Paul LeWinter Long Term Care Insurance Specialist

Independent Insurance Agent

Toll Free: (888) 657-7780

Office: (305) 233-9626

Cell: (305) 401-6103

Fax: (305) 971-9410

Email: paul.lewinter@acsialtc.com

ACSIA

FAQ / Common LTC Phrases

Answers

How do I determine the policy benefits that are right for me?

Prospective buyers of Long Term Care Insurance should consider their age, income, asset base and tolerance for financial risk. Some people prefer a "lean" approach in selecting daily benefits and benefit periods, either as a cost-saving measure or as a plan to augment current assets allocated for Long Term Care. Other people have lower risk tolerance and would prefer their policies to have more enriched benefits to alleviate worry in the future. A Long Term Care professional often can be helpful in assessing your situation and make recommendations. It is an hour well spent to navigate the various companies offering policies and the differing benefits so that the policy fits your situation.

Can I change benefits once my policy is issued?

Yes. When increasing benefits, you will be medically underwritten again for increased benefit approval. Also, the premium for the increased amount will be computed at the age you are when you apply for the increase. You may also reduce your benefits without medical underwriting.

How is premium determined?

Premium is determined by the amount of daily benefit, benefit period and elimination period selected when applying for a policy. When benefits are selected, your age also determines premium. Occasionally, an insurance company will approve coverage at an increased amount of premium if the existing health conditions of the applicant warrant it.

Also, there are additional premiums for any riders, such as inflation protection. Conversely, there are also spousal discounts which may lower premiums. Some companies also offer lower premiums to those in excellent health.

I'm a veteran. Will the VA pay for my care?

Benefits are available for those with severe service related illnesses under their priority group system. Although the Veterans Millennium Health Care Act "guaranteed" access to Long Term Care benefits, coverage is rationed based on funding and the veteran's ability to contribute to the cost. It may be wise to contact the Veterans Administration for information pertaining to your individual situation.

Are there any tax advantages with Long Term Care Insurance?

Since the passage of the Health Insurance Portability and Accountability Act (HIPAA) of 1996, Long Term Care policy holders with qualified policies have the following advantages:
Qualified LTC policies are tax deductible if you itemize and if your total expenses (including LTC premiums) exceed 7.5% of your total adjusted gross income. Benefit payments from qualified Long Term Care policies are treated as tax free and not subject to Federal taxation. Some states also have this provision. Employer LTC premium contributions made for employees and spouses may be 100% deductible as an ordinary business expense.

Benefits remain non-taxable to the employee.

I have plenty of assets to carry me through my retirement. Why should I consider Long Term Care Insurance?

You are one of the fortunate few. Consider the steps you took to arrive where you are today. Probably you planned well and made good decisions. Long Term Care today costs between $60,000 and $100,000 annually and it will be much higher in the future. Would it not be a good strategy to use a portion of interest from your assets to provide the safety net of Long Term Care Insurance? Again, it depends on your risk tolerance.

Activities of Daily Living (ADL)

ADLs include bathing, dressing, eating, toileting, transferring (from bed to chair), and continence. Insurance companies use ADLs to determine eligibility for Long Term Care benefits. A policy will state the number of ADLs which require assistance in order for the policy to pay, usually two out of six. Cognitive impairment is also another trigger to benefits.

Acute Care

Care provided by a doctor or other medical professional designed to treat or cure an illness, injury or condition.

Adult Day Care

A facility providing Long Term Care to adults during the day. Some follow a social model with limited health services and others follow a medical model with some medical services available.

Area Agency on Aging

Area Agencies on Aging are planning and service organizations with local chapters. Nationwide, they are charged with coordination services to older Americans and can provide valuable information and resources. To find an Agency in your area click www.n4a.org

Assisted Living Facility

This is a facility, either independent, connected with a hospital or care center, or on the campus of retirement communities that provides 24-hour custodial care. They may provide daily meals, dispense medications and assist with activities of daily living. Staffed by trained or certified aides, they are supervised by either a resident or on call physician.

Care Advisory Service

A company or individual providing information on Long Term Care and care giving issues. See the Resources section for more information and links to services available.

Certified Nursing Assistant

These are individuals trained or certified to provide care in most circumstances and are supervised by a Registered Nurse.

Cognitive Impairment

There is a vast range of conditions and diseases that encompass cognitive impairment. Alzheimer's disease and dementia are the most common. These kinds of conditions are a trigger for benefits on a Long Term Care policy. Most policies cover these kinds of conditions. Custodial Care Services aimed at maintaining health and/or preventing deterioration of a chronic condition. This is the most common type of care provided in assisted living and nursing care facilities. It is a type of care covered by most policies, but is not generally covered by Medicare benefits.

Daily Benefit

The Long Term Care policy's daily benefit is the greatest amount your policy will pay for a single day of care. For example, if the daily benefit you selected is $100, and the care you receive in a given day costs $120, you would have to pay the additional $20. Some policies have a weekly or monthly benefit instead of a daily. This allows more flexibility in care if you use services less often than daily. Additionally, some policies will pay the daily benefit regardless of the cost of care. See Indemnity vs. Reimbursement.

