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How State Guarantees Work For Current LTCI Claimants

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Over the past year, there have been an increase in inquiries from concerned consumers to the American Association for Long-Term Care Insurance (AALTCI) regarding the potential failure of long-term care insurance (LTCI) carriers.

A fair number of calls of this nature come from current policyholders, with the most recent from the spouse of an insured already on claim.

Much of the concern arises from continuing media coverage that negatively portrays the traditional long-term care insurance industry. Such coverage certainly draws the attention of consumers with policies as well as those who have yet to purchase.

(Related: AALTCI Explains Exchanges Into Annuities With LTC Benefits)

The latest call was from a husband whose wife was already on claim with one of the nation’s largest long-term care insurance (LTCI) carriers.  The bad news was that her need for care was increasing, as were the costs. The good news was the fact that she had an unlimited policy.  But the husband was hearing negative news about the overall long-term care insurance industry, and the billions being added to reserves. He worried what would happen should the insurer fail and go out of business.

I dutifully explained how there are safeguards and guarantees in place that consumers are not aware of and that rarely, if ever, are included in any of the media coverage: Specifically, the existence of state guaranty associations designed to protect individuals in all 50 states and the District of Columbia.

The associations protect consumers who have purchased life, health and long-term care insurance policies in the very rare instance that an insurance company goes out of business and is unable to pay claims.

What I didn’t know was how the guaranty associations worked for policyholders already on claim. Thankfully, information from the National Organization of Life & Health Insurance Guaranty Associations (NOLHGA) sheds light on this important topic.

The guaranty association coverage limit for LTCI benefits is now at least $300,000 per covered policyholder in all states. That is the maximum benefit a policyholder could receive under the state guaranty association laws in those states should an insurer fail.

Benefits paid up to the date when the guaranty association is ‘triggered’ would not count against the $300,000 in the guaranty association coverage.  In such an instance, the person already on claim would be eligible for continuing coverage of contract benefits up to the entire $300,000 of guaranty association coverage.

— Read Firm Proposes Long-Term Care Insurance Run-Off Program on ThinkAdvisor.

Jesse Slome (Photo: JS)

Jesse R. Slome is executive director of the American Association for Long-Term Care Insurance.