Long-Term Care Insurance Rate Guide from the Texas Department of Insurance

Long-Term Care Insurance Rate Guide

June 2009

Deciding if Long-Term Care Insurance Right for You
Texas Long-Term Care Insurance Partnership Program
Shopping for Long-Term Care Insurance
Protect yourself
Using the Rate Guide
Rate Tables
For More Information

Long-term care refers to the type of personal care services you need if you become unable to care for yourself because of a loss of functional capacity or cognitive impairment. Long-term care is different from traditional medical care that treats physical problems directly in an attempt to permanently cure or control them. Long-term care services help seniors, people with disabilities, or people with injuries or illnesses perform normal daily activities. These services could include personal assistance or custodial care and skilled care provided in a home, an adult day care center, a nursing home, or an assisted living facility.

Deciding if Long-Term Care Insurance Right for You

Most long-term care costs are paid by Medicaid, a federal-state assistance program for people who qualify. People with low incomes may already qualify for Medicaid, and those with moderate incomes may be able to "spend down" their assets to qualify.

Medicare may pay some long-term care costs. Medicare is a federal program that pays for health care for people over age 65 and for people under age 65 with disabilities. It covers the cost of some skilled care in approved nursing homes or in your home in certain situations. Medicare also might cover some custodial care in your home if you are receiving skilled care.

If you don´t qualify for Medicaid or Medicare, you´ll either have to pay your long-term care expenses out of pocket, with a long-term care insurance policy, or by some alternative means.

Long-term care insurance isn´t right for everyone. Consider your options carefully before buying a policy. Long-term care insurance is probably not right for people with fixed or low incomes and may not be right for people with moderate incomes who could spend down their assets to meet Medicaid eligibility. You also probably don´t need long-term care insurance if you have significant assets and could pay for a lengthy nursing home stay yourself if necessary.

If you choose to buy a policy, you will need sufficient income to pay premiums for the rest of your life without sacrificing your basic standard of living. Keep in mind that retirement income may not be enough to pay your cost of living over time. You need to be sure you can afford your premiums and still have a cushion for unexpected expenses or future premium increases.

Since long-term care premiums are based partly on your age and health, it´s more expensive to buy a long-term care policy if you are older or in poor health. That means the cost might be prohibitive for some people or you might be declined and unable to purchase a policy.

To determine whether long-term care insurance is right for you, consider your personal risk factors, assets, income, costs, and available alternatives. You can also use the Long-Term Care Insurance Suitability Worksheet to help you decide.

Agents are required to provide you with a worksheet and list of "things you should know before you buy" to help you decide if long-term care insurance is right for you.

Personal ´Risk Factors´

The following factors might affect your likelihood of needing long-term care:

Life expectancy. The longer you live, the more likely it is that you will need long-term care. Consider whether your family has a tendency for long life expectancy.
Gender. Women may need long-term care insurance more than men because they generally live longer.
Your family situation. If you have a spouse, adult children, or other family members who can care for you at home, you might not need some types of long-term care services.
Family health history. You may have a greater need for long-term care if chronic or debilitating health conditions run in your family.

Financial Considerations

Long-term care is typically less expensive if you purchase it when you´re younger. You may want to seek help from a trusted financial advisor to decide if it meets your needs. Consider the following questions about your personal financial situation:

What are my assets (not including my home, car, and $2,000 cash)? Will they change over the next 10 to 20 years? Are my assets large enough to justify the expense of a long-term care policy?
What is my current annual income? Will it change over the next 10 to 20 years? Will I be able to afford the policy if my income decreases or if the policy premiums increase significantly?
If I retire, how will retirement affect my ability to pay premiums?
How much does the policy cost? Will I pay the premiums from my income, savings, or investments? Will my family contribute toward the cost?
Will I be able to pay for charges in excess of the policy´s daily benefit amounts and for other expenses if I´m in a long-term care facility for an extended time?
When should I consider purchasing a policy? How much will the policy premium increase if I wait to purchase a policy?

