Course Outline Course Outline Chapter 1: Long-Term Care Insurance 7 Introduction to WA 48.83.130 7 Long-Term Care Insurance 8 What Will the Choices Include? 10 Daily Benefit Options 11 Expense-Incurred and Indemnity Methods of Payment 12 Determining Benefit Length 12 Policy Structure 12 Policy Free-Look Period 13 Guaranteed Renewable for Life 14 LTC Insurance Terms 15 Out-of-State Policies 20 Preexisting Health Conditions 20 Prohibited Policy Terms and Practices 21 Right to Return the Policy 22 Outline of Coverage 22 Policy Summary 23 Acceleration of Death Benefits 23 Denied Claims 23 Policy Rescission 24 Nonforfeiture Benefit Option 24 Suitability Standards 25 Violations and Fines 26 Rules 26 Receiving LTC Benefit Payments 26 Care Coordination Services 28 Nursing Home Benefits 28 Assisted Living Facility Benefits 30 Home Health Care Benefits 31 Caregiver Training Benefit 31 Alternate Care Benefit with Care Coordination Services 32 Hospice Care Benefit 33 Respite Care Benefit 33 Restoration of Benefits 33 Waiver of Premium Benefit 34 Inflation Protection Riders 34 Simple and Compound Inflation Protection 35 Required Rejection Forms 35 Partnership Long-Term Care Policy Inflation Protection Requirements 35 Chapter 2: Long-Term Care Services 37 Defining Long-Term Care Services 38 Medicare Requirements 39 Page 1
Course Outline Care Options 40 Is Insurance Necessary to Cover Services? 41 Ongoing Long-Term Medical or Personal Care 42 No Durational Coverage Under Medicare 43 Remaining At Home 43 Home Care Insurance Policies 44 Medicare s Home Care Benefits 45 Medicare Qualification 46 Assessing Care at Home 46 Gatekeepers 47 Protecting Against Catastrophic Costs First 47 Chapter 3: State and Federal Regulations and Requirements 49 Medicaid Benefits 49 Comparing Qualified and Non-Qualified Plans/HIPAA 50 Existing LTC Policies 51 Benefits Triggers 51 Activities of Daily Living (ADL) 52 Understanding the Difference in Benefit Triggers 54 Federal Criteria 54 IRS Notice 97-31 55 Agent s Responsibility to Know the Laws 56 Policy Conversions Were Offered 56 Who Will Benefit from Tax-Qualified Plans? 58 Defining Chronically Ill 58 Qualifying Contracts for Tax-Favored Status 58 Purchasing Contracts for Financial Protection 59 Determining Tax Treatment 59 Pre-1997 Long-Term Care Policies 60 The Treasury Responds with Exceptions 61 Addressing Consumer Concerns 62 Federal Tax-Qualified versus State Non-Tax (Non-Partnership) Qualified Policies 63 Section 6021: Expansion of State LTC Partnership Program (chart) 64 Making Benefit Choices 66 Daily Benefit Options 67 Agents May Not... 69 Prohibited Agent Practices 69 Asset Protection in Partnership Policies 70 Policy Structure 70 Home Care Options 71 Inflation Protection 71 Simple and Compound Protection 72 Required Rejection Forms 73 Elimination Periods in LTC Policies 73 Policy Type 74 Restoration of Policy Benefits 74 Preexisting Periods in Policies 74 Prior Hospitalization Requirements for Skilled Care 75 Nonforfeiture Values 75 Waiver of Premium 75 Unintentional Lapse of Policy 76 Policy Renewal Features 77 Page 2
Course Outline WA Limitations & Exclusion: WAC 284-83-02(2) 77 Extension of Benefits 78 Affordability of Contracts 78 Standardized Definitions 78 Minimum Partnership Requirements 78 Benefit Duplication 79 Partnership Publication 79 Partnership Versus Traditional Policies 79 Abbreviations 81 NAIC 2000 Model Act 82 Level Premium Does Not Mean Unchanging Rates 84 Financial Requirements for Rate Increases 84 Rate Certification from the Insurer s Actuary 84 Consumer Disclosure 85 LTC Personal Worksheet 85 Is the Policy Suitable for the Buyer? 85 Consumer Publications 86 Post Claim Underwriting 86 Tax-Qualified Policy Statement 87 Replacement Notices 87 Policy Conversion 87 An Overview 88 The Model Act Applies to All 88 Policy Renewable Provisions 89 Payment Standards Must be Defined 89 Preexisting Standards 89 Policy Type Must Be Identified 90 ADLs (Activities of Daily Living) 90 Life Insurance Policies with Accelerated Benefits 90 Nonforfeiture Provisions 90 Extension of Benefits 91 Home Health & Community Care 91 Additional Provisions for Group Policies 91 Outline of Coverage 91 Policy Delivery 92 No Field Issued LTC Policies 92 Policy Advertising and Marketing 92 No Policy Covers Everything 93 Prior to the Sale 93 Shopper s Guide 93 It s Just Plain Illegal 93 Association Marketing 94 Following the Sale 94 Failure to Pay Premiums 94 In Conclusion 95 Chapter 4: Changes or Improvements in LTC Services 96 Defining Long-Term Care 97 The Evolution of a Major Industry 99 Children as Caregivers 100 Can Families Make It Through? 101 Paid Home Care 102 Page 3
Course Outline Better Health Equates Into Longer Life 102 Policy Benefits Improve Over Time 103 Remaining At Home 104 Qualifying for Medicare Funded Home Care 105 How Does Medicare Determine a Covered Service? 105 Finding a Home Care Provider 106 Recognizing the Need (and the Market) 107 Insurers Determine Risks in LTC Insurance 108 The LTC Marketplace 111 Dramatic Policy Improvement, But Also Rising Premium Rates 111 History of the Partnership for Long-Term Care 112 Partnership Policies are Created 115 Medicaid is the Largest Nursing Home Payor 116 Partnership Asset Protection Chart 120 Program Performance 121 New Federal Legislation: The Deficit Reduction Act of 2005 122 Questions that Remain Unanswered 122 OBRA 1993 Provisions Pertaining to the Partnership for Long-Term Care 123 Sec 1917(b) paragraph 1 subparagraph C 123 Sec 1917(b) paragraph 3 123 Sec 1917(b) paragraph 4 subparagraph B 123 Promoting Partnership Long-Term Care Plans 124 Program Growth 125 Partnership Participation 126 Public Education 126 Consumer and Agent Education 127 Policy Benefits 128 Inflation Protection 129 Reciprocity Between States 130 Looking into the Future 130 State Funding 130 Chapter 5: Alternatives to LTC Insurance 132 Assessing the Need 132 Realistically Speaking 132 Asset Inventory 134 Liabilities 135 Estate Planning Tools 136 Asset Transfer 137 Government Sponsored Programs 137 Reverse Mortgages 139 Paid Family Members 140 Accelerated Life Insurance Benefits 141 The Largest Payer of LTC: Medicaid 142 Asset Transfers for Medicaid Eligibility 143 Trust Shelters 145 Catastrophic Coverage Act of 1988 146 Information Required When Applying to Medicaid 147 Viatical Settlements 148 Determining How to Cover LTC Costs 148 Receiving the Benefits Expected 149 The Buying Decision 149 Page 4