Durable Power of Attorney

This is a document that authorizes one person to act as an agent for another, also called an attorney in fact. Unlike a general power of attorney, a durable power of attorney remains valid even if the principal becomes incapacitated or incompetent. It helps ensure that spouses will not have difficulty in managing joint assets should one become incapacitated.

Home Health Care

This is a wide variety of services to provide either skilled or custodial nursing care, physical therapy or assistance with activities of daily living. The person who provides care can be either associated with an agency or independent. It can also include non-medical services such as housekeeping, money management or meal preparation.

Inflation Protection

This is an optional rider to a Long Term Care policy which increases daily benefits over time. They are designed to keep daily benefits up with the rising cost of care. See Inflation Adjustment.

Informal Care Giving

Care you receive at home from friends, a spouse or other relatives who are not health care professionals. Some Long Term Care policies include benefits to pay for caregivers to obtain professional training.

Medicaid

This is a medical assistance program financed jointly by state and Federal governments. It is a means-tested program available to those with limited income and assets. This has no relationship to Medicare which is available regardless of financial need to most people age 65 or older or with certain disabilities.

Medicare Supplement Insurance

This is private insurance that works hand in hand with Medicare. These policies fill the gap of benefits that Medicare does not pay, such as deductibles and other non-covered Medicare benefits. Medicare Supplement policies, also known as Medigap policies, DO NOT cover custodial care, the most common type of care required.

A licensed facility providing 24-hour nursing care under a doctor's supervision. Typically they provide both skilled and custodial care.

Pre-Existing Condition

Medical conditions that existed, were diagnosed, or were under treatment prior to applying for insurance. If conditions are severe enough, it is possible that coverage will not be approved. If the policy is issued, some policies (not all) may limit benefits for a period of time (6 months to 1 year) for conditions related to the pre-existing condition.

The process undertaken by insurance companies to determine the risk of loss presented by an insurance policy applicant, based upon health history. Most companies thoroughly review health records prior to approving a policy. Sometimes, certain companies perform a more thorough underwriting process after a claim is submitted, which is called post-claim underwriting. Beware of any company that engages in this process.

Are there any Federal tax benefits related to long term care insurance?

Yes. The Federal Long Term Care Insurance Program is designed to be a tax-qualified plan under the Internal Revenue Code. This means that:

  • benefits (claims) are not taxable; and
  • you can deduct premiums as medical expenses to the extent that your total qualified medical expenses exceed 7.5% of your annual adjusted gross income. The amount of long term care insurance premiums that you can include in your total medical expenses, to meet the 7.5% threshold, is subject to Internal Revenue Service limits by age. Here are the currently published IRS limits by age:
Your age in years, attained before the close of the taxable year Maximum long term care insurance premums you can include: tax year 2012 Maximum long term care insurance premiums you can include: tax year 2014
Age 40 or under $350 $360
Age 41 to 50 $660 $680
Age 51 to 60 $1,310 $1,360
Age 61 to 70 $3,500 $3,640
Age 71 or over $4,370 $4,550

Rates are subject to change yearly per the IRS. Please consult www.irs.gov for the latest tax deductibility information.

You may also wish to refer to Publication 502, Medical and Dental Expenses, published by the Internal Revenue Service, or consult your tax advisor.

This is not intended to provide tax advice. Always consult your tax attorney or CPA when dealing with tax deductibility considerations.

Could the Federal tax treatment of long term care insurance change?

Yes, generally only if the IRS tax code is amended.

Are there state tax benefits for purchasing long term care insurance?

Yes. Many states offer state tax incentives to encourage the purchase of long term care insurance. If you'd like to find out whether your state offers such incentives, please contact your state insurance department directly. You can find the contact information at the National Association of Insurance Commissioners website.

Does the Federal Long Term Care Insurance Program (FLTCIP) offer a non-tax qualified plan?

No. The law governing the FLTCIP requires the FLTCIP to offer only tax-qualified plans.

Does the Federal Long Term Care Insurance Program (FLTCIP) offer a non-tax qualified plan?

No. The law governing the FLTCIP requires the FLTCIP to offer only tax-qualified plans.

Can I pay premiums through a health savings account (HSA)?

Yes, HSAs can be used to pay long term care insurance premiums, subject to limits based on age, which are published by the IRS and are adjusted annually. An HSA is an account established to pay for qualified medical expenses, including qualified long term care costs and long term care insurance premiums. Contributions and withdrawals are tax-free for qualified expenses.

To open up an HSA you must be covered under a high deductible health plan and meet certain other requirements.

The Guide to Federal Benefits for Federal Civilian Employees contains more information on HSAs and high deductible health plans.

For more information on HSAs, please visit www.opm.gov/insure/health/hsa.

Can I pay premiums through a Flexible Spending Accounts (FSA)?

An FSA is an account established to pay for qualified out-of-pocket health care and dependent care expenses. Per Section 125 of the Internal Revenue Code, you cannot use it to pay FLTCIP premiums.