Healthcare Reform – Page 3 – Setnor Byer Insurance & Risk

Affordable Care Act and its Impact on your Bottom Line

All employers, both large and small, are concerned about the rising cost of healthcare. It is the belief of many that the Affordable Care Act will ultimately resolve both the issue of affordability and availability. Yet, there are others who may very well represent the majority of business owners, who suggest that the Affordable Care Act was designed and implemented in haste, providing broader benefits to a greater population of U.S. residents without, first, driving at the triggers to cost in our American healthcare system.

Fortunately or unfortunately, the debate about the Affordable Care Act will not be resolved for quite some time. In the interim, it is probable that health insurance costs will continue to rise. For this reason, every employer needs to work closely with their professionals to monitor the impact of the Affordable Care Act on their health insurance costs, and remain informed about creative options, including High Deductible Plans and Self-Insurance.

For small employers, the new Health Insurance Exchanges set to be operational by 2014, may present yet another option. These Exchanges remain ill-defined and their ability to improve the group benefits shopping experience is questionable given the complexity of the product(s) and the question of who exactly will be engaged or employed by government to help field inquiries. Fortunately, many insurance professionals have built Healthcare Advocacy teams to assist in the navigation of the new Exchanges.

In the next several years, there will be many changes to our healthcare system, including a laser focus on wellness, primary care delivered by nurse practitioners, reductions in costly screenings for low-risk individuals, new challenges to medical treatments, shifting providers, and more. Human Resources and Benefits Coordinators need to be prepared to communicate these changes and manage the ‘emotionally charged’ aftermath.

With all the changes anticipated, some good, and some bad, the following are particularly noteworthy:

Through 2013, businesses with fewer than 25 full-time equivalent employees, which pay average annual wages below $50,000 and provide health insurance, may qualify for a small business tax credit of up to 35% (up to 25% for non-profits) to offset the cost of insurance.
Starting in 2014, the small business tax credit goes up to 50% (up to 35% for non-profits) for qualifying businesses.
Under the Act, employer-based plans that provide health insurance to retirees ages 55-64 can get financial help through the Early Retiree Reinsurance Program, which is designed to lower the cost of premiums for all employees and reduce employer health costs.
In 2014, small businesses with generally fewer than 100 employees can shop in an Affordable Insurance Exchange. These Exchanges are designed to create a new marketplace where individuals and small businesses are guaranteed health plans regardless of medical history. Health benefit plans must meet certain benefits and cost standards to be available through an Exchange.
Employers with fewer than 50 employees are exempt from the Act’s employer responsibility provisions, which assess a penalty on larger businesses that fail to insure their employees in certain circumstances.
In 2014, businesses with 50 or more full-time employees will generally be required to offer adequate health insurance or pay a penalty assessment.
Businesses with more than 200 full-time employees will have to automatically enroll new employees in their health insurance plan and provide an opportunity to opt out of coverage.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the next several years of change. Check back with us often for updates on the American Healthcare System and the Affordable Care Act by calling us directly at 1-888-253-8498 or by emailing specific questions to HealthAgents@setnorbyer.com

What is a Health Insurance Exchange?

Change has been in the air since the U.S. Supreme Court ruled on the Patient Protection and Affordable Care Act (Act). Adjustments are being made to recent changes and preparations are being made for changes that are yet to come. Though opinions about the Act’s desirability and efficacy vary, many are experiencing a shared anxiety over one of the more significant changes on the horizon—Affordable Insurance Exchanges.

The Act calls for the creation of state-based competitive marketplaces where individuals and small businesses will be able to purchase affordable private health insurance. These new marketplaces, or Exchanges, are designed to make it easy for consumers and small businesses to compare health plans, get answers to questions, find out if they are eligible for various tax credits, and enroll in a health insurance plan that meets their needs.

The main functions of Exchanges, which are to be operation in 2014, include:

Certifying, recertifying, and decertifying health plans offering coverage through the Exchange, called qualified health plans;
Assigning ratings to each plan offered through the Exchange on the basis of relative quality and price;
Providing consumer information on qualified health plans in a standardized format;
Creating an electronic calculator so consumers can assess the cost of coverage after any advance premium tax credits and cost-sharing reductions;
Operating a website and toll-free telephone hotline offering comparative information on qualified health plans and allowing eligible consumers to apply for and purchase coverage;
Determining eligibility for the Exchange, tax credits and cost-sharing reductions for private insurance, and other public health coverage programs, and facilitating enrollment of eligible individuals in those programs;
Determining exemption from requirements to carry health insurance and granting approvals based on hardship or other exemptions; and
Establishing a Navigator program to assist consumers in making choices about health care options and in accessing their new health care coverage.