Course Outline Chapter 6: RCW 48.83, 48.84 and 48.85 151 48.83.005 Intent 151 48.83.010 Application 151 48.83.020 Definitions 152 48.83.030 Out-of-state policy -Restriction 154 48.83.040 Preexisting conditions 155 48.83.050 Prohibited policy terms and practices - Field-issued, defined 156 48.83.060 Right to return policy or certificate - Refund 158 48.83.070 Required documents for prospective and approved applicants - Contents - When due 158 48.83.080 Benefit funded through life insurance policy - Acceleration of a death benefit 159 48.83.090 Denial of claims - Written explanation 160 48.83.100 Rescission of policy or certificate 160 48.83.110 Inflation protection features - Rules 161 48.83.120 Nonforfeiture benefit option - Offer required - Rules 162 48.83.130 Selling, soliciting, or negotiating coverage - Licensed insurance producers - Training - Issuers duties - Rules 48.83.140 Determining whether coverage is appropriate - Suitability standards - Information protected - Rules 48.83.150 Prohibited practices 166 48.83.160 Violations - Fines 167 48.83.170 Rules, generally 167 48.83.900 Severability - 2008 168 48.84.010 General provisions, intent 168 48.84.020 Definitions 169 48.84.030 Rules - Benefits-premiums ratio, coverage limitations 169 48.84.040 Policies and contracts - Prohibited provisions 170 48.84.050 Disclosure rules - Required provisions in policy or contract 171 48.84.060 Prohibited practices 173 48.84.070 Separation of data regarding certain policies 174 48.84.900 Severability 174 48.84.910 Effective date, application 174 48.85.010 Washington Long-Term Care Partnership program - Generally 174 48.85.020 Protection of assets - Federal approval - Rules 175 48.85.030 Insurance policy criteria - Rules 176 48.85.040 Consumer education program 177 Chapter 7: Chapter 284-54 WAC 179 Purpose & Authority 179 Applicability & Scope 179 Definitions 180 Standards for Definitions 181 Minimum Standards for Benefit Triggers 183 Exclusions 185 Renewability 186 Minimum Standards in General 187 Minimum Standards for Gatekeeping Provisions 188 Reduction in Coverage 188 Non-duplication of Benefits (With State or National Health Care Benefits) 189 Prohibition Against Preexisting Conditions/Periods in Replacements 189 Community Based Care Minimum Standards 189 Grace Periods 190 Unintentional Lapse 191 162 165 Page 5
Course Outline Extension of Benefits 192 Requirement of Offer Inflation Protection 192 Information and Style 194 Long-Term Care Disclosure Form 195 Format of LTC Contracts 201 Loss Ratio Requirements 201 Loss Ratio Definitions 202 Grouping Contract Forms for Loss Ratios 203 Loss Ratio Requirements in Individual Contract Forms 204 Loss Ratio Experience Records 205 Evaluating Loss Ratio Experience Data 205 Loss Ratio Special Circumstances 206 Advertising 206 Standards for Education of Licensees 206 Unfair or Deceptive Acts 208 8213 352 nd Street East Eatonville, Washington 98328-8638 253-846-1155 www.uiece.com www.cheapce.com mail@uiece.com Page 6
Introduction Introduction Between January 1, 2009 and July 1, 2009 all insurance producers continuing to transact LTC insurance in Washington must complete an initial 8-hour long-term Care course and new agents must complete the initial course before transacting any long-term care sales or applications. Each license renewal period thereafter agents must complete a WA LTC Refresher 4-Hour course to continue transacting long-term care business. Agents must complete this initial LTC course even if they have previously completed such courses for the state of Washington. This course is approved for continuing education credits for Washington. Since the course is specific to Washington, it will not provide credit hours for other states in which you may be licensed. Long-term care insurance contracts are very detailed; failure to fully understand the products you sell can cause your clients financial harm if an inappropriate product is placed. Unfortunately the policyholder may not be aware of the error until benefits are requested. As an agent, it is your responsibility to fully understand the products you represent since even an innocent error may affect your policyholder. Thank you for ordering your education from We have been offering continuing education courses since 1987 and hope you will find the material you have ordered useful and interesting. 8213 352 nd Street East Eatonville, Washington 98328-8638 www.uiece.com www.cheapce.com mail@uiece.com Page 6
Chapter 1: Long-Term Care Insurance Introduction to WA 48.83.130 Selling, soliciting, or negotiating coverage Licensed insurance producers Training Issuers duties Rules (Effective January 1, 2009) A person may not sell, solicit, or negotiate long-term care insurance unless he or she is appropriately licensed as an insurance producer and has successfully completed longterm care coverage education that meets the requirements of this section. As of January 1, 2009 licensed insurance producers must obtain specific long-term care education prior to soliciting, selling, or negotiating long-term care insurance coverage. A one-time education course consisting of no less than 8 hours must initially be completed. Thereafter a 4 hour refresher course will be required each license renewal period. The long-term care education must include information on policy coverage, long-term care services, state and federal regulations and requirements, changes or improvements in the services and providers of long-term care, alternatives to purchasing insurance, the effect inflation has on purchased benefits (importance of inflation protection), and consumer suitability standards. All insurance producers who plan to sell long-term care products in the state of Washington, including those agents who hold their resident license in another state, must complete the initial 8 hour long-term care course that was available as of January 1, 2009 even if he or she has previously completed similar education elsewhere or at an earlier time. This course is required to continue soliciting, selling, or negotiating long-term care coverage in Washington. This course must be completed no later than July 1, 2009. This initial 8 hour course is a one-time requirement. Every 24 months producers must obtain another four hours of long-term care education in a course that will be titled WA LTC Refresher 4-Hour Course. This refresher course will be a condensed version of the initial 8 hour course and will, as the title implies, refresh the agent s knowledge of long-term care services and policies. It is important to note that these eight and four hours of education are part of the 24- hour requirement for education in Washington, not in addition to the total requirement. However, the refresher course is due within 24 months of the initial 8-hour course so it does not go by license renewal dates but by the date of the first course completion. Page 7
