Long-Term Care Insurance Partnership Program Guidance Issued

Written By: Attorney Jeffrey A. Marshall, CELA*

The Pennsylvania Department of Insurance has issued updated guidance to insurers who issue Long Term Care Partnership Policies.  Partnership policies permit individuals to protect additional resources when applying for long term care benefits under Medicaid (Medical Assistance).

Pennsylvania's application to participate in the Partnership program was approved by federal Medicaid authorities on December 19, 2007.  The Department's new guidance gives additional detail regarding producer training requirements, policy exchanges, inflation protection, policy certification, and policyholder notifications. 

Any individual who sells, solicits or negotiates Qualified Partnership Policies must receive training and demonstrate evidence of an understanding of Qualified Partnership Policies and how such policies relate to other public and private coverage of long-term care services. These requirements may be met by completion of a 1-hour training course prior to any sale, solicitation, or negotiation of a Qualified Partnership Policy; by completion of an 8-hour training course (which may include the 1-hour course if prior to any sale, solicitation or negotiation of a Qualified Partnership Policy) by December 31, 2008; and by completion of a 4-hour training course every licensing cycle thereafter.

Each of these training courses may be qualified as continuing education and, if so qualified, may be counted towards a producer's 24 hour continuing education requirement. The satisfaction of substantively similar 8-hour or 4-hour approved training courses by a nonresident insurance producer in the producer's home state may also demonstrate evidence of such training and understanding.

The Department of Insurance guidance is available online at http://www.pabulletin.com/secure/data/vol38/38-16/771.html

Partnership policies will offer consumers yet another new option to consider as they plan to deal with the potentially devastating consequences of long term care.

Few seniors can afford a long term stay in a nursing home. At a current annual average cost in excess of $83,000 in Pennsylvania, a lifetime of savings doesn't last long. After personal resources are depleted, Medicaid is usually the only source of financial assistance for seniors who need the level of care provided in a nursing home.  However, Medicaid is only available to those who are very poor or have impoverished themselves paying for their care.

After qualifying for Medicaid, an individual must continue to put all of his or her income toward the cost of nursing home care, except for a small personal needs allowance (currently $45 a month). In addition, assets generally cannot exceed $2,400 or $8,000, excluding a home of modest value.  (Special rules allow higher asset levels for a community spouse of a nursing home resident). If an applicant transfers assets for less than full market value, they face a 5 year look back period that can delay eligibility.

The Long-Term Care Partnership Program is intended to encourage individuals to purchase private long-term care insurance to fund their long-term care needs.  If middle-class individuals set aside funds in advance to cover long-term care, their reliance on Medicaid may be deferred or avoided.   The hope is that this will save money for federal and state governments by reducing Medicaid expenditures. 

Individuals who buy a Partnership policy and eventually need long-term care services must first rely on the private insurance policy to cover their long-term care costs.  When the partnership policy benefits no longer meet the cost of care, additional resources will be disregarded for the purposes of Medicaid qualification and estate recovery.  The amount of the additional disregard is to be equal to the amount of insurance benefits the policyholder received from the partnership policy.

Partnership policyholders will nevertheless need to meet other Medicaid program requirements before qualifying for Medicaid.  These include income, transfer of assets, and level of care requirements. The facility providing the care must also participate in Medicaid.   

Whether a partnership policy is a good investment for a middle class consumer is an extraordinarily complicated question.  Partnership policies are likely to be expensive because of mandatory requirements such as the inclusion of inflation protection for any purchaser under age 76.  Many questions remain about how the asset disregard will work.  And the additional Medicaid disregards will be unavailable to policyholders who move to a state that does not participate in the Partnership program. 

Partnership policies join an already confusing array of long term care insurance plan options.  Since the first policies were sold in the 1970s, long term care insurance has become an exceedingly complicated product.  There are dozens of plans which seem to be in a constant state of modification.  Relatively new variations include:

 ►       "Life Stage Products," which are geared toward people who currently don't have enough cash (perhaps due to mortgage or child tuition payments) to buy a long-term care policy with better benefits, but expect to have more money in the future;

►        "Hybrid Plans" which combine a long-term-care policy and life insurance by allowing premiums to roll over into a death benefit, and

►        "Low Premium Policies," that reduce premiums by raising deductibles and reducing benefits.  For example, Genworth's Cornerstone Advantage cuts the normal premium in half but policy benefits don't begin until you have paid a deductible that is 50 times the daily benefit. Thus, if your daily benefit is $200, you'll need to pay $10,000 in out-of-pocket payments before you are eligible for reimbursement of 80 cents of every additional dollar.

To further complicate matters, premiums on existing policies can be (and have been) increased by many Insurers.

Consumers need to understand their goals and realistically assess their situation and prospects before committing to the purchase of long term care insurance.  Factors such as the availability of family assistance, family history, current health, finances, and the availability of other sources of payment (such as Medicaid or Veteran's benefits) should be factored into the planning.

Take your time. Don't be blinded by the "Partnership Policy" label. You might be better served by policies that are quite different from those offered under the Partnership. 

Start by reading about long term care insurance and asking yourself - why am I considering it?  What goals do I want it to help me achieve? Only after you have identified the reasons you want this kind of coverage can you build a plan that will realistically help you reach your goals. Then you can look for a policy with the provisions that will best meet your unique needs.

Long term care insurance may be the biggest investment you will make for the remainder of your life. Once you have completed your study and analysis and made a realistic assessment of your achievable goals, you need to find agents and advisors who will work with you to design a policy that is most appropriate for your particular circumstances.    

Attorney Marshall can be contacted at webmail@paelderlaw.com or at 1-800-401-4552

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