Though resources and support are available, Exchanges are to be run by the individual states. If, however, a state does not establish an acceptable Exchange, the U.S. Department of Health and Human Services (HHS) will assume that that state has elected not to do so, and the HHS will operate a federally-facilitated Exchange in that state.

To offer guidance, the HHS published rules setting forth standards to be followed by states when establishing and operating Exchanges. The framework provided by the HHS includes standards for:

Establishing and operating an Exchange;
Qualifying health insurance plans for participation in an Exchange;
Determining an individual’s eligibility to enroll in health plans and insurance affordability programs;
Enrolling in health plans through Exchanges; and
Determining employer eligibility for participation in the Small Business Health Options Program (SHOP).

Despite these standards, the HHS gave states some flexibility to meet specific needs. For example, each state can elect to structure its Exchange as a non-profit entity established by the state, as an independent public agency, or as part of an existing state agency. A state can also choose to operate its Exchange in partnership with other states through a regional Exchange and to operate multiple Exchanges that cover distinct areas within the state.

Despite this flexibility, Exchanges must have safeguards to prevent conflicts of interest and promote ethical and financial disclosure standards. Consumers utilizing Exchanges should enjoy easy access to information about plan choices and comparisons, protections to ensure fair marketing and enrollment practices by health plans, and appeals rights in case something goes wrong with Exchanges or health plans.

The Act provides that a state’s plan to operate an Exchange must be approved by the HHS no later than January 1, 2013. However, the HHS may provide conditional approval if the state is advanced in its preparation but cannot demonstrate complete readiness by January 1, 2013.

The prospect of conditional approval confirms that though the deadline draws near, much remains to be done. At this point, it is too early to tell how or if the Exchanges will do what they were designed to do. This uncertainty has no doubt been the source of anxiety for many. Unfortunately, those wanting confirmation that the Affordable Insurance Exchanges contemplated under the Act are in fact the wave of the future will have to wait until then.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the rapidly changing health care landscape. Be sure to check back with us periodically for future informational updates. In the meantime, if you have specific questions about health care reform or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, please contact us.

Clearing a High Health Insurance Hurdle: the Pre-Existing Condition Insurance Plan (PCIP) Program

There is a new option for those who are uninsured because of a pre-existing condition—the Pre-Existing Condition Insurance Plan (PCIP) program. Created by the Patient Protection and Affordable Care Act (the health reform law), the PCIP is designed to make health coverage available to those with pre-existing conditions. Importantly, the PCIP does not cost enrollees more just because of their medical condition.

The U.S. Department of Health and Human Services runs the PCIP program in twenty-three states and is contracting with a national insurance plan to administer the program. These states are: Arizona, Alabama, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Kentucky, Louisiana, Massachusetts, Minnesota, Mississippi, Nevada, Nebraska, North Dakota, South Carolina, Tennessee, Texas, Vermont, Virginia, West Virginia, Wyoming, as well as the District of Columbia.

The remaining states are running their own pre-existing condition insurance plan programs. As a result, application procedures, costs and benefits for these state-run programs may differ not only from the federally-run PCIP, but also from other states.

Under the federally-run PCIP program, a broad range of health benefits are covered, including primary and specialty care, hospital care and prescription drugs. Benefits provided by these PCIPs are available even if they are used to treat a pre-existing condition.

To qualify for coverage under the PCIP program, a person:

Must be a United States citizen or legal resident;
Must have been without health coverage for at least the previous six months; and
Must have a pre-existing condition or have been denied coverage because of health a condition.

The PCIP program offers three plan options:

The Standard Plan;
The Extended Plan; and
The HSA Plan.

Each plan has its own premiums, calendar year deductibles, prescription deductibles, and co-payment requirements. However, all three plans pay for preventive care at 100%, with no deductible when a preventive diagnosis is indicated by an in-network doctor. Preventive care includes annual physicals, flu shots, routine mammograms, and cancer screenings. For non-preventive care, insureds staying in-network will pay 20% of their medical costs after satisfying the deductible.

