Long-Term Care Insurance Rate Guide
The Cost of Long-Term Care | Deciding if Long-Term Care Insurance is Right for You | Qualified and Nontax-Qualified Policies | Shopping for Long-Term Care Insurance | How to Use the Rate Guide | Sample Policies | Carrier´s "Most Popular" Policy | For More Information or Assistance
(September 2011)
Long-term care is a type of personal care service you might need if you become unable to care for yourself because of a physical illness, a disability, or a cognitive impairment, such as Alzheimer’s disease.
Long-term care is different from traditional medical care. Traditional medical care attempts to cure illnesses. Long-term care helps you perform normal daily activities, but it might not improve your medical problems. You can get long-term care at home or in a hospice, adult day care center, nursing home, or assisted living facility.
Read TDI’s Shoppers Guide to Long-Term Care Insurance for more information about long-term care.
The Cost of Long-Term Care
Long-term care can be expensive. The cost depends on the amount and type of care you need, where you receive it, and who provides it.
People pay for long-term care in a variety of ways, including:
- Medicaid
- Medicare
- Long-term care insurance policy
- With their own money
Most long-term care costs are paid by Medicaid, a federal-state assistance program for people who qualify. People with low incomes might already qualify for Medicaid, and those with moderate incomes often "spend down" their assets to qualify.
To learn more about Medicaid eligibility, call your local Area Agency on Aging or Texas Health and Human Services Commission office. A list of phone numbers is on the inside back cover of this publication.
Medicare pays some long-term care costs. Medicare is a federal program that pays for health care for people over age 65 and for people under age 65 with disabilities. It covers the cost of some skilled care in nursing homes or possibly in your home. Medicare might also pay for some non-medical care in your home if you are receiving skilled care.
If you don´t qualify for Medicaid or Medicare, you´ll either have to pay your long-term care expenses out of pocket, with a long-term care insurance policy, or by some alternative means.
Deciding if Long-Term Care Insurance is Right for You
Long-term care insurance can help protect your assets against the high cost of extended long-term care. However, long-term care insurance usually only makes sense if you have significant assets to protect other than your home, car, and a small amount of cash.
Long-term care insurance is probably not a good idea if you have trouble stretching your income to pay for utilities, food, or medicine. If you don’t have significant assets, you may have to pay for your care out of pocket until you exhaust, or spend down, your assets enough to qualify for Medicaid.
To determine whether long-term care insurance is right for you, consider your personal risk factors, assets, income, costs, and available alternatives. You can also use the Long-Term Care Insurance Suitability Worksheet to help you decide.
Agents are required to provide you with a worksheet and list of things you should know before you buy to help you decide if long-term care insurance is right for you.
Personal ‘Risk Factors’
The following factors might affect your likelihood of needing long-term care:
- Life expectancy. The longer you live, the more likely it is that you will need long-term care. Consider whether your family has a tendency for long life expectancy.
- Gender. Women may need long-term care insurance more than men because they generally live longer.
- Your family situation. If you have a spouse, adult children, or other family members who can care for you at home, you might not need some types of long-term care services.
- Family health history. You may have a greater need for long-term care if chronic or debilitating health conditions run in your family.
Financial Considerations
Long-term care is typically less expensive if you purchase it when you’re younger. You may want to seek help from a trusted financial advisor to decide if it meets your needs. Consider the following questions about your personal financial situation:
- What are my assets (not including my home, car, and $2,000 cash)? Will they change over the next 10 to 20 years? Are my assets large enough to justify the expense of a long-term care policy?
- What is my current annual income? Will it change over the next 10 to 20 years? Will I be able to afford the policy if my income decreases or if the policy premiums increase significantly?
- If I retire, how will retirement affect my ability to pay premiums?
- How much does the policy cost? Will I pay the premiums from my income, savings, or investments? Will my family contribute toward the cost?
- Will I be able to pay for charges in excess of the policy’s daily benefit amounts and for other expenses if I’m in a long-term care facility for an extended time?
- When should I consider purchasing a policy? How much will the policy premium increase if I wait to purchase a policy?
