Idaho LTC Partnership Sets Inflation Shield Standards

Gem State officials are wondering whether options that let long term care insurance policyholders buy more coverage are equivalent to policy provisions that automatically increase LTC coverage levels each year.

For now, the Idaho Department of Insurance will not let policies eligible for the state’s new LTC insurance partnership program use coverage purchase options as the main vehicle for protecting policyholders against the effects of inflation, Shad Priest, Idaho’s acting insurance director, writes in Idaho Bulletin Number 06-7.

The bulletin affects insurers that want to sell Idaho LTC partnership program policies.

The Deficit Reduction Act of 2005 has expanded the original LTC partnership program, which was open to only 5 states, to include all states that want to participate.

Participating states can encourage residents to buy private LTC insurance by letting them keep more assets than uninsured residents if they run out of private LTC coverage and end up relying on Medicaid nursing home benefits.

States are supposed to set strict quality standards for LTC partnership policies, to ensure that policyholders do not end up turning to Medicaid nursing home benefits because the private policies provide poor coverage.

The DRA requires a partnership policy to provide “compound annual inflation protection” if a policy is sold to an individual under age 61, and “some level of inflation protection” if the policy is sold to an individual ages 61 to 75.

“The DRA does not define ‘inflation protection’ for purposes of the partnership program,” Priest writes in the bulletin.

So far, not much guidance is available to indicate what Congress intended when it included the inflation protection requirement, Priest writes.