Chapter 1: Long-Term Care Insurance Product-specific training supplies by insurance companies will not be allowed for this continuing education requirement. Only courses that have been approved by the state as meeting the required outlines will qualify for this long-term care education requirement. As was previously true, the insurers are required to monitor this, accepting new applications for coverage only from agents who have shown long-term care education compliance. Most insurance companies will require a copy of the agent s Certificate of Completion as proof of education compliance. Some insurance carriers might seek approval of a course that they will offer directly to their contracted agents, but most will probably leave it to the agents to achieve compliance, requiring proof prior to accepting new product applications. Insurance companies must show evidence of that verification if the insurance commissioner s office requests it. Long-Term Care Insurance In order to define long-term care insurance it is necessary to define long-term care. Although definitions have some variation depending upon the application, Medicare defines long-term care as: A variety of services including medical and non-medical care for people who have a chronic illness or disability. 1 Federal requirements define long-term care as care provided for 90 days or longer. Most long-term care definitions refer to activities of daily living. These activities include eating, toileting, transferring, bathing, dressing, and continence. Non-federal criteria usually include ambulation as a seventh activity of daily living. Washington defines long-term care insurance as a policy, rider, or contract that is advertised, marketed, offered, or designed to provide coverage for at least twelve consecutive months for a covered person. Chronic illness is often the basis for needing some form of long-term assistance. A chronic illness is one that is long lasting and unlikely to correct itself. The assistance may be performed in the recipient s home or some other location within the community, including a nursing home or assisted living facility. Nursing home policies were developed by insurance companies to fill a growing need of elderly Americans. There was a time when family members (most often daughters) stepped in to provide the care for their aging family members but with decreasing family size and the necessity of working, fewer family members are available to provide the needed care. 1 Medicare & You 2009 Page 8
Chapter 1: Long-Term Care Insurance At one time most consumers did not believe they would ever enter a nursing home. This attitude has mostly changed as people acquired first-hand knowledge of friends and family members entering institutions. Today it is common for people to consider the purchase of nursing home policies in their fifties, when pricing is more affordable. Insurance policies offer many choices so applicants make several choices when considering coverage for the nursing home, home health care, and assisted living coverage. A long-term care policy is issued by an insurance company who completes underwriting prior to policy issuance. Acceptance of the risk is determined by factors related to the likelihood of the applicant needing long-term care services of some type (not necessarily just in a nursing home). Like all types of insurance coverage, underwriting criteria is based upon the risks that lead to receiving benefits under the contract (policy). Policy issuance begins with the application. As such, the insurance agent is the first person to begin the underwriting process. By correctly answering the health questions on the application the agent provides vital information that will be used by the insurer s underwriting department. It is common for the underwriting department to also request information from the applicant s doctors or other attending medical personnel. Intentionally incorrect or omitted information on the application will cause policy denial even if they might otherwise have issued the policy. If the policy has already been issued when fraudulent information is discovered it is possible that the issued policy might be rescinded by the insurer, depending upon the level of misrepresentation, and how it might affect claim payments. Claims may be denied if the information provided for underwriting would have affected policy issue. Once the policy has been in force for two full years only fraudulent misstatements in the application may be used to void the policy or deny claims. All insurance contracts must conform to the laws of the state where issued. If the policy is a tax-qualified policy, they must also conform to federal requirements. If any policy provision conflicts with the state or federal laws, the provision is automatically changed to comply with the minimum state and federal requirements. Insurance companies work daily with risk factors. Therefore, the earlier an individual purchases a long-term care policy the lower the cost will be since the insurer has more time to work with the premium dollars, accumulating and investing the money. Premiums for long-term care policies can and probably will increase over time. The older the applicant the more he or she will pay than their counterpart who is ten years younger. There are two ways to price a long-term care policy: by attained age at application and by age banding. Attained age refers to the age of the applicant at the time they apply for coverage. Age banding looks at groups of age, such as age 65 through 69. In this case, Page 9