Despite being a federally-run program, PCIP premiums may vary by state. For example, premiums are higher in Texas than they are in Florida.

In Florida, the monthly premiums for people 18 years old or younger are $118 for the Standard Option, $158 for the Extended Option, and $122 for the HSA Option. In Texas, the premiums are $133 for the Standard Option, $179 for the Extended Option, and $138 for the HSA Option. Similarly, those living in Florida ages 35 to 44 years old will pay $211 for the Standard Option, $284 for the Extended Option, and $220 for the HSA Option. In Texas, the monthly premiums are $239 for the Standard Option, $323 for the Extended Option, and $248 for the HSA Option.

Under this program, the first premium payment is due within 30 calendar days from the date an approval letter is received; otherwise the application will be cancelled. The effective date of coverage depends on the date the application and all supporting documents are received by the PCIP. If the documentation is received on or before the 15th of the month, coverage will be effective on the first day of the next month. If documentation is received after the 15th of the month, coverage will be effective on the first day of the second month.

If an application for coverage under the PCIP is denied, the applicant will receive a letter explaining the reasons for such denial. These applicants have 45 days to file an appeal of their denial, if they so desire. Otherwise, they are free to re-apply for PCIP coverage upon meeting the eligibility requirements.

The PCIP program is only available until 2014. This is because in 2014, insurance companies will be prohibited from refusing to sell coverage or renew policies because of a person’s pre-existing condition. Additionally, in 2014, individuals whose employers don’t offer them insurance will be able to buy insurance directly in a health insurance exchange.

For those who have been unable to get health insurance due to a pre-existing condition, the PCIP program may be the solution they have been looking for. However, given the disagreement and uncertainty surrounding health care reform, even after the Supreme Court upheld nearly every provision of the law, only time and experience will tell if the PCIP program is in fact what it was designed to be.

The Supreme Court’s Ruling on Health Care Reform: Is it All Good or All Bad?

On the last day before summer recess, the United States Supreme Court handed down its ruling in the much anticipated “ObamaCare” case. Despite being difficult to follow without the assistance of a roadmap, the result of the nearly 200-page ruling is that health care reform will proceed largely as planned. In the aftermath, many are left wondering, what now?

Ordinarily there is little disruption when the Supreme Court upholds a law because the status quo has been preserved. This is far from the case with the Patient Protection and Affordable Care Act (Act). The political excitement and division surrounding the Act left many unsure about whether looming changes to our health care system would ever become a reality.

Consequently, many are now desperately behind in terms of planning and preparing for the (apparently?) inevitable changes. In other words, it is crunch time for those who were expecting the Supreme Court to strike down ObamaCare.

To stay current, employers and individuals must become familiar with the changing landscape. Specifically, it is important to posses a minimum understanding of the current and future changes under the Act, such as:

the requirement that all individuals, with some exceptions, have health insurance;
the prohibition of lifetime benefits limits based on dollar amounts;
the prohibition of coverage rescissions or cancellations, except in cases of fraud or intentional misrepresentation;
the requirement that dependent insurance coverage continue up to the age of 26;
the prohibition of pre-existing condition exclusions for dependent children under the age of 19; and
the limitation on medical expense contributions to flexible spending accounts to $2,500 per year.

For individuals, many of the Act’s provisions require little or no preparation. The same cannot be said for employers, since various requirements under the Act require preparation, such as:

Mandatory Offer of Coverage: Employers with 50 or more employees may be assessed a $2,000 penalty (or tax, according to the Supreme Court) per full-time employee (in excess of 30 employees) if they do not offer coverage and if they have at least one employee who receives a premium credit through an exchange. Such employers offering coverage but having at least one employee receiving a premium credit through an exchange may face a $3,000 penalty for each full-time employee.
Automatic Enrollment: Employers with more than 200 employees are required to automatically enroll their employees into employer-offered health insurance plans; however, employees may be able to opt out of coverage.
Nondiscrimination Requirements: Under the Act, certain non-grandfathered group health plans (other than self-insured plans) cannot discriminate in favor of highly compensated employees in terms of benefits, eligibility or premium subsidies. Violations can result is severe penalties and taxes. (Note: Implementation of the nondiscrimination requirements has been delayed to allow for the issuance of additional guidance.)
Health Insurance Exchanges: Exchanges will provide marketplaces for individuals and small employers with up to 100 employees to directly compare available private health insurance options on the basis of price, quality, and other factors.
Tax Reporting Requirements: The Act requires employers to report the value of health care benefits on employee’s W-2 tax statements.