If you decide you want to buy a policy, you can use the Long-Term Care Insurance Policy Comparison Worksheet to compare companies and coverages before you purchase a policy.

Texas Long-Term Care Insurance Partnership Program

Texas created the Long-Term Care Partnership Program as an incentive for Texans to plan for their long-term care needs. The partnership is a joint effort between private insurers and the state. Insurers must follow state and federal guidelines to sell partnership policies.

Partnership policies have an asset disregard benefit that is useful if you deplete your insurance benefits and need to apply for Medicaid. Partnership policies, however, do not guarantee you´ll be accepted into Medicaid. You´ll still have to meet income, medical, and other eligibility criteria.

With the asset disregard benefit, every dollar of long-term care benefits your partnership policy pays will equal one dollar of countable assets that will be disregarded to determine if you´re eligible for Medicaid. This means you can retain assets above the normal limit and you won´t need to "spend down" your assets to qualify for Medicaid. In addition, the assets that were disregarded in the Medicaid eligibility process will not be subject to Medicaid liens and recoveries after you die.

In addition to asset disregard, long-term care partnership policies must also include the following benefits:

Inflation protection. Inflation protection helps your policy continue to pay long-term care benefits as costs rise. Partnership policies provide varying levels of inflation protection based on your age:

Under 61 years old: The insurer is required to offer you the option to purchase and retain 5 percent compound annual inflation protection but you can choose to purchase protection at a lower rate. Upon attaining 61 years of age, you can amend the inflation protection provision to comply with requirements of the next age bracket.
Ages 61 to 76: You must purchase and retain some form of inflation protection until you are 76 years old.
After age 76: Insurers must offer inflation protection, but you don´t have to purchase or retain it.

Tax qualification. You may be able to deduct part of the premium from your taxes as a medical expense, and policy benefits are generally not taxable as income.

If you´re considering a long-term care policy, ask your insurance company or agent if a partnership policy meets your needs. If you purchased a long-term care policy on or after February 8, 2006, ask your agent about exchanging your policy for a partnership policy. The insurance company is required to certify that each agent who sells partnership policies or certificates complies with the training requirements.

Note: Partnership policies will be accompanies by a disclosure statement identifying the policy as a long-term care partnership policy. Be aware that if you make any changes to your partnership policy, you could lose your partnership policy status. Your agent can tell you what changes will result in a status change.

Shopping for Long-Term Care Insurance

If you have investigated long-term care insurance for yourself or for someone else, you´ve probably encountered complicated options, unfamiliar terms, and difficult calculations. Since long-term care insurance isn´t standardized in Texas, every policy is different. In general, however, there are some questions you should ask about each policy you´re considering:

What types of care are covered and in what setting? Policies can offer a full range of services, including home health care, adult day care, assisted living facility care, and nursing home care. Policies are required to cover all levels of care from custodial to intermediate to skilled care.
What are the benefit eligibility requirements? Policies won´t pay until you´ve satisfied certain requirements, such as being unable to perform tasks called activities of daily living or being certified as cognitively impaired. The benefit eligibility triggers may vary from policy to policy.
How much is the daily benefit amount for each type of benefit? Most policies will pay a maximum daily amount for your care. You choose the maximum daily benefit when you purchase the policy. It´s important that you choose your benefit amount wisely. Keep in mind that you do not need to insure the full cost of care. To keep premiums down, you could plan to pay some of the cost yourself.
How long will benefits be paid? The chances of needing long-term care for more than five years are relatively small. For most people, a policy covering three to five years is appropriate and more cost-effective. However, if you´re concerned about contracting a disease requiring more care, such as Alzheimer´s, you may want to consider the more costly option of lifetime coverage.
Does the policy have a pre-existing condition waiting period? If so, how long is it? Some policies won´t cover a pre-existing medical condition until after a certain period of time has elapsed. Some policies will pay for care related to a pre-existing condition immediately if you disclosed the condition on your application. Make sure you know what the policy says about pre-existing conditions.
What inflation protection is offered? Inflation protection helps ensure that you have adequate coverage in the future. All companies must offer an automatic increase in benefits at the rate of 5 percent compounded annually. If you reject inflation protection, the rejection must be in writing. The company may also have other options for inflation protection. Remember that to be prepared for inflation, you must pay ´a higher premium today or higher out-of-pocket costs later.
What is the nonforfeiture benefit? All companies must offer you a nonforfeiture benefit. If you reject the nonforfeiture benefit, the rejection must be in writing. If you cancel or lapse your policy after a specified number of years, the insurance company will either return a percentage of the premiums you paid; extend benefits for a period of time equal to the premiums paid, less any claims; or provide a greatly reduced benefit.
Is the policy tax-qualified? If you buy a tax-qualified policy, you can deduct part of the premiums you paid as a medical expense on your income taxes. Benefits paid from a tax-qualified policy are generally not considered taxable income. The policy must disclose if it is intended to be tax-qualified or non tax-qualified.
Can I upgrade the policy later by purchasing more benefits? Some companies allow you to upgrade your policy after purchase. However, you will likely have to complete and submit a new medical questionnaire.