Chapter 1: Long-Term Care Insurance an applicant who is 65 years old will pay the same premium as another applicant who is 69 years old. Few companies will issue policies to individuals who are age 80 and older. Premium may be paid monthly, quarterly, semi-annually, or annually. Many industry professionals prefer their clients to use a monthly bank-draft mode since memory loss is common with aging. The wrong time for a policy to lapse due to nonpayment of premium is when the insured is experiencing memory loss. What Will the Choices Include? All policies must follow specific guidelines, including those mandated by the federal and state governments where policies are issued. Policies following federal guidelines will be tax-qualified, whereas the policies following state guidelines will be non-tax qualified plans. Washington mandates specific agent education prior to being able to market or sell LTC policies to ensure that the field agents properly represent the products. All policies offer some options, which may be purchased for additional premium or refused. When refusing some types of options, a rejection form must be signed and dated by the applicant. When a consumer decides to purchase a long-term care policy, several buying decisions must be made. These could include: 1. The amount of per day benefits if confinement in a nursing home occurs. 2. The length of time the policy will pay benefits. This is likely to range from one year to lifetime. Of course, the longer the benefit period selected, the more expensive the policy will be. 3. Whether or not to include an inflation protection to guard against rising costs. 4. The waiting period, also called an elimination period, must be selected. This is the period of time that must pass while receiving care before the policy will pay for anything. It is a deductible expressed as days not covered. The option can range from zero days to 160 days. 5. The specific type of policy to be purchased. Policies may be federally taxqualified or non-tax qualified. Partnership long-term care policies are also coming since the passage of DEFRA opened up this type of coverage to all states. As every field agent knows, clients often prefer to have the agent make selections for them, but this is not always wise. Although the agent will be valued for the advice he or she gives the actual benefit decisions need to be made by the consumer. This means the Page 10
Chapter 1: Long-Term Care Insurance agent must fully explain each option so that the consumer can make informed choices. In a way, it is similar to the cafeteria insurance plans where employees had an array of choices in benefits. The difference is that the long-term care policies have no limits on the choices that the consumer can make. If he or she is willing to pay the price, absolutely everything available can be selected. Daily Benefit Options While there are many policy options, the daily benefit amount is usually the first policy decision, with the second one being, the length of time the benefits will continue. Both of these strongly affect the cost of the policy. The daily benefit is based upon the type of policy selected. Policies that cover institutional care in a nursing home will have options that may vary from policies that cover only home care benefits. Integrated policies will vary from those that pay a daily indemnity amount. Obviously, the consumer could not select a higher daily benefit than offered by the issuing company. Nor can an insurer offer a daily indemnity amount that is lower than those set by the state where issued. At one time insurers offered as low as a $40 per day benefit in the nursing home. By today s standards, that would be extremely inadequate for nursing home care. This daily benefit can have variations. Some policies will specify an amount (not to exceed actual cost) for each nursing home confinement day. Other policies (called integrated plans) offer a more relaxed benefit formula. These policies have a "pool" of money, which may be used however the policyholder sees fit, within the terms of the contract. This means that this "pool" of money could be spent for home care rather than a nursing home confinement. Benefits will be paid as long as this maximum amount lasts regardless of the time period. The danger in having a pool of money, however, is that the funds may be used up by the time a nursing home confinement actually occurs. If the funds have been previously used up, there will be no more benefits payable. Since people prefer to stay at home, this may work out well, but it can also quickly deplete funds in a wasteful manner. While there are not specific figures available across the board (individual insurers most certainly do keep these figures for their company), most policies are probably still written as a set daily benefit amount. The amounts paid will usually vary depending upon whether they are going towards a nursing home confinement, home health care, adult day care, and so forth. The "pool of money" is gaining popularity, however, since consumers see it as a way to make health care choices more freely. Integrated policies are generally more expensive than indemnity contracts. Page 11
Chapter 1: Long-Term Care Insurance Expense-Incurred and Indemnity Methods of Payment When benefits are paid from a specific dollar schedule for a specific time period, they are generally paid in one of two different ways: 1. The expense-incurred method in which the insured submits claims that the insurance company then pays to either the insured or to the institution up to the limit set down in the policy. 