It is worth noting that not all of the Act’s provisions survived judicial scrutiny. For example, the Supreme Court limited the expansion of Medicaid by giving states some flexibility to not expand their Medicaid programs without paying the same financial penalties set forth in the Act.

Despite the Supreme Court’s landmark ruling, significant questions remain about how various provisions of the Act will be implemented, maintained and enforced. This makes it vitally important for businesses to maneuver through the developing law and stay ahead of the curve.

Those continuing to hold out hope for some kind of legislative or judicial relief from the Act should not delay their preparations any further. The time is now. Those needing to adapt their practices to comply with the Act should begin doing so immediately; otherwise, they may soon find themselves drowning in the coming sea of change.

At Setnor Byer Insurance & Risk, we are committed to guiding you through what is sure to be a bumpy ride. Check back with us periodically for future informational updates. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

Healthcare Reform Prompts Many to Explore Alternatives to Health Benefit Programs

The passage and continued implementation of Healthcare Reform, as well as its uncertain political future, have placed employers in a precarious position with their health benefit programs. Nevertheless, employers continue to do their best to balance the need to attract smart and sophisticated employees by offering well-rounded health benefit programs with the costs of providing such programs.

It is important that employers succeed in their balancing act because health benefit programs remain pivotal in attracting and retaining top-notch employees. According to a study performed by MetLife, employees make the financial security and protection of their families a top priority, and many believe that this requires sound health benefit programs. According to the study, employees who are satisfied with their health benefit programs are more likely to remain satisfied with their jobs from year to year.

Research done by the Personal Group revealed that 40% of employers plan to review their health benefit programs, and that employers are beginning to explore the various options that will (or may) be available to their employees under Healthcare Reform. According to a Towers Watson’s 2012 HealthCare Trend Survey, in 2014, when healthcare exchanges are scheduled to become available, employers will begin to reconsider and redefine their role in providing healthcare benefit programs in light of the new options. Since healthcare exchanges will give employers an alternative to the traditional sponsoring of health benefit programs, many employees are beginning to view individual health care plans as a viable option.

At Setnor Byer Insurance & Risk, we have been successful in finding attractive solutions for those of our clients exploring new options. We would be pleased to have the opportunity to assist you in effectively navigating this transitional period, as well. Please visit our website at http://www.setnorbyer.com to view and compare our various health plan options.

Improving Patient Safety and Combating Abuse in Long-Term Care Facilities

In a move aimed at combating abuse and neglect in the nation’s long-term care facilities, the Centers for Medicare & Medicaid Services (CMS) awarded more than $13 million on October 6, 2010, to six states to design comprehensive applicant criminal background check programs for jobs involving direct patient care.

“Elder abuse and neglect is tragic and intolerable,” said HHS Secretary Kathleen Sebelius. “Workers with a history of abuse or neglect should be identified and prevented from ever working with residents of these facilities.

“The new health care law will help states identify the best, most effective ways to determine which applicants can be trusted with the health and safety of residents and which cannot,” said Donald M. Berwick, M.D., CMS administrator.

Created by the Affordable Care Act, the new National Background Check Program will help identify “best practices” for long-term care providers to determine whether a job seeker has any kind of criminal history or other disqualifying information that could make him or her unsuitable to work directly with residents.

The first round of states to participate in the program are: Alaska, Connecticut, Delaware, Florida, Missouri, and Rhode Island. They each will share a portion of $13.7 million.

An additional 11 states applied and may be funded beginning in October or November. CMS will also issue a second solicitation in October for those states that did not apply but may still do so.

The new law set aside $160 million for the program, which is to run through September 2012, an amount sufficient to enable all states to participate.

The national background check for each prospective direct patient care employee must include a criminal history search of both state and federal abuse and neglect registries and databases, such as the Nurse Aide Registry or FBI files.