Also consider the following tips when shopping for any type of insurance:

Consider your needs. Although it´s difficult, try to anticipate what services you might need in the future and choose a policy that´s right for you.
Shop around. Prices can vary substantially from one company to another, even for policies with similar benefits. Get quotes from several companies before buying a policy.
Buy only from companies that are financially sound. A company´s financial rating by an independent rating service is a helpful indication of the company´s overall financial strength.
Choose companies that have a good track record for customer service. The number of consumer complaints against a company is a good indication of the company´s customer service record. Your family and friends are other sources of information about a company´s customer service. Ask them if they´ve had any experience with the companies you´re considering.
Buy only from licensed companies. Licensed companies belong to a guaranty association that will pay your claim if your insurance company goes broke. If you buy from an unlicensed company and have a claim, it might go unpaid.
Review and consider the company´s 10-year history of rate increases. While past increases is not a guarantee or predictor of future increases, you may want to take the rate history into consideration. You can view the rate increase histories of companies selling long-term care insurance on TDI's Long-Term Care Insurance Company Rate Increase Histories page.
Buy from an agent you know and trust. If you buy insurance through the mail or by phone, ask whether the company has a local agent or a toll-free number you can call if you have questions.
Try to find an agent that specializes in long-term care insurance. Because of the many variations in long-term care policies, having an agent with knowledge and experience can help you choose the right coverage for your needs.
Use your "free look period." Insurance companies must give you at least 30 days to look over your long-term care policy after you receive it. Read the policy carefully to be sure it has the benefits and features you want. If you decide to return the policy within the 30 days, you will get a full refund of any premium paid. It´s a good idea to use certified mail so you will have proof that you returned the policy. Be sure to keep a copy of everything you return.

You can learn a company´s financial rating, its complaint index, and whether it is licensed by viewing the Company Lookup page on the TDI website or by calling TDI´s Consumer Help Line

1-800-252-3439

Protect yourself

As with any insurance purchase, it´s important to protect yourself. Follow these tips:

Read what you are asked to sign before you sign it. Never sign a blank application form.
If an agent tries to rush you, be suspicious!
Ask questions and take notes when you talk to an agent. The notes could help you later if there is a dispute over what you were told about a policy.
Don´t buy insurance on the agent´s first visit. Invite someone you trust to be present during the second visit. An agent shouldn´t object.
Answer all questions on the application accurately. Don´t let the agent fill it out for you. If an agent helps you complete the application, make sure the information is correct and complete before you sign. Omitting or falsifying information could cause the company to deny your claims or cancel your policy.
Do not pay cash. Always pay by check or money order so you have a clear record of payment. Make checks payable only to the insurance company or insurance agency, not to an individual agent. Insist on a receipt signed by the agent on the company´s letterhead.
Be sure you have the names and addresses of the agent and the insurance company. Know how to contact the agent and the company if you need help.