2. The indemnity method in which the insurance company pays benefits directly to the insured in the amount specified in the policy without regard to the specific service that was received. Of course, both methods require that eligibility for benefits first be met. Determining Benefit Length While the daily benefit is typically the first choice made, the second choice is just as important to the policyholder: the length of time for which benefits will be paid. This may apply to a single confinement or it can apply to the total amount of time spent in an institution. An indemnity contract offers benefits payable for a specified number of days, months or years (depending upon policy language). An integrated plan pays whatever the daily cost happens to be unless the contract specifies a maximum daily payout amount. When funds are depleted, the policy ends. While statistics vary depending upon the source, most professionals feel a policy should provide benefits for at least three years of continuous confinement. The average stay is 2.5 years according to federal figures. Of course averages are made up of highs and lows. Some people will only be in a nursing home for three months while others may remain there for five years. Using the average stay, however, is a good medium figure. Since the majority of consumers will not be willing to pay the price for a life-time benefit, three or four year policies are likely to do a good job for them and still be affordable. Policy Structure We have seen much legislation by the states directed at long-term care policies. Even the federal government has been involved in this with the tax-qualified plans. It is important to note that tax-qualified plans always come under federal legislation whereas non-tax qualified plans come under state legislation. Each state will have specific policy requirements. The states will assign descriptive names in an effort to identify policies in Page 12
Chapter 1: Long-Term Care Insurance a way that consumers can comprehend. Such terms as Nursing Facility Only policy, Comprehensive policy or Home Care Only policy will be used. Washington, like many other states, mandates specific agent long-term care education prior to selling them. Even in those states that do not have special continuing education requirements, however, it is necessary for agents to acquire knowledge in this field. Long-term care policies often do not pay benefits for years after purchase. An error on the part of the agent can have devastating consequences. When an individual is applying for long-term care coverage he or she must make several decisions: the daily benefit amount, the elimination period, maximum benefit periods, adding special types of care (such as home care), and inflation riders that increase policy benefits over time. The benefits selected directly affect the cost of the policy; obviously the more coverage an applicant chooses the more the cost of the coverage. Policy Free-Look Period When a policy is issued and delivered to the applicant there is a 30-day free-look period that allows the insured to review the issued policy. This will be stated in the policy and may have a heading similar to 30-day Right to Examine Your Policy. If the applicant is not satisfied with the issued policy, or merely changes their mind for no reason at all, the contract may be returned for a full premium refund. This voids all coverage as though the policy was never issued at all (so the insurer would not be liable for any claims). The premium refund must be made within 30 days of cancellation. Unfortunately most people, including agents, never read the policy in its entirety. Insurance contracts are the number one unread best seller. Even though every issued policy tells the insured to review their policy, few people actually do so. Instead they rely upon their memory of what the agent told them during the sales presentation. That is why it is so important for agents to be complete in their policy presentation and to present the facts in a way the average consumer can easily understand. A copy of the original policy application will be included with the insurance policy. Both the agent and the applicant should review this for accuracy. Of course the name must be correctly spelled, but the listed medical information must also be reviewed since incorrect medical information could mean a denied claim. No policy covers everything and that includes long-term care policies. Long-term care policies might be very specific in their coverage, such as coverage only for nursing home admittances. Under the heading Notice to Buyer the insurance company will list the benefits that are provided by the issued policy. Page 13
Chapter 1: Long-Term Care Insurance The policy will have several sections to it. The Policy Schedule will list the insured s name and the options that were chosen and purchased at the time of application. Several items may be listed, including: 1. Elimination period (deductible expressed as time not covered); 2. Maximum daily home and adult day health care benefit; 3. Maximum daily nursing home facility benefit (or total benefit amount if it is an integrated policy); 4. Maximum lifetime benefit; and 5. The type of inflation benefit selected, if any. Most policies issued today are tax-qualified plans. Some professionals feel the non-tax qualified contracts had less restrictive language, so paid claims easier. That may be true since so many insurers have stopped issuing the non-tax qualified plans. On the other hand it may simply be a reflection of what consumers are buying. When policies are tax-qualified plans this will be stated on the front page of the longterm care contract. It will say something similar to: This is a tax qualified contract. This policy is intended to be a tax qualified long-tem care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986 (as amended by the Health Insurance Portability and Accountability Act of 1996 Public Law 104-191). There may also be a Caution notice regarding the information provided on the application. It warns the insured that the issuance of the long-care contract was based on the responses to questions in the application and states that a copy of the original application is enclosed. The policy will state: If your answers are incorrect or untrue we may have the right to deny benefits or rescind the policy. It will also state: This policy is not a Medicare supplement policy. Guaranteed Renewable for Life Policyholders may renew their long-term care policy, if it contains a guaranteed renewable clause, for the duration of their life. Although premiums will not increase due to a change in their personal age, premiums may rise if everyone in their premium class receives the premium increase. Premium Class means a population segment classified by the actuaries as having similar characteristics, such as issue age, issue year, policy form number, rate classification or some other selected benefit option or criteria. Page 14
