Before Congress passed the Balanced Budget and the Health Insurance Portability and Accountability Acts in 1996, which severely limit home health care coverage for seniors, most health care providers came from licensed agencies.
Supported primarily by liberal Medicare payment policies for short-term home care, health care agencies had proliferated in size and scope. By making licensed care also available to long term care patients, they made it possible for many care recipients to remain at home and avoid nursing institutions. Care for the home-bound patient was either paid for by the patients themselves, through Medicare or by LTC insurance. Benefits were paid directly to the agency as actual expenses, up to the daily policy limit.
Within 2 years of the enactment of these bills, Medicare payments to skilled-care agencies decreased by almost half, shutting down many home health care businesses. Families with chronic or custodial members had to scurry to find home-care providers from the quickly dwindling licensed agencies. Care recipients wanted options other than licensed home health care agencies.
The change in LTC insurance
LTC insurance companies responded by expanding coverage for home-bound patients to include specialized home care of any kind, including “independent professionals,” i.e., registered nurses or licensed home health care aides. Provisions for caregiver training to allow more individuals to become qualified also was included. Along with these new standards, carriers began to offer 2 distinct, customized home health care policy options to consumers, giving them a choice between a professional reimbursement plan, or one with a cash benefit option where insureds would receive a monthly cash check to use however they saw fit.
A caregiver training benefit was added by most carriers to help pay for the cost of sending an unlicensed person to school to get licensed as a qualified home health care aide. The benefit usually pays as a multiple of the monthly benefit, such as 5 times the monthly benefit amount.
Eventually, the home-care rider disappeared from the LTC insurance plans of the leading carriers. Instead, comprehensive plans focus on care at home first, with assisted-living facilities and skilled-nursing facilities as additional locations where they may pay benefits.
According to Medicare, about 9 million men and women over age 65 will need long term care this year. By 2020, an additional 12 million older Americans will need LTC, and most will be cared for at home. In fact, up to 70% of older LTC recipients still live in their own homes or with family or friends, according to research by the National Alliance for Caregiving and by AARP.
Hybrid plans are born
As most of us know, LTC insurance can be a complicated product to sell, and no area is more difficult to explain to clients than coverage for home health care benefits. With almost 80% of benefits paid out by LTC insurers to home health care providers, making certain insureds understand and select the most appropriate benefits for their individually-designed LTC insurance policies is a huge challenge.
To further complicate the sales approach, hybrid home health plans, which combine a professional reimbursement plan with a cash benefit option, are on the rise. Inspired insurers, along with their creative marketing departments, have come up with many different monikers for the new plans, including “flex cash” (Prudential), “additional cash” (John Hancock), “full and monthly indemnity benefit” (Allianz) and “indemnity rider” (MetLife).