If you decide you want to buy a policy, use the Long-Term Care Insurance Policy Comparison Worksheet to compare companies and coverages before you purchase a policy. Also visit the list of companies selling long-term care policies in Texas.
Qualified and Nontax-Qualified Policies
Tax-Qualified Long-Term Care Policies
You may be able to deduct part of the premium you pay for a tax-qualified long-term care policy from your taxes as a medical expense. In addition, you are generally not required to claim your qualified long-term care policy benefits as taxable income. However, in the case of an indemnity policy, you might have to pay taxes on any benefits the policy pays above costs that pay for care.
All policies sold before January 1, 1997, are automatically tax-qualified and policies sold later are either tax-qualified or nontax-qualified. To determine whether your policy is tax-qualified, look for a statement on your policy similar to this: “This policy is intended to be a qualified long-term care insurance contract as defined by the Internal Revenue Code of 1986, Section 7702B(b).”
Consult with an attorney, accountant, or tax advisor about how purchasing a long-term care insurance policy will affect your taxes.
To claim a tax deduction for long-term care premium payments, your out-of-pocket medical expenses, including premiums, must be more than 7.5 percent of your adjusted gross income. The maximum amount of long-term care premium you can deduct depends on your age at the end of each tax year.
Long-Term Care Partnership Policies
Texas implemented the Long-Term Care Partnership Program to educate Texans about planning for their long-term care needs. The partnership is a joint effort between private insurers and the state. Insurers must follow state and federal guidelines and agents must complete training to sell partnership policies.
Partnership policies have an asset disregard benefit that is useful if you need to apply for Medicaid assistance to pay for long-term care expenses. Partnership policies, however, do not guarantee you’ll be accepted into Medicaid. You’ll still have to meet income, medical, and other eligibility criteria.
With the asset disregard benefit, every dollar of long-term care benefits your partnership policy pays will equal one dollar of countable assets that will be disregarded to determine if you’re eligible for Medicaid assistance. This means you can retain assets above the normal limit and you won’t need to spend down your assets to qualify for Medicaid. In addition, the assets that were disregarded in the Medicaid eligibility process will not be subject to Medicaid liens and recoveries after you die.
In addition to asset disregard, long-term care partnership policies must also include the following benefits:
Inflation protection. Inflation protection helps your policy continue to pay long-term care benefits as costs rise. Partnership policies provide varying levels of inflation protection based on your age:
- Under 61 years old: The insurer is required to offer you the option to purchase 5 percent compound annual inflation protection. You can choose to purchase protection at a lower rate, but you must retain some form of compound inflation protection. When you turn 61, you can change the inflation protection provision to meet the requirements of the next age bracket.
- Ages 61 to 76: You must purchase and retain some form of inflation protection until you are 76 years old.
- After age 76: Insurers must offer inflation protection, but you don’t have to purchase or retain it.
If you’re considering a long-term care policy, ask your insurance company or agent if a partnership policy meets your needs. If you purchased a long-term care policy on or after February 8, 2006, ask your agent about exchanging your policy for a partnership policy.
Note: Partnership policies will come with a disclosure statement identifying the policy as a long-term care partnership policy. Be aware that if you make any changes to your partnership policy, you could lose your partnership policy status. Your agent can tell you what changes will result in a status change.
Moving to another state
Texas participates in a national reciprocity agreement with other states to honor the terms of your partnership policy. If you move to a state that participates in the reciprocity agreement, the new state will honor your partnership policy. Be careful basing your decision to purchase a partnership policy on reciprocity with other states because states can start or stop the reciprocity agreement at any time. For a list of participating states, visit www.OwnYourFutureTexas.org. If you move to another state, you will also need to meet all the Medicaid requirements for your new state of residence.
View a list of companies selling partnership program policies in Texas.
Nontax-Qualified Long-Term Care Policies
Premiums for nontax-qualified long-term care policies are not tax deductible. In addition, you might have to pay taxes on any benefits the policy pays above expenses incurred.