Using the Rate Guide

This publication provides information about companies that sell long-term care insurance in Texas, including estimates of the rates companies charge. The Texas Department of Insurance (TDI) also publishes a separate publication called A Shopper´s Guide to Long-Term Care Insurance, which provides more specific information about long-term care insurance. Companies that sell long-term care insurance in Texas must provide you with a copy of the publication before selling you a policy. You can also order a copy by calling TDI´s Publication Order Line

1-800-599-SHOP (7467)
305-7211 in Austin

Definitions

The following terms are often used to discuss long-term care insurance. Some of the terms are used in the rate tables in this guide.

Activities of daily living (ADLs): Activities considered essential to a normal lifestyle. Activities of daily living include bathing, toileting, dressing, transferring (mobility), eating, and continence. Your policy must provide coverage for long-term care services listed in the policy if you are unable to perform the specified number of ADLs or if you require supervision and services due to "cognitive impairment."

Benefit: The services and items covered by a long-term care policy. Common benefits in long-term care policies in Texas include nursing home services, home health services, and adult day care. Long-term care policies are not standardized, so benefits can vary from policy to policy. Even though benefits may have the same or similar names, one company may define a particular benefit different from another. It´s important that you read your policy carefully to understand exactly what your policy covers.

Benefit amounts: The amount a policy will pay for a covered service or item. Usually benefit amounts are expressed as the maximum amount a policy will pay per day for a particular covered service.

Benefit eligibility triggers: The conditions that must occur before the policy pays benefits. For long-term care policies, benefit eligibility triggers usually are the inability to perform a specified number of ADLs or a requirement of supervision because of cognitive impairment.

Benefit period: The length of time a specific benefit will be paid under the policy. For the sample policies included in this guide, benefit periods of two years, five years, and lifetime were used.

Cognitive impairment: A long-term care policy must pay for services when a loss in your mental capacity requires you to have substantial supervision to maintain the safety of yourself and others. The loss may be due to Alzheimer´s disease, senility, an accident, or other causes. A doctor or other health practitioner licensed to make such a diagnosis in Texas must certify your cognitive impairment.

Combination policy/Comprehensive policy: A long-term care policy that includes benefits for both nursing home care and home health care.

Daily benefit: The amount a policy will pay per day for a covered service.

Elimination period: A type of deductible; the length of time you must pay for covered services out of your own pocket before the insurance company will begin to make payments.

Home health care policy: A policy that pays for skilled care or personal assistance in your home. The services must be provided by a licensed home health agency. Covered services may include part-time skilled nursing care, physical therapy, and assistance with activities of daily living.

Medical necessity: A benefit eligibility trigger in some policies. These policies pay if a doctor or other health practitioner certifies that you have a medical condition that requires you to receive long-term care services.

Non tax-qualified plans: Non tax-qualified plans do not allow you to deduct your long-term care premiums as medical expenses on your income tax return.

Nursing home policy: A policy that pays for care in a licensed nursing facility.

Outline of coverage: A short description of a policy´s features, benefits, limitations, and exclusions. An agent or company must give you an outline of coverage when offering a long-term care policy. If you are offered a policy that includes coverage with benefits based on three ADLs, the policy must include a description of the benefits payable for two ADLs, three ADLs, and cognitive impairment. The company must also include this description in its marketing materials and applications for these types of policies. Use the outline of coverage to help you compare policies.

Policy form number: A unique identifying number for the long-term care policies a company is approved to sell.

Pre-existing condition: A condition for which you received treatment or medical advice from a physician within six months before the effective date of coverage. Pre-existing conditions may be excluded from coverage for a specific period of time, as stated in the policy, but never for longer than six months.

Tax-qualified plans: Tax-qualified plans allow you to deduct your long-term care premiums as medical expenses on your income tax return, up to a specified amount.

Types of daily benefit payments: Generally, policies pay benefits in one of two ways:

Expense incurred - this type of payment method will pay less than the daily maximum if the actual cost is less. For instance, if the policy has a $100 daily benefit, but the actual expenses are only $80 a day, the policy would pay $80 a day.
Indemnity method - this type of payment method pays the full dollar amount of the benefit regardless of the cost of services. For example, if the policy has a $100 daily benefit, the policy would pay $100, even if the actual cost of the covered service you receive is $75 or $125.