Chapter 1: Long-Term Care Insurance Premiums will not increase because the insured experienced a birthday or submitted claims for a covered condition. Of course, premiums must be paid on time; if the insured fails to pay a premium on time (and it is past the allowed grace period) the insurer is not obligated to reinstate the policy. When an increase in premium occurs the insurer will notify their policyholders at least 60 days in advance. Increases typically occur on policy anniversary dates since policies usually give a one year rate guarantee. Rates may increase due to increases in coverage offered under inflation clauses, depending upon the policy language. LTC Insurance Terms Every policy will contain a glossary of terms used in the policy. Every insurance policy is a legal contract so terms are an important part of the document. Policies typically capitalize the entire word or the first letter of the word anywhere the term appears in the contract. Activities of Daily Living: Bathing, Dressing, Toileting, Transferring, Continence, or eating. Applicant: In the case of an individual long-term care insurance policy, the person who seeks to contract for benefits; in the case of a group long-term care insurance policy, the proposed certificant holder is the applicant. Bathing: Washing oneself by sponge bath; or in either a tub or shower, including the task of getting into or out of the tub and shower. Certificate: Includes any certificate issued under a group long-term care insurance policy that has been delivered or issued for delivery in WA. Dressing: Putting on or taking off all items of clothing and any necessary braces, fasteners, or artificial limbs. Long-Term Care Insurance: An insurance policy, contract, or rider that is advertised, marketed, offered, or designed to provide coverage for at least twelve consecutive months for a covered person. Long-term care insurance may be on an expense incurred, indemnity, prepaid, or other basis, for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, provided in a setting other than an acute care unit of a hospital. Long-term care insurance includes any policy, contract, or rider that provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. Long-term care insurance does not include life insurance policies that: Page 15
Chapter 1: Long-Term Care Insurance 1. Accelerate death benefits for one or more qualifying events of terminal illness, medical conditions requiring extraordinary medical intervention, or permanent institutional confinement; 2. Provide the option of a lump-sum payment for those benefits; or 3. Do not condition the benefits or the eligibility for the benefits upon receipt of long-term care. Long-term care insurance does include group and individual annuities and life insurance policies or riders that provide directly or supplemental long-term care insurance. Some contracts may be qualified long-term care insurance contracts under federal guidelines. Long-term care insurance policies are not basic Medicare supplements, basic hospital expense policies, basic medical-surgical expense plans, hospital confinement indemnity plans, major medical contracts, disability income, related income, asset protection, accident only, specified disease, specified accident, or limited benefit health contracts. Policy: includes a document such as an insurance policy, contract, subscriber agreement, rider, or endorsement delivered or issued for delivery in WA by an insurer, fraternal benefit society, health care service contractor, health maintenance organization or any similar entity authorized by the insurance commissioner to transact the business of longterm care insurance. Qualified Long-Term Care Insurance Contract or Federally Tax-Qualified Long- Term Care Insurance Contract: means either an individual or group insurance contract that meets the requirements of section 7702B(b) of the Internal Revenue Code of 1986, as amended, or the portion of a life insurance contract that provides long-term care insurance coverage by rider as part of the contract and that satisfies the requirements of sections 7702B(b) and (e) of the Internal Revenue Code of 1986, as amended. Toileting: Getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene. Transferring: Moving into or out of a bed, chair or wheelchair. Continence: The ability to maintain control of bowel and bladder functions; or when unable to maintain control, the ability to perform associated personal hygiene, such as caring for a catheter or colostomy bag. Adult Day Care: a program of social and health-related services provided during the day in a community group setting for the purpose of supporting frail, impaired elderly or disabled adults who might benefit from care in a group setting outside of their home. Page 16
Chapter 1: Long-Term Care Insurance Adult Day Health Care Center: a facility that is licensed or certified to provide a planned program of adult day health care services by the state in which it operates. Such centers must operate pursuant to the law and meet the following standards: Provide Adult Day Health services in a protective setting under appropriate supervision that meets the needs of the functionally or cognitively impaired adults; Operate on a less than 24-hour basis; Keep written records of services for each person in their care; and Establish procedures for obtaining appropriate aid if a medical emergency arises. Assisted Living Facility: a facility that is engaged primarily in providing ongoing care and related services that has the appropriate state licensure and meets all of the following: It provides services and care on a continuous 24-hour basis sufficient to support the needs resulting from the inability to perform activities of daily living from a severe cognitive impairment. It has trained and ready-to-respond personnel actively on duty in the facility at all times to provide the services and care. It provides at least three meals each day and accommodates special dietary needs. It provides residential services and maintenance or personal care services in a single location. It has formal arrangements with a physician or nurse to furnish medical care in case of an emergency situation, and It has appropriate procedures to provide on-site assistance with prescription medications. An assisted living facility is not a clinic, hospital, or nursing home. Assisted living facilities provides necessary services that prevent an individual from going to a nursing home and this is probably a large reason they have been so well received by the public. If the patient needs special care, such as for alcoholism or drug addition, an assisted living facility may not be the appropriate place for care, and the facility will usually make a health and mental assessment before accepting a resident. Some facilities have multiple types of care available. For example, one wing may be for assisted living residents, another wing for nursing home care, and yet another wing for special needs, such as patients suffering from Alzheimer s disease. Basic Home Health Care: this means care or services provides in the recipient s home. Services include part-time or intermittent services provided by a nurse, support services, and home health aide services. Page 17