Shopping for Long-Term Care Insurance
If you have shopped for long-term care insurance, you´ve probably encountered complicated options, unfamiliar terms, and difficult calculations. Since long-term care insurance isn´t standardized in Texas, every policy is different. In general, there are some questions you should ask about each policy you´re considering:
- What types of care are covered and in what setting? Policies can offer a full range of services, including home health care, adult day care, assisted living facility care, and nursing home care. Policies are required to cover all levels of care from custodial to intermediate to skilled care.
- What are the benefit eligibility requirements? Policies won´t pay until you´ve satisfied certain requirements, such as being unable to perform tasks called activities of daily living or being certified as cognitively impaired. The benefit eligibility criteria may vary from policy to policy.
- How much is the daily benefit amount for each type of benefit? Most policies will pay a maximum daily amount for your care. You choose the maximum daily benefit when you purchase the policy. It´s important that you choose your benefit amount wisely. Keep in mind that you do not need to insure the full cost of care. To keep premiums down, you could plan to pay some of the cost yourself.
- How long are benefits paid? The chances of needing long-term care for more than five years are relatively small. For most people, a policy covering three to five years is appropriate and more cost-effective. However, if you´re concerned about contracting a disease requiring more care, such as Alzheimer´s, you may want to consider the more costly option of lifetime coverage.
- Does the policy have a preexisting condition waiting period? If so, how long is it? Some policies won´t cover a preexisting medical condition until after a certain period of time. Some policies will pay for care related to a preexisting condition immediately if you disclosed the condition on your application. Make sure you know what the policy says about preexisting conditions.
- What inflation protection is offered? Inflation protection helps you keep up with the higher cost of services between the time you bought your policy and the time you actually need them. All companies must offer an automatic increase in benefits at the rate of 5 percent compounded annually. If you reject inflation protection, the rejection must be in writing. The company may also have other options for inflation protection. Remember that to be prepared for inflation, you must pay a higher premium today or higher out-of-pocket costs later.
- What is the nonforfeiture benefit? Companies must offer you a guarantee that you will receive some of the benefits you paid for even if you later cancel or lose coverage. If you reject the nonforfeiture benefit, the rejection must be in writing. If you cancel or lapse your policy after a specified number of years, the insurance company will either return a percentage of the premiums you paid; extend benefits for a period of time equal to the premiums paid, less any claims; or provide a greatly reduced benefit.
- Is the policy tax-qualified? If you buy a tax-qualified policy, you can deduct part of the premiums you paid as a medical expense on your income taxes. Benefits paid from a tax-qualified policy are generally not considered taxable income. The policy must disclose if it is intended to be tax-qualified or nontax-qualified.
- Can I upgrade the policy later by purchasing more benefits? Some companies allow you to upgrade your policy after purchase. However, you will likely have to complete a new medical questionnaire.
Also consider the following tips when shopping for any type of insurance:
- Consider your needs. Although it´s difficult, try to anticipate what services you might need in the future and choose a policy that´s right for you.
- Shop around. Prices can vary substantially from one company to another, even for policies with similar benefits. Get quotes from several companies before buying a policy.
- Buy only from companies that are financially sound. A company´s financial rating by an independent rating service is a helpful indication of the company´s overall financial strength.
- Choose companies that have a good track record for customer service. The number of consumer complaints against a company is a good indication of the company´s customer service record. Your family and friends are other sources of information about a company´s customer service. Ask them if they´ve had any experience with the companies you´re considering.
- Buy only from licensed companies. Licensed companies belong to a guaranty association that will pay your claim if your insurance company goes broke. If you buy from an unlicensed company and have a claim, it might go unpaid. Call the Texas Department of Insurance (TDI) Consumer Help Line or use the “Check Companies” on our website to learn financial ratings, complaint histories, and license status.
1-800-252-3439
463-6515 in Austin
www.tdi.texas.gov - Consider the company´s 10-year history of rate increases. While past increases are not a guarantee or predictor of future increases, you may want to take the rate history into consideration. You can view the rate increase histories of companies selling long-term care insurance on TDI's Long-Term Care Insurance Company Rate Increase Histories page.
- Buy from an agent you know and trust. If you buy insurance through the mail or by phone, ask whether the company has a local agent or a toll-free number you can call if you have questions.
