The Short Term Care Revolution

With all the hoopla about LTC carriers going out of the market or raising rates, many agents have found clients are more willing to consider short-term care (STC) policies.

If you haven’t added them to your portfolio yet, you’re missing the boat.

Short-term care (also known as Recovery Care or “LTC Lite”) is not a new product but it has been gaining ground in the last 2 years as an alternative to traditional LTCi. With its shorter underwriting cycle, high-issue rates, and low premiums it’s becoming increasing popular – especially among the agents who traditionally sell Medicare supplements.

The standard STC policy provides coverage for 1 year or less. The benefits are usually reimbursement-type. Most are the “use it or lose it” type, although MedAmerica’s newest product called Transitions takes the pool-of-money approach.

STC elimination periods are much more consumer-friendly. Most don’t go longer than 60 days and some offer a 0-day EP. And since these policies are not true LTCi – there is no 90-day certification required before the client can receive benefits. This makes STC perfect for those who might have purchased a long-term care policy with a longer EP. Also, the policy can pay even if Medicare pays. In short, if your client chooses a 20-day EP, that’s exactly what he will get. Benefits will start on Day 21.

Underwriting is a breeze. You won’t be waiting 4 to 6 weeks for a policy – more like 7 to 10 days. Most STC applications are just 10 or 11 health questions. If the client answers “No” to the questions, then he/she is 95% through the underwriting process. Most carriers do a Prescription Drug Screen and a phone interview. The older ages will require a face-to-face interview with a cognitive screen. From time to time doctor records will be ordered, but that is pretty rare.

The health questions are similar to the questions you would find on an LTCi application and would be considered “knock-out” questions. Generally the carrier wants to make sure that the client isn’t already ADL deficient, cognitively impaired or affected by any life-threatening conditions? (Of course I’m generalizing – but you get my drift). A “yes” answer to any of the questions means the client will definitely not qualify.

Coverage can vary from policy to policy. They all cover care in a nursing home. While some policies only cover facility care, many offer benefits for care in the community as well. Some carriers may limit the amount of benefits they’ll pay for home care while others cover all types of care equally – just like a regular LTCi policy. One carrier offers a home care rider – but it only provides for 90 home care visits. Coverages vary from company to company so be sure to do your homework and understand exactly what the policy will pay.

The benefit triggers are the same as LTCi – 2 of 6 activities of daily living (ADL’s) or severe cognitive impairment.

A major difference between STC and LTCi is no 90-day certification requirement. This means if your client only needs care for 6 or 7 weeks (as she might while recovering from a broken hip), these handy little policies will pay for that care. A traditional LTCi policy would not.