Chapter 1: Long-Term Care Insurance Chronically Ill: A chronically ill person has been certified by a licensed health care practitioner as: Being unable to perform, without substantial assistance from another person, at least two activities of daily living for a period of time that is expected to last at least 90 days due to a loss of functional capacity. Having a level of disability similar to the level of disability in accordance with any regulations prescribed by the Secretary of the Treasury in consultation with the Secretary of Health and Human Services; or Requiring substantial supervision to protect oneself from threats to health and safety due to a severe cognitive impairment. In order to meet the definition of chronically ill under most insurance policies the individual must have been certified as such by a licensed health care practitioner within the previous 12-month period. Elimination Period: a period of time that applies to an issued insurance policy. It is the total number of days the insured remains chronically ill and covered under their policy before benefits will actually be payable by the policy. It is often referred to as a deductible expressed as time not covered. The elimination period begins on the first day the insured is ill and has expenses or receives services that would be covered under their long-term care policy. Each day that would have been covered under the policy terms counts towards the elimination period until the total days selected have been met; then the policy begins paying benefits. Molly purchased a long-term care nursing home policy. At the time of application she selected a 90-day elimination period. Therefore her longterm care benefits would begin on the 91 st day of covered services (the first 90 days are her elimination period the time period not covered). When she becomes ill and goes to a nursing home her elimination period will begin with the first day of covered confinement in the nursing home. On the 91 st day of covered services her policy will begin paying benefits on Molly s behalf. Elimination periods always deal with covered time periods. In other words, the type of care or services received must be covered under the policy that was purchased. The elimination period would not apply to types of care or services that were not covered under the purchased policy. Again, it works just like a deductible, only in terms of time rather than dollars. Page 18
Chapter 1: Long-Term Care Insurance Home: the place an individual lives; an independent residence rather than a group home or nursing home. Even if a confinement becomes long-term it never includes a hospital, nursing home, assisted living facility or any other institutional setting where the person is dependent upon other for assistance. Home Health Care: services performed in an individual s private home: Part-time or intermittent skilled services provided by a nurse; Services to support compliance with medication or treatment regimens; Home health aide services; Physical therapy, respiratory therapy, occupational therapy, speech therapy or audiology therapy; and Services provided by a specialist in the field of nutrition or the administration of chemotherapy. Hospice Care: care for the terminally ill, typically defined as having six months or less to live. Hospice care provides services designed to provide palliative care and alleviate the individual s physical, emotional and social discomfort associated with the last months of life. Maintenance Care: also called custodial care or personal care, it is the type of care that is personal in nature, such as helping with the activities of daily living while the person is chronically ill. It does not include services that would come under skilled or intermediate nursing care. A person with no medical training can provide maintenance care, although it is typically still under the supervision of a medical person, such as a nurse or doctor. It is common for a family member to provide maintenance care. Medical Necessity: care or services that are: Provided for acute or chronic conditions; Consistent with accepted medical standards for the insured s condition; Not designed primarily for the convenience of the insured or their family; and Recommended by a doctor who has no ownership in the long-term care facility or alternate care facility in which the insured is receiving care. Plan of Care: a written individualized plan of services prescribed by a licensed health care practitioner. Respite Care: the supervision and care of an individual while the family or other service individuals who normally provide substantial amounts of care take short-term leave. Severe Cognitive Impairment: a loss or deterioration in intellectual capacity that is comparable to (and includes) Alzheimer s disease and similar forms of irreversible dementia. It is measured by clinical evidence and standardized tests that assess mental impairment. Cognitive impairment typically includes such things as memory loss, loss of Page 19