- Try to find an agent that specializes in long-term care insurance. Because of the many variations in long-term care policies, having an agent with knowledge and experience can help you choose the right coverage for your needs.
- Use your free look period. Insurance companies must give you at least 30 days to look over your long-term care policy after you receive it. Read the policy carefully to be sure it has the benefits and features you want. If you decide to return the policy within the 30 days, you will get a full refund of any premium paid. It´s a good idea to use certified mail so you will have proof that you returned the policy. Be sure to keep a copy of everything you return.
Protect yourself
As with any insurance purchase, it´s important to protect yourself. Follow these tips:
- Read what you are asked to sign before you sign it. Never sign a blank application form.
- If an agent tries to rush you, be suspicious.
- Ask questions and take notes when you talk to an agent. The notes could help you later if there is a dispute over what you were told about a policy.
- Don´t buy insurance on the agent´s first visit. Invite someone you trust to be present during the second visit. An agent shouldn´t object.
- Answer all questions on the application accurately. Don´t let the agent fill it out for you. If an agent helps you complete the application, make sure the information is correct and complete before you sign. Omitting or falsifying information could cause the company to deny your claims or cancel your policy.
- Do not pay cash. Always pay by check or money order so you have a clear record of payment. Make checks payable only to the insurance company or insurance agency, not to an individual agent. Insist on a receipt signed by the agent on the company´s letterhead.
- Be sure you have the names and addresses of the agent and the insurance company. Know how to contact the agent and the company if you need help.
How to Use the Rate Guide
The rate tables list estimates of the annual rates companies charge for six long-term care policies. The policies are only a sample for comparison and are not a full list of the long-term care policies available.
The tables have rates for people purchasing policies between the ages of 40 and 80 in five-year periods. To learn what you would pay at age 45 for a policy with the benefits listed on a particular sample policy, look under the column with the heading "45." If you are 50 years old, look under the column with the heading "50," and so on.
The sample policies each have a $100 maximum daily benefit for nursing home care and a $50 maximum daily benefit for home health care. The tables also contain information about the policy´s elimination period, preexisting condition waiting period, and the policy form number. If you find a policy with the benefits you want, refer to the policy form number when you’re talking to the company.
The rate guide also includes rates for an insurance company´s "most popular" policy. These policies don´t exactly match the benefits and features of the six sample policies. Information on the benefit amounts, elimination period, benefit period, and other features included in the policy are shown. Be aware that making rate comparisons between the most popular policies may be difficult because the benefits and features will vary widely.
Note: Keep in mind that not all companies will offer a policy with the specific features included in the six sample policies. Because long-term care policies in Texas are not standardized, features and benefits will likely vary from company to company and by policy. Read the policy´s outline of coverage for a brief description of the features included.
Insurance companies can raise the premiums on policies that do not have fixed rates, but only if they increase the premiums on all policies in your rate class. For example, some companies may automatically raise rates once you reach a certain age. Individuals cannot be singled out for a rate increase, regardless of the number or amount of claims they have made or any change in their health. Your rate class may be based on your age, where you live, and your health status at the time you purchased your long-term care policy. Once your rate class is established, deteriorating health may not change your class or affect your individual premium.
Information in the Rate Tables
The following terms are often used to discuss long-term care insurance and are used in the rate tables:
- Activities of daily living (ADLs): Activities considered essential to a normal lifestyle. Activities of daily living include bathing, toileting, dressing, transferring (mobility), eating, and continence. Your policy must provide coverage for long-term care services listed in the policy if you are unable to perform the specified number of ADLs or if you require supervision and services because of cognitive impairment.
- Benefit: The services and items covered by a long-term care policy. Common benefits in long-term care policies in Texas include nursing home services, home health services, and adult day care. Long-term care policies are not standardized, so benefits can vary from policy to policy. Even though benefits may have the same or similar names, one company may define a particular benefit different from another. It´s important that you read your policy carefully to understand exactly what your policy covers.
- Benefit amounts: The amount a policy will pay for a covered service. Benefit amounts are usually expressed as the maximum amount a policy will pay per day for a particular covered service.
