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There's No Place Like Home For Health Care

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One of the most gratifying things about working in the long term care insurance industry is helping to address the concerns of people all across the nation about the possibility that they will one day need extended health care. Knowing that we make a difference in the lives of thousands of people nationwide by providing them with financial resources and peace of mind makes ours a truly valuable profession.

Carriers in the industry are always trying to improve each generation of product. This has led to a number of different approaches to solve the same problem. Take, for instance, the home health care benefits available under the various LTC insurance policies offered for sale today. There are a number of approaches, each designed to tackle the problem from a different angle.

Traditional approaches

Is your client looking to maximize his or her benefit dollars? Then look no further than a policy with a tried-and-true reimbursement style home health care benefit.

For those not familiar with this kind of plan, a reimbursement style policy repays the insured up to the daily benefit limit for expenses incurred in receiving qualified LTC services under the terms of the contract.

The key to a reimbursement policy is that the insured receives dollars for only those qualified expenses that he or she incurs. So if after becoming benefit-eligible, the insured requires covered home health care services for only 12 days per month, the daily benefit home health care feature would reimburse the insured for those 12 days, up to the policy’s daily benefit maximum. Any remaining benefit dollars unspent on any given day would remain in the policy for use as needed. You can think of this kind of policy as a pool of money or an escrow, as illustrated in Table 1.

The daily benefit model works well when the insured’s home health care expenses are less than or equal to the selected daily benefit. However, if the expenses exceed the daily benefit, the insured may have out of pocket expenses, as illustrated in Table 2.

An even stronger form of reimbursement policy pays its home health care benefits on a monthly basis, thereby minimizing the insured’s risk of incurring out-of-pocket expenses. The monthly benefit home health care feature multiplies the insured’s selected daily benefit amount by the number of days in the month and makes the resulting total available for the insured’s use each month (see Table 3). To illustrate, let’s assume the same facts as in the above example, substituting a $3,000 monthly benefit home health care feature (the same $100 daily benefit x 30 days).

The last two examples clearly show the advantages of a monthly benefit home health care feature over a daily benefit model–a greatly reduced risk to incur un-reimbursable expenses. That’s a pretty strong feature. But without minimizing the high quality of LTC insurance policies that feature monthly benefit home health care, there is still a significant hole that these policies fail to address–flexibility.

To qualify for payment, reimbursement policies require the insured to incur expense for a service covered by the policy.

Day by day

While reimbursement policies provide strong financial protection, they have limited flexibility. The next step in the long term care insurance evolutionary process–indemnity policies–takes its inspiration from disability insurance. These policies are simple: They pay the insured a selected daily benefit each day, regardless of the expense incurred.

For example, if the insured purchases an indemnity plan with a $100 daily benefit, once the insured becomes benefit-eligible, he or she will receive $100 each day regardless of the amount of expenses incurred. If the expenses are less than the selected daily benefit, the insured gets to pocket the difference, while if the expenses exceed the daily benefit, the insured will have out-of-pocket expenses.

Create a hybrid

In this day of environmental consciousness, the terms “hybrid” and “going green” are associated with innovation, fuel economy and getting the most for your dollar. While we’re not talking gas mileage or emissions in the LTC insurance arena, grabbing a hybrid and going green are still intelligent decisions for your client. Some innovative carriers are currently marketing the next generation of LTC insurance policies and the industry’s first “hybrid,” combining the solidity of a monthly reimbursement model with the ultimate “green” stuff–cash.

These policies are designed with a built-in feature that allows the insured to choose to receive a percentage of the monthly benefit in cash once on claim, in lieu of other benefits. The insured can use the cash as he or she sees fit and can change between receiving cash or reimbursement on a monthly basis.

The flexibility to receive cash in this fashion can really help an insured who incurs unexpected everyday expenses. These may not necessarily be care-related and could include expenses related to prescriptions, unpaid medical bills and deductibles, lawn care, house cleaning and so on. Remember, to qualify for benefits, an insured must be unable to perform at least 2 of 6 activities of daily living or be chronically ill. In either event, the insured usually is unable to do many of chores around the house like yard work or cleaning. Many times, the insured must hire someone to come into the home and perform these tasks, so the demands on the insured’s money are even greater. It’s at this time that a little bit of cash goes a long way.

For the client who is seeking ultimate flexibility in a LTC insurance policy, some carriers sell a cash benefit rider that pays the entire monthly benefit in cash once the insured is qualified for benefits. This option can be expensive but provides the greatest amount of freedom in long term care options

So there are a number of different ways to approach the same issue. And the winner is…

Well, our clients are. The key is to interview your clients thoroughly to determine their needs and then design a plan with the benefits–including home health care benefits–that meet their needs. With so many great options available, there’s no doubt you’ll find one to fit the bill.

Eric Holtzman is a vice president of long term care marketing and sales management at the Prudential Insurance Company of America, Newark, N.J. He may be reached at [email protected].


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