Rate Tables

The rate tables list estimates of the annual rates companies charge for six long-term care policies. The policies are only a sample for comparison and are not an exhaustive list of the long-term care policies available.

The tables include rates for people purchasing policies between the ages of 40 and 80 in five-year increments. To learn what you would pay at age 45 for a policy with the benefits listed on a particular sample policy, look under the column with the heading "45." If you are 50 years old, look under the column with the heading "50," and so on.

The sample policies each have a $100 maximum daily benefit for nursing home care and a $50 maximum daily benefit for home health care. The tables also contain information about the policy´s elimination period, pre-existing condition waiting period, and the policy form number. If you find a policy with the benefits you want, refer to the policy form number when your talking to the company.

The rate guide also includes rates for an insurance company´s "most popular" policy. These policies don´t exactly match the benefits and features of the six sample policies. Information on the benefit amounts, elimination period, benefit period, and other features included in the policy are shown. Be aware that making rate comparisons between the most popular policies may be difficult because the benefits and features will vary widely.

Note: Keep in mind that not all companies will offer a policy with the specific features included in the six sample policies. Because long-term care policies in Texas are not standardized, features and benefits will likely vary from company to company and by policy. Read the policy´s outline of coverage for a brief description of the features included.

Insurance companies can raise the premiums on policies that do not have fixed rates, but only if they increase the premiums on all policies in your "rate class." Some companies, for instance, may automatically raise rates once you reach a certain age. Individuals cannot be singled out for a rate increase, regardless of the number or amount of claims they have made or any change in their health. Your rate class may be based on your age, where you live, and your health status at the time you purchased your long-term care policy. Once your rate class is established, however, deteriorating health may not change your class or affect your individual premium.

Sample Policies

The rate tables are divided into sample policies with common benefits and features. Click on the "Sample Policy" title to view rates for that particular policy.

Sample Policy 1

Individual tax-qualified combination nursing home and home health care policy, with $100 daily benefit for nursing home care and $50 daily benefit for home health care, 0-20 day elimination period, and two-year benefit period

Sample Policy 2

Individual tax-qualified combination nursing home and home health care policy, with $100 daily benefit for nursing home care and $50 daily benefit for home health care, 30-60 day elimination period, and five-year benefit period

Sample Policy 3

Individual tax-qualified combination nursing home and home health care policy, with $100 daily benefit for nursing home care and $50 daily benefit for home health care, 90-100 day elimination period, and lifetime benefit period

Sample Policy 4

Individual non-tax-qualified combination nursing home and home health care policy, with $100 daily benefit for nursing home care and $50 daily benefit for home health care, 0-20 day elimination period, and two-year benefit period

Sample Policy 5

Individual non-tax-qualified combination nursing home and home health care policy, with $100 daily benefit for nursing home care and $50 daily benefit for home health care, 30-60 day elimination period, and five-year benefit period

Sample Policy 6

Individual non-tax-qualified combination nursing home and home health care policy, with $100 daily benefit for nursing home care and $50 daily benefit for home health care, 90-100 day elimination period, and lifetime benefit period

Carrier´s "Most Popular" Policy

These are individual combination nursing home and home health care policies. Each policy will likely have different daily benefit amounts, elimination periods, benefit periods, and other features. The policies are the ones that each company identified as its most popular, or most frequently purchased, policy.

For More Information or Assistance

For answers to general insurance questions or for information on filing an insurance-related complaint, call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday, or visit our website

1-800-252-3439
463-6515 in Austin
www.tdi.state.tx.us

For printed copies of free consumer publications, call the 24-hour Publications Order Line

1-800-599-SHOP (7467)
305-7211 in Austin

Help us prevent insurance fraud. To report suspected fraud, call our toll-free Fraud Hot Line

1-888-327-8818

To report suspected arson or suspicious activity involving fires, call the State Fire Marshal´s 24-hour Arson Hot Line

1-877-4FIRE45 (434-7345)

For more information contact:

Texas Department of Insurance