Chapter 1: Long-Term Care Insurance orientation as to people, places, and time or problems with deductive or abstract reasoning. Substantial Assistance: either hands-on assistance or standby assistance. Hands-on Assistance is the physical assistance of another person without which the person would be unable to perform the activities of daily living. Standby Assistance means the presence of another person, within arm s reach, that is necessary to prevent injury while performing the activities of daily living. This injury is prevented by being physically close enough to the person to provide physical intervention, such as catching the person if he or she begins to fall. Terminally Ill: having six months or less to live, as certified by a qualified individual, such as a doctor. Out-of-State Policies Group long-term care insurance policies may not be offered to a resident of Washington under a group policy issued in another state to a group in this state unless the state of issue has substantially similar requirements. A determination would have to be made to determine that such requirements have been met. 48.83.030 Preexisting Health Conditions Insurers may not define preexisting condition more restrictively than allowed by Washington. They may define it less restrictively, but not more so. Washington defines preexisting condition as a condition for which medical advice or treatment was recommended by or received from a provider of health care services within the previous six month period (six months prior to application). The exception is a policy or certificate that applies to group long-term care insurance under RCW 48.83.020(6) (a), (b), (c). A long-term care insurance policy or certificate may not exclude coverage for a loss or confinement that is the result of a preexisting condition unless the loss or confinement begins within six months following the effective date of coverage. In other words, a medical condition that was noted as a preexisting condition is not covered during the first six months of the issued policy. This would include claims that are directly related to the preexisting condition. Obviously insurers want to have application questions that are designed to elicit the complete health history of an applicant so they may correctly underwrite the policy. Page 20
Chapter 1: Long-Term Care Insurance Unless otherwise provided under the terms of the policy, and regardless of whether the medical condition was disclosed on the application, a preexisting condition need not be covered until the waiting period expires. Even though a preexisting condition exists insurers cannot exclude coverage for that condition. It is prohibited whether by policy clause, waivers, or riders. Once the preexisting time period has passed, if the policy was issued the condition must be covered following the preexisting 6 month exclusion period. Coverage also may not be reduced or limited in any way. Again, once the preexisting period has passed, coverage must be the same for that particular condition as for any other medical situation that may develop. 48.83.040 Prohibited Policy Terms and Practices No long-term care insurance policy may: 1. Be canceled, non-renewed, or otherwise terminated on the grounds of the age or the deterioration of the mental or physical health of the insured individual or certificate holder. 2. Contain a provision establishing a new waiting period in the event existing coverage is converted to or replaced by a new or other form within the same company, except with respect to an increase in benefits voluntarily selected by the insured individual or group policyholder. 3. Provide coverage for skilled nursing care only or provide significantly more coverage for skilled care in a facility than coverage for lower levels of care. 4. Condition eligibility for any benefits on a prior hospitalization requirement. 5. Condition eligibility for benefits provided in an institutional care setting on the receipt of a higher level of institutional care (they can t require an individual to first receive skilled care, for example, before custodial care is covered). 6. Condition eligibility for any benefits (other than waiver of premium, postconfinement, post-acute care, or recuperative benefits) on a prior institutionalization requirement. 7. Include a post-confinement, post-acute care, or recuperative benefits unless the requirement is clearly labeled in a separate paragraph of the policy entitled Limitations or Conditions on Eligibility for Benefits and the limitations must specify any required number of days of pre-confinement or post-confinement. Page 21
Chapter 1: Long-Term Care Insurance 8. Condition eligibility for non-institutional benefits on the prior receipt of institutional care. 9. A long-term care insurance policy may be field-issued if the compensation to the field issuer is not based on the number of policies or certificates issued. Fieldissued means a policy or certificate issued by the producer or a third party administrator of the policy pursuant to the underwriting authority by an issuer and using the issuer s underwriting guidelines. 48.83.050 Right to Return the Policy Long-term care insurance applicants have the right, as previously discussed, to a free look at the policy they purchased. Applicants may return their policy or certificate for any reason within thirty days after it was delivered. Their premium must be refunded in full. The notice of the right to return the policy for a full refund must be prominently printed on or attached to the first page of the policy. It must state that the applicant may return the policy or certificate within thirty days following delivery and receive their refund without question. The refund must be made within a thirty day period. Denials of refund must also be made within thirty days of the applicant s request. This would not apply to group policies. 48.83.060 Outline of Coverage An Outline of Coverage is given to the consumer prior to presenting an application or enrollment form. The outline must prominently direct the applicant s attention to the document and its purpose. The commissioner will prescribe the standard format, including style, arrangement, overall appearance, and the content of an outline of coverage. An issued policy will have an Outline of Coverage with the policy in addition to the copy that was presented at the time of application. Once the policy is approved it must be delivered within 30 days of approval. A policy summary will be delivered with the policy that provides long-term care benefits within the policy or rider. 48.83.070 Policy Summary A policy summary is delivered to the applicant with their issued policy or rider. The summary will include an explanation of how the long-term care benefit interacts with Page 22