June 23

Hybrid Long-Term Care Policies Provide Cash and Leave Some Behind

A relatively new option for those who wish to buy long term care insurance is a hybrid policy that packages coverage for long-term care with a universal life insurance policy or a fixed annuity. Such products can be tapped for reasons other than long-term care and even passed on to heirs, although the amount available for other uses is reduced if you use the hybrid to pay for long-term care. Sales of such hybrid or combination products have more than doubled since 2008 to more than $2.4 billion last year, according to Limra, an insurance industry research group. In comparison, $300 million in stand-alone policies for long-term care are sold annually, which are now actively sold by only 16 insurers, compared with nearly 100 a decade ago, as companies face higher costs and drop out of the market. A hybrid policy for long-term care works by keeping a certain amount of cash within the policy.

For the article from the New York Times, click here.

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March 24

Class Certified in Case Against LTC Insurer that Denied Coverage to Assisted Living Residents

A U.S. district court in Connecticut certifies a class action against a long-term care insurance company by policyholders who claim they were unfairly denied coverage because they lived in a managed care community or assisted living facility. Gardner v. Continental Casualty Company (U.S. Dist. Ct., D. Conn., No. 3:13cv1918 (JBA), March 1, 2016).

A group of individuals purchased long-term care insurance from Continental Casualty Company. The policies provide that in order to qualify for benefits, claimants must demonstrate that the facility they live in meets the definition of a long-term care facility. The policy defines a long-term care facility as one that is licensed by the state. The individuals moved into managed care communities or assisted living facilities and applied for benefits. The company denied benefits on the grounds that the facilities were not licensed facilities.

The individuals filed a lawsuit against the company, arguing that the insurance company wrongly denied them benefits. They asked the court to certify a class of all people who currently own two specific types of long-term care insurance policies and a subclass of all people who owned long-term care insurance and were denied care at a managed care community or assisted living facility.

The United States District Court, District of Connecticut, grants class certification. The court rules that the class is easily ascertainable and including all current policyholders is not too broad. In addition, the court finds that the subclass is not too small to meet the numerosity requirement because the class will consist of at least 29 people. The court also rules that the plaintiffs have demonstrated commonality and typicality because they have shown that class members’ claims depend on a common contention that is capable of class-wide resolution.

For the full text of this decision, go to: https://ecf.ctd.uscourts.gov/cgi-bin/show_public_doc?2013cv1918-168

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March 14

Group of Experts Recommends Major Changes to Financing and Delivery of Long-Term Care

A diverse group of long-term care policy experts and stakeholders has issued a report proposing major changes in the way long-term care is financed and delivered in the United States. The Long-Term Care Financing Collaborative’s report proposes a new catastrophic long-term care insurance program as well as changes to Medicaid’s long-term care benefit.

The Collaborative spent three years studying long-term care in the U.S., and although its members represent a broad range of ideological views, they were able to agree on a number of key recommendations to pay for and improve long-term care services.

The Collaborative’s main recommendation is to establish a universal catastrophic insurance program aimed at providing financial support to those with high levels of long-term care needs over an extended period of time. The idea is for individuals with high levels of long-term care needs to pay for their own care for one or two years and then receive a lifetime daily benefit. Individuals with lower lifetime incomes would be eligible to receive the catastrophic benefits sooner than individuals with higher incomes.

The Collaborative also recommends changing Medicaid law to provide the same services to institutional and non-institutional recipients. The goal would be to make Medicaid more flexible and responsive to the needs of individuals.

Other recommendations include encouraging private sector initiatives to revitalize long-term care insurance to lower costs and increase enrollment for non-catastrophic risks, and increasing retirement savings and improving education on long-term care costs.

To read the full report, go here: http://www.convergencepolicy.org/ltcfc-final-report/.

For an analysis by collaborative member Howard Gleckman of the Urban Institute, click here.

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February 15

The Benefits and Drawbacks of Buying an Annuity Doubler to Pay for Long-Term Care

As long-term care insurance premiums keep rising and fewer companies are offering policies, seniors are looking for other ways to help pay for long-term care. Annuity “nursing home doublers” have emerged as a new long-term care option. These doublers can be beneficial, but as with any annuity product, customers should use caution before purchasing.

An annuity is a contract with an insurance company under which the consumer pays the company a certain amount of money and the company sends the consumer a monthly check for the rest of his or her life, or for a certain term. Immediate annuities are a way to receive a guaranteed income for life and can be useful in Medicaid planning. 

Many insurance companies that sell annuities are now offering “nursing home doublers” to help pay for long-term care. If the beneficiary of such an annuity needs long-term care, the insurance company will make double payments for five years or until the annuity’s cash value is depleted. To activate the doubler, the annuitant needs to be unable to perform two of six activities of daily living (i.e., eating, bathing, dressing, transferring, toileting, and continence). Once the five years are up and if the annuity still has a cash value, the insurance company would go back to making regular payments.

The benefit of a doubler is that it is relatively inexpensive. Many insurance companies offer the doubler at no additional cost beyond the lifetime income rider fee. If there are additional fees, the fees are usually low. The double payments are not designed to cover the full cost of long-term care, but the double payments can help defray the cost.

Before purchasing an annuity, you should fully research the product. While annuities—particularly immediate annuities–can be a valuable retirement product, annuity salespeople have come under scrutiny for targeting older Americans with deceptive sales tactics. Before purchasing an annuity with a doubler, find out whether it covers home care in addition to nursing home care. In addition, using a doubler depletes the cash value of your policy, which means there would be less left in the annuity to leave to your heirs. Also, if you purchase a joint annuity, the doubler will only cover one spouse’s long-term care.

Before making any purchases consult with your elder law attorney to find out the best way to plan for long-term care. 

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