What’s the best way to help your clients should they ever become chronically ill and file claims? Helping them understand the nuances of the LTC elimination period Long-term care insurance policy benefits don't typically start the first day your client enters a nursing home or the first day she starts having care at home. Most policies have an elimination period (sometimes called a deductible or a waiting period). This means benefits can start 0, or 20, 30, 60, 90, or more days after your client starts requiring help with Activities of Daily Living (ADL’s) or has a severe cognitive impairment. How many days your client has to wait for benefits to start does not just depend on the elimination period they chose when they purchased the policy. In addition to the Elimination Period, federally tax-qualified LTC insurance policies require that your client is unable to perform at least two or more ADLs without substantial supervision from another person, due to a loss of functional capacity, AND this loss of functional capacity must be expected to continue for at least 90 days. This expectation is sometimes called the “certification period” or “qualification period.” The elimination period is the first major policy provision that your client will encounter after the care coordinator certifies their need for care. Many policyholders forget that satisfying the elimination period is not as simple as counting off the days on the calendar. The Zero Day Elimination Period Many policies offer a zero day elimination period for Home Care. With a zero-day elimination period, once the 90 day “certification period” is satisfied, benefits are payable as soon as the care is needed. If you sell a policy with a zero day elimination period for home and community based care, you must make sure that everyone knows that the 90 day Certification Period must be met before any Home Care expenses are paid or reimbursed. Many advisors and clients regularly forget about the 90 day Certification Period. The 90 day Certification Period verifies that the condition is a chronic Long Term Care event; not a potentially self-insurable Short Term Care recovery event. The Calendar Day vs Service Day Elimination Period Under the calendar-day elimination period, every day of the week would count towards satisfying the elimination period regardless of whether your client received any services on those days. If you sell a policy with a calendar-day elimination period, your client should not have a problem understanding how it works. Most people intuitively believe that this is the way the Elimination Period days are counted. A policy with a calendar-day wait will even allow relatives, roommates, or friends to provide care during this period. This is a great way for relatives to assuage their guilt before they leave their ailing relative in someone else’s care. Relatives who can provide care during the elimination period can help your client eliminate the cost of that big deductible. Many policies, however, have a Service Day Elimination Period. Policies with a Service Day Elimination Period will only consider Elimination Period days to be satisfied if a covered service was provided and paid for on that day. This is a cause for concern when the insured is receiving care for only one or two days a week, which is not uncommon when friends and relatives may be helping out initially. Imagine the client’s reaction when they find out that it will take 90 weeks to satisfy their 90 day Elimination Period! Another feature to look out for is the Accumulation Period. This is a time limit that the insurer imposes on the insured as the maximum time period in which the insured is allowed to accumulate the qualified long term care service days needed to satisfy the EP. One plan being sold today requires a 30 day Home Care EP must be satisfied within 180 days. This is something to pay attention to. If the insured received one day per week of care, they would never become eligible for reimbursement because they would not have satisfied the EP within the Accumulation Period. Another policy available today requires the purchase of a rider in order for days of Home Care to be credited towards the Facility Care EP. Since facility care days are generally consecutive, some clients will not have a problem accepting a slightly lower premium in exchange for the possibility of paying a bill for the first 3 months in a facility. It may come as a surprise though, if they enter a facility after many months of being reimbursed for Home Care. Ideally, your client will purchase a plan with a zero-day elimination period for home and community based care with the feature or the rider which allows days in which the EP is waived for Home Care or Adult Day Care to be used to satisfy the EP for other benefits available under the policy. Catastrophic LTC Insurance If your client has enough assets, they may choose a long elimination period to lower the premium. They may want to buy catastrophic LTC insurance. With the probability of needing Long term Care being so great, the initial diagnosis of a chronic condition being so catastrophic to a family, and the premium discount being so minimal, long Elimination Periods are rarely purchased, and therefore not frequently available. People buy LTC insurance because they do not want to be a burden to their family and friends. With a zero-day elimination period, it is less likely that a loved one is burdened with the decisions of which assets to sell or how to arrange care during the long elimination period. Thirty years from now, the average cost of care could be $100,000 during a 90-day elimination period, but let’s not dwell on the costs or the probability of needing LTC. Let’s discuss the consequence for your client’s loved ones. What are the consequences of not having a plan with benefits immediately available after a devastating diagnosis?
The 0-Day LTC Elimination Period: 90-Day Certification Required