Long-term care facilities or providers covered under the new program include nursing facilities, home health agencies, hospice providers, long-term care hospitals, and intermediate care facilities for persons with mental retardation, and other entities that provide long-term care services.

Questions about the National Background Check Program may be sent via e-mail to the Center for Medicare & Medicaid Services.

To learn more about conducting background investigations, click here.

Source: Department of Health & Human Services

Health Care Reform Installment – Making Sense of the Affordable Care Act

President Barack Obama signed into law on March 23 the most sweeping reform of the United States health care system in the last 50 years. Combined, the Patient Protection and Affordable Care Act and the Reconciliation Act of 2010, now referred to collectively as the Affordable Care Act, dedicates more than $900 billion in new federal funding over the next decade to provide as many as 32 million of the 46 million uninsured people with access to affordable health insurance. This 32 million comprises approximately 11% of our population of residents.

The Affordable Care Act made its way through Congress and to our President’s desk in order to deal with the uninsured who are: ineligible for public programs, and are unable to afford private insurance, do not qualify for private insurance
or those that are eligible for public programs but have not enrolled.

By 2019, the government reports that the Affordable Care Act will result in 94 percent of Americans being covered, up from the 85% percent today.

The Whitehouse suggests that the Affordable Care Act puts our budget and economy on a more stable path by reducing the deficit by more than $100 billion over the next ten years — and more than $1 trillion over the second decade, through cuts to government overspending and reining in waste, fraud and abuse. The deficit decrease in no way suggests that there won’t be considerable tax increases to all citizens who can afford to pay, including small businesses, who are on tap for a significant increase in their costs of doing business.

Today, our healthcare spending is estimated at 15% of Gross National Product, with projection for the percentage to reach 19% by 2018. These numbers are often used to alarm the public, suggesting that our healthcare dollars are being squandered. When one looks at Canada’s 10.1 or England’s 8.4 or Japan’s 7.9, one must realize that our numbers include the profits derived from a largely private system and increases in administrative costs due to a complex multiple payer system. In other words, the dollars we spend on direct care, are not the as alarming as reported. It should also be noted that the overhead associated with our healthcare distribution finds its way back into the system through spending in other sectors, thereby producing a greater GNP than our peer nations — a clear marker for economic health. The US economy is typically ranked in the top 3% for economic vibrancy.

This is all not to suggest that our current system is not flawed, which might explain, fully, the success of this legislation.
There are over 2000 pages of laws and documents that address 4 key areas:

Coverage access, along with coverage improvements
Financing of future healthcare
Mechanisms to reduce costs
Solutions for Long Term Care

The expansion of healthcare to some of the 32 million people, along with the mandated coverage improvements are already in place, with the Department of Health and Human Services ready to bind coverage for high-risk individuals as early as August 1st. The high-risk pool is available for individuals with pre-existing conditions who have not been insured by creditable coverage for the 6 month period preceding the application for coverage. To prevent the current insurance market from ‘dumping’ high-risk insureds into this new marketplace, there is a specific reference in the law for reimbursements from such insurers who take such action.

This high-risk pool is intended to remain in place until replaced by Insurance Exchanges in 2014, which will be an alternative marketplace for Qualified Health plans for the uninsured, self-employed, and small groups regardless of health status. These exchanges will subsidize those with incomes between 133 percent and 400 percent of poverty level. The Government has funded the high-risk pool, to subsidize premiums, with 5 billion dollars. Unfortunately, it is expected that this funding will have to increase to 15 billion by 2013. This pre-existing insurance plan (PCIP) will charge based on age, sex, and territory. Premiums in Florida can be as high as $675 a month for a 50 year male with medical conditions.

The Exchanges will cover a broad range of health benefits, including primary and specialty care, hospital care, and prescription drugs. All covered benefits are available for you, even if it’s to treat a preexisting condition. In addition to monthly premiums, you will pay other costs. You will pay a $2,500 deductible for covered benefits (except for preventive services) before the plan starts to pay. After you pay the deductible, you will pay a $25 copayment for doctor visits, $4 to $30 for most prescription drugs, and 20% of the costs of any other covered benefits you get. Your out-of-pocket costs cannot be more than $5,950 per year. These costs may be higher, if you go outside the plan’s network.
Some of the provisions within the Affordable Care Act apply to all plans, individual and group, while others apply exclusively to new plans, leaving so called grandfathered plans alone.

