Long Term Care/Disability Coverage

Question 1

Medicaid

Answer 1

• eligibility determined by a persons assets
• individuals entering a nursing home can apply for Medicaid and are eligible once assets are spent down
• penalty period based on amount of assets gifted in five years prior to entering the nursing home
• if nursing home cost $5000 a month, and & $15000 was gifted in the prior 5 years, the penalty period would be 3 months of no Medicaid coverage once assets were spent down.

Question 2

Medicare

Answer 2

• available to those eligible for social security
• benefits are extremely restrictive
• Medicare only pays if the patient is capable of realizing and improvement in his or her condition.

Question 3

Continuing Care retirement communities (CCRC)

Answer 3

Retirement community that offers several levels of care on site

• independent living
• Assisted living
• Memory Care
• Skilled nursing and Rehabilitation

Question 4

Private long term care policy

Answer 4

• provides care for care nor covered by health insurance.

Seven types of coverage:

1. Skilled Nursing - Traditional nursing home, physician ordered.
2. Intermediate Nursing - Occasional nursing care, physician ordered.
3. Custodial Care - Assistance with eating, dressing, bathing, etc.
4. Home Health Care - In-home nursing or necessary assistance.
5. Assisted Living - Apartment style living with healthcare services.
6. Adult Day Care - Daily assistance while a spouse or family member works.
7. Hospice Care - For terminally ill, at home, hospital or nursing facility.

Question 5

Eligibility for long term care benefits

Answer 5

Must be chronically ill or suffer from substantial cognitive impairment.

Chronically Ill - Unable to perform 2 of 6 ADLs for at least 90 days.

Activities of Daily Living include: Eating, bathing, dressing, transferring from bed to chair,
using the toilet, and continence.

Substantial cognitive impairment - Behavior threatens own/others health and safety.

Question 6

Long Term Care insurance partnership program

Answer 6

-Program establishes eligibility rules for a partnership between Individual LTC Insurance and Medicaid

• Individuals use a LTC policy to pay the first portion of Long-term Care and then qualify for Medicaid without the spend down requirement.

• partnership qualified policy included an “asset disregard” for Medicaid to the extent of the total amount of
  benefits received under the long-term care policy.
  For example, if the long-term policy provides $200,000 of lifetime benefits, the individual will be able
  to shelter $200,000 from the Medicaid spend down requirement.

Question 7

What are long term care tax benefits?

Answer 7

• premiums are tax deductible and limited based upon age of the insured.
• benefits are tax free as long as policy is “qualified”

Question 8

What provisions make a long term care policy qualified?

Answer 8

• person is expected to need care for at least 90 days

- unable to perform 2 or more activities of daily living or person suffers from substantial cognitive impairment.

Question 9

Long term care misc info

Answer 9

• no surrender value
• limited to qualified long term care services
• uses dividends to reduce future premiums or increase benefits
• meets consumer protections laws
• does not pay for expenses covered under Medicare

Question 10

Disability income insurance

Answer 10

• provides income to the insured in the event the insured is unable to work because of illness or injury

Policy issues:

Coverage (sickness and accident).
Term (to retirement or to death).
Elimination Period (0 to 180 days).
Taxability of Benefits (depends on payor).
Amount of Benefits (60 to 70%).
Definition of Disability (own occupation, etc.).
Residual Benefit.
Probation Period.

Question 11

What are the four different definitions of disability?

Answer 11

1. Any occupation - considered disabled if the insured cannot perform the duties of “Any occupation”

Least expensive premium

2. Modified any occupation - considered disabled if unable to perform duties of gainful occupation they are reasonably fitted by education, experience, training and prior economic status.
3. Own occupation - considered disabled if insured cannot perform duties of his “own occupation”

More expensive premiums.

4. Split definition - begins with own occupation and moves into modified any occupation after a year or two under own occupation definition.

Question 12

What are the benefit periods of disability insurance?

Answer 12

Short term: coverage is for two years or less

Long term: coverage is until normal retirement age, death, or for a specified period of time.

Question 13

What is the elimination period of disability insurance?

Answer 13

• amount of times until benefits begin
• during elimination period, the premium is typically waived.
• the elimination period serves as a deductible.

Question 14

Taxation of disability benefits:

Answer 14

-If EMPLOYEE pays the premium with AFTER-TAX dollars:

Premiums are Not Deductible;
Benefits ARE Tax Free.

-If EMPLOYER pays the premium:

Premiums ARE Deductible to Employer; Benefits to Employee ARE TAXED

If EMPLOYEE pays premium with PRE-TAX dollars (cafeteria plan):

Benefits to employee ARE TAXED.

Question 15

What is cost of living rider?

Answer 15

Benefits received will adjust for inflation, which maintains the insureds purchasing power.

Question 16

What are disability residual benefits?

Answer 16

If insured goes back to work at less pay, the policy will pay the difference between current income and income prior to disability.

Question 17

How do disability policy’s coincide with social security?

Answer 17

Any disability benefits received by social security will reduce the amount of disability benefit paid by the insurer.

Question 18

What is the probation period?

Answer 18

• The time the insured must wait after the policy is issued, before specific conditions are covered
• typically 15-30 days after inception

Question 19

What is the grace period? (Health and disability)

Answer 19

• period of time beyond due date of premium. Coverage remains if you pay policy premium before grace period ends

Question 20

Chart taxation of insurance products

Answer 20

Must know for exam****

Question 21

Need to memorize!

Answer 21