Using Long Term Care Insurance to Help Pay for Home Care

In my last article we discussed the advantages offered by the VA to help cover the costs of home care. Continuing that theme, I wanted to share the benefits of long-term care (LTC) insurance, which many of our clients wisely use to help pay for their home care. Consulting with your trusted insurance agent is critical at this stage as we are not providers of insurance, but we do deal with the ins-and-outs around the process of making payment claims against the policy to ensure clients receive the maximum of their long-term care insurance benefit.

Long-term care refers to the range of services that people may need as they age, such as nursing home care, home-based care and assisted living facilities. Long-term care can be very expensive for clients and their extended family, and traditional health insurance does not cover long-term care costs.

LTC insurance companies will only provide reimbursement if the individual receives care from a credentialed home care organization. They will not reimburse individuals who use private care caregivers, and the home care agency not only needs to be licensed but also have a W-9 tax form which will be required by the LTC insurance company as to the verification of tax status.

A long-term care policy does not guarantee payment coverage unless you satisfy reimbursement requirements. This is a complex process that demands a thorough understanding of policies, expertise of home care services and experience of dealing with an insurance company’s service force. Now, let us dive into the benefits reimbursement process which is critical to the heavy financial investment of paying insurance premiums over many years or decades.

First, there is an elimination period once a policy holder decides to apply for the benefit. The elimination period typically ranges from 30 to 180 days. You can pay for a higher premium for a shorter elimination period when choosing specific policies to purchase. During the elimination period you are required to pay for services out of pocket.

Second, there is an insurance assessment of an individuals’ qualification to receive the LTC benefit. A nurse or social worker from the insurance company will schedule an in-home assessment to determine the benefit eligibility. In California, if you cannot perform two ADLs (activities of daily living) out of five (eating, bathing, dressing, toileting, transferring), or you have the onset of cognitive impairment such as dementia, the insurance companies must pay for the LTC benefit. A care plan is also required of the home care company before home care services are implemented.

Third, once you qualify for a LTC benefit, you or the home care organization are required to submit a service invoice and supporting document to the LTC insurance company for reimbursement. The service invoice must be broken down into hours and minutes of care by licensed care providers, and the supporting document must thoroughly list the ADLs assisted by the certified caregivers. This documentation is critical to benefit reimbursement as there are usually hurdles and claim rejections when the documents are deemed inadequate or inaccurate to the assessment.

There are standalone LTC policies in addition to hybrid policies such as extra life insurance with what is called a long-term care rider. We have increasingly seen the popularity of life insurance policies with a long-term care rider utilized by clients. At a high level, an LTC policy that you sign up for will have a lump sum that you will claim against and may be depleted, while the addition of a long-term care insurance rider can help extend the benefit payment. Important to the rider is to be sure inflation is also factored into your policy and premiums are locked in to avoid future increases.

In conclusion, long term care insurance can be a smart financial decision for those who want to protect themselves and their loved ones from the high costs of aging life care. It provides flexibility, cost-effectiveness, tax benefits and peace of mind. If you are considering purchasing LTC insurance, it is important to speak with a financial advisor and a LTC insurance expert to determine if it is the right choice for your specific situation.