Long-term care insurance can help pay for nursing home and other accelerated care in a continuing care retirement community, or CCRC.
But some insurance plans work better in that circumstance than others, and some communities are more suited to this use, say both insurers and those familiar with CCRC management and fee structures.
“Long-term care is really compatible with fee-for-service care, and it can be compatible with life care, but you need to understand how the policies work and how the community calculates costs,” says Certified Financial Planner professional Brad Breeding, president of retirement and senior living research firm, My LifeSite, and author of “What’s the Deal with Retirement Communities?”
CCRCs offer an all-in-one approach to retirement living, with independent living, assisted living and nursing home care often under the same roof or at least in the same compound. The most flexible plans are fee for service. You move into the independent or assisted living sections and pay a monthly rate. If you need nursing home care, your costs increase to reflect the added services. In the industry, this is known as Type C. Breeding says this arrangement has a straightforward approach to billing that makes using long-term care insurance to pay fairly simple. “When the monthly rate goes up, you can use long-term care to offset the cost,” says Breeding.
On the other end of the spectrum is a life-care contract, a Type A contract, as the industry calls it. In this arrangement, the resident has paid what is usually a high entrance fee. In return, the monthly rate usually remains relatively flat or rises with inflation, no matter what kind of care a resident needs. Integrating a long-term care policy into this billing structure can be much more difficult, Breeding says.
A Type B contract takes a hybrid approach, with lower entrance fees and limits on services available without an increase in fees.
In general, people are qualified to collect on their long-term care policy when they are unable to do 2 or 3 of the 6 activities of daily living — bathing, toileting, continence, dressing, eating and transferring — or if they are affected by dementia. They must pass the initial “elimination period,” the interval of time during which payments must be made by an individual until the insurance kicks in.
Old vs. new long-term care insurance
The best solution is to have one of the older long-term care plans based on cash payments. Under these policies, once an insured qualifies for long-term care, the insurer begins sending checks for the agreed upon amount. No proof of how the money is being spent is required.
Newer long-term care policies generally operate differently. They pay based on reimbursement for services. The patient has to submit proof that the approved services are being provided and the insurance company reimburses for those costs only. Making this kind of reimbursement work can require diligent record-keeping. “Generally, the community will have a formula that specifies what percent of the monthly cost is considered a health-care expense,” Breeding says.
With some insurance companies, that approach doesn’t work very well, resulting in frustration for patients and families trying to collect. With other companies, it can work smoothly.
Bob Bua, president of CareScout, a Genworth company, says that today’s long-term care policies are really more flexible than some of the older ones were, covering care in all sorts of settings and reflecting a variety of circumstances. For instance, his own parents entered a CCRC where his mother went to independent living and his father went directly to the nursing home. Their long-term care insurance covered what some people might consider extras, like a private room for his father.
State rules vary
The specifics of how this can work is very dependent on the state in which the policy is written, Bua explains. An insurer has to get approval from the state insurance department in each state in which it sells insurance and each state has different rules. “It’s important to understand what the continuing care community requires, and if it meets the contractual agreements in your long-term care policy,” Bua says.
In other words, ask lots of questions and get the answers in writing, advises Jesse Slome, executive director of the American Association for Long-Term Care Insurance. “Ultimately, one needs to get a clear definition from the insurance company.
“I would strongly recommend the following: Write down the date and time of the call, the name of the person you spoke with. Hang up and immediately call back so that you will be speaking with another individual and do the same. If the answers vary, know you may have a potential issue. If they are the same, you might ask the second person if they will confirm via an email or letter,” Slome says.
Since long-term care insurance can be pricey, you might want to consider short-term care insurance.