But Gordon at MAGA insists there is a way around some of these strictures if a particular LTC policy permits it. “A few carriers allow you to take one-third of benefits in cash, up to a certain amount, which can go to family caregivers or anything else,” he says, citing such companies as Mutual of Omaha and Transamerica. “And in some cases, the elimination period is waived for the cash benefit, so it can start on day one, as long as a medical professional signs off on the claim.” For certain plans, he says, eligibility for cash benefits requires filing a formal plan of care every 90 days.
A Web of Details
It can be difficult to keep up with all the different rules and limits and exceptions. That’s partly because the carriers keep tweaking their terms. “Nowadays, every six months they come out with small changes,” says Gordon.
The biggest area of change—and where the most restrictions have piled on in recent years—lies in the underwriting. Which is to say, it’s harder than ever to qualify for LTC coverage. “In medical restrictions, there really hasn’t been much change. But companies are constantly coming up with new ways to try to underwrite the risk in order to provide the coverage and still make a profit,” says Ryan.
Years ago, he says, companies might not request medical records from all applicants, or they wouldn’t send a nurse out to examine them unless they were over 75 years old. Now medical interviews are common for almost any age. “In the old days, you just filled out an application and sent it in. It was pretty easy to get coverage. In fact, they used to say LTC underwriting was the easiest underwriting there is. Now it’s getting up there with disability insurance underwriting, which has always been the hardest.”
This isn’t because the carriers want to be vindictive, Ryan points out. “It’s probably what they should’ve been doing all along, to manage their risks and stay solvent. They were careless at the beginning, and that’s biting them right now,” he says.
The Basics
It’s always been the case that LTC benefits kick in when a policyholder can no longer perform two of the six designated activities of daily living: eating, bathing, dressing, toileting, transferring to/from a bed or chair, and controlling bathroom functions. The causes can be physical or cognitive impairments.
None of that has changed. It’s mandated by the National Association of Insurance Commissioners (NAIC), an industry standards organization. “The NAIC model requires carriers to adhere to standardized policy language for tax-qualified LTC insurance coverage,” explains Steve Cain, a principal and national sales leader at Los Angeles-based LTCI Partners. “There’s no way for carriers to change these triggers without NAIC oversight and approval.” In addition, he notes all plans must be filed with state insurance regulators or the Interstate Insurance Product Regulation Commission, headquartered in Washington, D.C. Policies, including premiums, can’t be changed without prior approval, which usually takes six months or longer, he says.
So going forward, chances are that additional LTC insurance changes will be minimal. The general consensus seems to be that the industry has matured and arrived at reasonable rates and coverage definitions. “I do not expect further limitations for benefits,” says Len Hayduchok, president and CEO of Hamilton, N.J.-based Dedicated Senior Advisors. “Of course, some policies may give the insured the option to carve out benefits, but these provisions would have to be allowed” by various state insurance departments.
In fact, if there are any noteworthy changes looming, they may be enticements to combat the bad press of recent years. “Insurers have introduced assurances that a policyholder’s coverage cannot be canceled based on a deterioration in health,” says attorney Oakes. Furthermore, he notes, some carriers have eliminated a “requirement that, before a claim may be filed, the insured has to have been hospitalized or received skilled nursing-home care.”
And get this: Rates could come down. “Some carriers found they were charging too much, so they tweaked their assumptions and refiled to be able to lower premiums a little bit,” says Gordon. “If others find they’re not competitive, that they were too cautious in reaction to mistakes they’d made in the past, they might reduce premiums, too.”
Staying Up-To-Date
As medical technology advances, some LTC policies are already trying to keep up. “There are policies that specifically say they will consider future medical devices, even if they haven’t been invented yet,” says Gordon.
It’s also possible that future technologies will make qualifying for LTC coverage even more selective. “I don’t see the exclusions changing, but I do see the underwriting changing,” says Ryan. “Who knows at what point companies will be using underwriting methods we haven’t even heard of yet, such as DNA testing.”
One thing is clear: With all these conditions and possibilities, choosing an LTC insurance product isn’t for amateurs. “They’re not one-size-fits-all,” says Gordon.