Thanks to the passage of a special public-private partnership program as part of the Deficit Reduction Act of 2005, there’s a new incentive to purchase long term care insurance.
Several states are starting to take interest in these partnerships between private long term care insurers and state Medicaid programs. In order to take full advantage of this opportunity for your clients, it’s important for you to gain a good understanding of the new offering.
For individuals who purchase LTCI through the partnership program, Medicaid will cover long term care services once benefits have been paid by private insurance – without requiring the individual to spend down assets.
In most states, Medicaid requires individuals to spend their assets down to about $2,000 to qualify for long term care benefits. With nursing home costs averaging $70,000 annually, it doesn’t take long for the average person to deplete his retirement savings in order to qualify for Medicaid. However, rather than wiping out a lifetime of savings, partnership programs allow LTCI policyowners to protect a dollar of assets for every dollar paid out in long term care policy benefits. Insurance carriers track policyowners’ coverage and report to the states when the insured goes on claim.
So, for example, $100,000 of benefits paid under a LTCI policy would protect $100,000 of assets from Medicaid’s spend-down requirements. Under this program, the policyowner could receive Medicaid benefits and, in this scenario, keep $100,000 in assets.
In order to participate in the program, states must receive approval of a Medicaid plan amendment from the Center for Medicare and Medicaid Services. Upon approval, the federal government will provide guidelines for the implementation of a partnership program. Insurance carriers must file their LTCI policies with state insurance departments for certification to participate in this program. One of the most significant policy requirements is that qualifying coverage must include compound inflation protection for individuals age 60 and under. Additionally, individuals between the ages of 61 and 75 must have some form of inflation protection in their coverage.
What are the advantages of this program?
There are several positive factors that may make qualifying plans attractive to you and your clients:
Currently marketed policies can qualify
Product requirements can be no more stringent than that of regular LTCI plans. There are no additional state regulations that would change the coverage that insurers now offer. So, there’s no need for agents to learn new products. That means carriers can implement partnership programs rather quickly.
Use existing point of sale materials
Agents can continue to use existing point of sale materials that outline coverage and include applications. This eliminates the need to carry separate materials into the sales situation. Certificates placed in the insured’s policy will explain details regarding the partnership program.
Flexible inflation protection requirements