Grandfathered can be defined as plans that do not change substantially. The following plan changes will result in the “cessation of grandfather status:”

The elimination of all or substantially all benefits to diagnose or treat a particular condition.
Any increase, measured from March 23, 2010, in a percentage cost-sharing requirement (such as an individual’s coinsurance requirement).
Any increase in a fixed-amount cost-sharing requirement other than a co-payment (for example, a deductible or out-of-pocket limit), determined as of the effective date of the increase, that exceeds medical inflation plus 15%.
Any increase in a fixed-amount co-payment that exceeds the greater of $5 (increased by medical inflation), or medical inflation plus 15%.
A decrease in employer contribution rate by more than 5% or the addition of a new annual limit, when one didn’t previously exist, or a decrease in annual limits.

As of September 23rd, children under the age of 19 cannot be denied coverage for their pre-existing conditions; however, the law does not prohibit insurers from denying to insure the children, which is in the process of being remedied. It seems that the regulations were not drafted to require insurers to issue policies to these children.
As of September 23rd, insurers cannot rescind coverage on any health plan, new and grandfathered, except for fraud or intentional misrepresentation.
As of September 23rd, insurers cannot impose lifetime dollar limits on any, new and grandfathered, plan for essential benefits, like:

Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn Care
Mental health and substance use disorder services
Prescription drugs
Rehabilitative services and devices
Laboratory services
Preventive and wellness services and chronic disease management
Pediatric services, including oral and vision care

It should be noted that regulations impose a good faith requirement with respect to the interpretation of the term, essential health benefits. Additionally all insurers, but for grandfathered individual insurers, must provide no less than specified annual limits defined by law for essential benefits as previously defined. In 2010, the maximum annual benefit is set at $750,000, increasing to a maximum of 2 million prior to 2014 when limits are removed completely.

As of September 23rd, all new plans, or existing plans that change substantially, not grandfathered plans, must cover, with absolutely no charge to the patient, certain preventive services such as children immunizations, tobacco counseling for pregnant women, mammograms, colonoscopies, hepatitis B screening, depression screening, HIV screening for high-risk adults and obesity screening and counseling for adults and children. The non-grandfathered plans must also provide patient protections such as access to OB-GYNs and pediatricians without a referral by a separate primary care provider; and greater freedom for patients to obtain certain emergency treatment without certain plan restrictions.

As of September 23rd, dependents under 26 are extended coverage on a parents plan. This applies to all plans.
In 2014, the law finally prohibits insurers from engaging in discriminatory practices that enable them to refuse to sell or renew policies or limit benefits due to health status, nor can health status be used in setting premiums.

While the Congressional Budget Office found that the law would have little impact on premiums for employer’ sponsored coverage, there remains debate as to the laws possible impact on the cost of health insurance premiums. The extension of preventive care alone, along with the elimination of annual and lifetime benefits as well as what will be pre-existing coverage for children under 19, the new taxes to health insurers and healthcare providers, additional cost-shifting due to changes in Medicare reimbursements, and the weaknesses in reform which still permit the healthy to remain uninsured, could raise premiums an average of 40% through 2013. Without these changes, premiums were expected to increase 26% through that same period, with the greatest impact hitting individuals and small groups.

For more information about financing the Affordable Care Act, as well as cost containment measures and Long Term Care provisions, contact the author.

Long Term Care: A Major Concern for Today’s Baby Boomers

As the large numbers of Baby Boomers start to turn 60, many of them assume incorrectly that Medicare, Medicaid, supplemental policies or standard health insurance policies will cover their long-term health care expenses and needs. Consequently, many people do not plan ahead financially to provide for their care in the event of infirmity or extended illness.

Costs of services provided by a nursing home in Florida (based on 2004 numbers) can exceed $60,000 annually, or more than $5,000 per month. Costs for residing in an assisted living facility or nursing home continue to rise every year. The cost of quality “in home health care” is already approaching that of a nursing home.

A New England Journal of Medicine study stated that 43% of all people age 65 would either have to enter a nursing home or require long term care in their home. Another study by the Health Insurance Association of America has shown that more than 50% of all Americans will need some form of long term care during their lives whether in their home, at a day care facility or in a nursing home.

