would not be able to perform an Activity of Daily Living.

Severe Cognitive Impairment means a deficiency in: your short term or long-term memory; orientation as to person, place or time; deductive or abstract reasoning or judgment as it relates to safety awareness.

Chronically Ill Individual means an insured who has been certified that they are expected to be unable to perform, without substantial human assistance, at least 2 ADLs for a period of at least 90 days from inception of the illness or injury, or have a severe cognitive impairment that requires substantial supervision to protect the insured or others from threats to health and safety.

Care-Coordinator means a Registered Professional Nurse or Licensed Social Worker who is trained and experienced in providing care coordination services.

Plan of Care means a written individualized plan of services developed by a Licensed Health Care Professional.

Respite Care means the supervision and care of persons with deficiencies in ADLs or who are severely cognitively impaired. It is provided when a family member or other caregiver who normally provides long-term care services on a regular basis takes a short-term leave or rest from their caregiving responsibilities.

Hospice Care means services that are designed to provide palliative care and to alleviate physical, emotional, social and spiritual discomforts of a terminally ill individual, as well as providing supportive care to the primary caregiver and family of the terminally ill individual.

Caregiver Training means training you or a person designated to assist you in the proper use and care of a therapeutic device or caregiving procedure.

Emergency Response System means a communication system installed in your home, which is used to call for assistance in the event of a medical emergency.

Alternate Plan of Care means health care or personal care services that are not specifically covered by this policy but which you, your Physician and your care coordinator, and the insurance company agree would be appropriate to meet your long-term care needs.

Bed Reservation allows the insured to be reimbursed for the reservation of a room and bed in a nursing or assisted living facility if he or she has to leave the facility for any reason.

Waiver of Premium eliminates premiums on a month-to-month basis while receiving certain types of care.

Disclaimer: These definitions are for informational purposes only. Policy benefits and definitions may vary by state. Please refer to your contract for specific definitions and terms.

UNDERWRITING

Jolles Insurance will take into consideration your health history and other underwriting considerations before making a final recommendation. By understanding your specific health history, we will take the following steps:

1. We will check with the leading carriers for their specific underwriting rules.

2. As part of our initial process, we work closely with nurses who understand the underwriting issues for most of the major carriers. They assist us in focusing on the carriers that will likely provide the most favorable underwriting.

3. We will, whenever possible, talk directly with an underwriter to determine if there are specific requirements that we can obtain to facilitate a better underwriting outcome.

4. We will follow-up with all parties throughout the underwriting process to assure that you get the best possible offer.

There are many insurance companies who have recently entered into the long-term care marketplace. Some have set up relationships with other existing companies, while others have designed new products that are untested. Because of the ever changing long-term care industry, it is very difficult for inexperienced carriers to offer products without the historical advantage of underwriting new business and projecting the cost of future claims. It is for this reason that we strongly suggest that one of the most important considerations is selecting an experienced carrier with a long track record in the long-term care marketplace.

Even in underwriting there are substantial differences between the top carriers. Depending on the medical history, one carrier might offer a preferred underwriting status while another might issue a rated policy or even decline the applicant. With a very high degree of accuracy, we can determine the likely underwriting result before an application is even submitted.

It is important to deal with an agent who specializes in long-term care. Brian Jolles has spent years learning the marketplace and understanding how to properly evaluate the competing products. Further, as a Certified Senior Advisor (CSA), he works with many other professionals who specialize in the senior market. His overall understanding of insurance, estate, and financial planning and how the various pieces fit together to determine specific needs are essential to providing the best possible assistance.

Once it is determined that long-term care insurance is an appropriate option for a client’s needs, our next step is to have the client complete a health screening questionnaire. This tool allows us to communicate with nurses and underwriters to begin narrowing down the realistic and most appropriate options. It is our strong recommendation that you never submit an application without having a reasonable expectation based on the work of the agent that you are likely to receive a favorable underwriting result.

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