Thursday, April 08, 2010

Howdy Pardner: LTCi Update [Updated & Bumped]

[Please scroll down for update]

Regular readers may recall my report, almost two years ago, on my 8-hour long Long Term Care class. That was a mind-number; not so the "refresher" course I attended yesterday afternoon. Taught once again by local LTCi guru Ray Copenheaver, this 4-hour course was anything but mind-numbing. We heard from Ray about some very interesting new developments (I'll get to these in a moment). A registered nurse explained some of the differences between levels of care, and a local Elder Law Attorney provided invaluable insights into the inner workings of Medicaid. Atypically, this class "flew by,"

There are some new developments on the Long Term Care insurance (LTCi) front, and I'll cover some of the highlights (and one potential lowlight).

As an aside, if you're a consumer looking for advice about whether (and/or when) you should consider buying LTCi, I heartily recommend Herman Bruns' post on the subject.

First up, reciprocity: As a result of the Deficit Reduction Act of '05, all 57 states now offer some form of "reciprocity." That is, if one buys a Partnership Qualified (PQ) plan in Ohio (for example), and moves to Florida, the safety net provided by the plan is honored in The Sunshine State. That reciprocity, by the way, even extends to states such as New Mexico, even though there are no such plans currently available for sale in that state. NB: Wisconsin is apparently an exception, but that's being resolved even now.

Another interesting development is the implementation of the Pension Protection Act of '06. One of the provisions in this legislation make it possible for folks to "trade-up" to an annuity with a long term care rider. For example, someone with a "regular" annuity may be able to trade it in, on a tax-advantaged basis, for one with a long term care rider. It's one way to stretch one's long term care dollars even further.

The "fly in the ointment" is the CLASS(less) program: The Community Living Assistance Services and Supports Act is a part of ObamaCare© that "mandates the creation of a national long-term care insurance program that will provide average benefits of no less than $50 per day to help people pay for non-medical expenses." As I opined before, I'm quite sure that the gummint will find a way to screw up Long Term Care, as well. On the other hand, it may be beneficial as an example of "how not to do it;" that is, it may well motivate folks to finally consider buying a real LTCi plan.

UPDATE: Almost forgot something else I learned at this class. One carrier has developed (and is test-marketing) a new configuration which offers a zero day elimination period (in other words, benefits begin pretty much right away) but pays on an 80/20 basis. It's apparently priced significantly lower than current products.

Typically, products come in three "flavors:"

■ Reimbursement, which is the most common. Here, you pay the bill (to the nursing home, for example) and submit the receipt to the carrier.

■ Indemnity, which typically costs about 10-15% more; these don't require receipts, and pay the daily benefit.

■ Cash Benefit, which cost even more than Reimbursement, but pays the full amount directly.

The "new" plan works a little differently. Say you buy such a plan with a $100 per day ($3000 per month) benefit. You go into a nursing home that costs $110 a day. They'll pay 80% of that $110 (or $88). If the cost was $150 a day, they'd cap the reimbursement at the $100 you bought (not the $120 that represents 80%). It's fairly new, and I don't have any other details, but expect to see more carriers introducing these kinds of products.
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