Based on the above numbers, it is easy to see how a retirement nest egg can be depleted when one major illness strikes an individual, spouse or family. How to pay for this potential expense is, and should be, a major concern for our ageing society.

There are five basic options available on how to finance the cost of care:

Pay for the Cost out of Savings- This option is usually chosen by the extremely wealthy. If this is the option you are considering, you must ask yourself if you will have enough resources to pay this expense and continue to maintain your desired standard of living.

Depend on Medicare/Medicaid – Medicare pays a limited amount, and it only pays under certain circumstances. Medicaid is designed for only the poorest individuals.

Other Medical Insurance – Most medical insurance plans do not pay for long term care expenses.

Depend on Family – This type of care and expense is physically and emotionally demanding- is this what you want for your family?

Long-Term Care Insurance – This insurance is most likely your best choice. A quality Long Term Care Policy will help you pay for the expenses associated with long term care, while helping protect your family and your assets.

If after reviewing the five options above you decide that Long Term Care Insurance is the option you want to pursue, it is important to understand the following:

What is Long-Term Care Assistance?

Long term care is the everyday assistance needed when a person suffers from a cognitive impairment-such as Alzheimer’s disease- or can no longer perform activities of daily living due to age or illness.

Long-Term Care Insurance provides assistance for the following activities of daily living:

Bathing
Dressing
Eating
Toileting
Continence
Transferring

What options exist as to where this assistance can be provided?

Assistance can be provided:

In your home
In the community (Adult Day Care Facility)
In an Assisted Living Facility
In a nursing home

What factors need to be considered if applying for Long Term Care Insurance?

The cost of a Long Term Care Insurance Policy is determined by many factors: your age at the time of application, your general health, medications you are taking, your prior medical history and the benefit options you select. The two factors that have the greatest effect on your ability to obtain a Long Term Care Policy at a lower rate are based on your age and overall state of health. The younger and healthier you are when you apply, and ultimately purchase a Long Term Care Policy, will have the greatest effect on your final annual premium.

The number of insurance companies offering Long Term Care products has continually grown as the product demand has increased. Selecting the correct company is now as important as selecting the correct coverage. Many companies that came into the marketplace priced their product too low and are now increasing premiums on a regular basis.

When selecting a company, the following questions should be asked:

How long has the company been selling the Long Term Care product?
Have they ever had rate increases, and if so, how frequently?
Does the company guarantee that the policy can never be cancelled (except for non payment of premium)?
What is the insurance company’s rating by A.M. Best Company? (A.M. Best is recognized as the premier Insurance Rating Service Company. Other premier rating companies to look at are Fitch, Moody’s Standard & Poor’s and Weiss. The higher the rating, the more financially secure the company.)
What percentage of the Long Term Care market do they write? (The larger the number of policies they write, the more likely the company is to know the business.)

How To Get Started.

The best place to start is to contact your local insurance agent and have their Long Term Care Specialist contact you. You should try to locate an agent who deals with Long Term Care as his primary product. The Long Term Care market is very complex and dealing with an agent who has limited access to various markets or has limited knowledge of the product is not a path to take. Have the agent educate you on the Long Term Care product(s) he is recommending and options open to you regarding the various coverages, riders or options open to you.

After you have spent time with the agent discussing the various factors that affect Long Term Care Insurance Coverage, decide on the basic factors you want included in your policy.

The major items to be considered are: the amount of coverage (daily or monthly), duration of benefits, deductible periods and inflation protection. It is also important to remember that there are significant discounts offered by all companies if both a husband and wife apply for and purchase Long Term Care Insurance at the same time. Once these basic factors are determined, the agent will be able to present you with an initial quote.

Once a final program and company have been selected, the next step will be to complete the company application. The agent will complete the application with you. All companies require that a portion of the annual premium accompany the application. Depending on the applicant’s medical condition, the processing of the application can take up to six to eight weeks for approval. Many companies require that a company representative personally interview each applicant and detailed reports from the applicant’s doctors may also be required.

Once the application is approved, a policy will be issued. The premium originally quoted by the agent may be different than that on the final policy. The insurance company’s underwriters determine the final premium based on the applicant’s final health condition. The agent will deliver the policy directly to you and will be responsible for collecting any additional premium that is due. You will have thirty days to review the policy. If during that time you decide not to keep the policy, it should be returned to the agent and a full refund will be issued.