- Benefit eligibility criteria (also known as triggers): The conditions that must occur before the policy pays benefits. For long-term care policies, benefit eligibility criteria are usually the inability to perform a specified number of ADLs or a requirement of supervision because of cognitive impairment.
- Benefit period: The length of time a specific benefit will be paid. For the sample policies included in this guide, benefit periods of two years, five years, and lifetime were used.
- Cognitive impairment: A long-term care policy must pay for services when a loss in your mental capacity requires you to have substantial supervision to maintain the safety of yourself and others. The loss may be due to Alzheimer´s disease, senility, an accident, or other causes. A doctor or other health practitioner licensed to make such a diagnosis in Texas must certify your cognitive impairment.
- Combination policy/Comprehensive policy: A long-term care policy that includes benefits for both nursing home care and home health care.
- Daily benefit: The amount a policy will pay per day for a covered service
- Elimination period: The length of time you must pay for covered services out of your own pocket before the insurance company will begin to make payments.
- Home health care policy: A policy that pays for skilled care or personal assistance in your home. The services must be provided by a licensed home health agency. Covered services may include part-time skilled nursing care, physical therapy, and assistance with activities of daily living.
- Medical necessity: A benefit eligibility criteria in some policies. These policies pay if a doctor or other health practitioner certifies that you have a medical condition that requires you to receive long-term care services.
- Nursing home policy: A policy that pays for care in a licensed nursing facility.
- Outline of coverage: A short description of a policy´s features, benefits, limitations, and exclusions. An agent or company must give you an outline of coverage when offering a long-term care policy. If you are offered a policy that includes coverage with benefits based on three ADLs, the policy must include a description of the benefits payable for two ADLs, three ADLs, and cognitive impairment. The company must also include this description in its marketing materials and applications for these types of policies. Use the outline of coverage to help you compare policies.
- Policy form number: A unique identifying number for the long-term care policies a company is approved to sell.
- Preexisting condition: A condition for which you received treatment or medical advice from a physician within six months before the effective date of coverage. Preexisting conditions may be excluded from coverage for a specific period of time, as stated in the policy, but never for longer than six months.
- Tax status: Tax-qualified plans and nontax-qualified plans.
- Payment or disbursement method: Generally, policies pay benefits in one of two ways:
- Expense incurred pays the benefit amount – either the actual expense or the dollar benefit of your policy, whichever is less -- to you or your provider. . For instance, if the policy has a $100 daily benefit, but the actual expenses are only $80 a day, the policy would pay $80 a day.
- Indemnity method pays a set dollar amount up to the limit of the policy regardless of the cost of the service you receive. For example, if the policy has a $100 daily benefit, the policy would pay $100, even if the actual cost of the covered service you receive is $75 or $125.
- Waiting period: A long-term care policy can delay coverage of a preexisting condition for up to six months after the policy’s effective date. This is the policy’s waiting period.
Sample Policies
The rate tables are divided into sample policies with common benefits and features. Click on the "Sample Policy" title to view rates for that particular policy.
Individual tax-qualified combination nursing home and home health care policy with:
- $100 daily benefit for nursing home care and $50 daily benefit for home health care
- 0-20 day elimination period
- two-year benefit period.
Individual tax-qualified combination nursing home and home health care policy with:
- $100 daily benefit for nursing home care
- $50 daily benefit for home health care
- 30-60 day elimination period
- five-year benefit period.
Individual tax-qualified combination nursing home and home health care policy with:
- $100 daily benefit for nursing home care
- $50 daily benefit for home health care
- 90-100 day elimination period
- lifetime benefit period.
Individual nontax-qualified combination nursing home and home health care policy with:
- $100 daily benefit for nursing home care
- $50 daily benefit for home health care
- 0-20 day elimination period
- two-year benefit period.
Individual nontax-qualified combination nursing home and home health care policy with:
- $100 daily benefit for nursing home care
- $50 daily benefit for home health care
- 30-60 day elimination period
- five-year benefit period.
Individual nontax-qualified combination nursing home and home health care policy with:
- $100 daily benefit for nursing home care
- $50 daily benefit for home health care
- 90-100 day elimination period
- lifetime benefit period.
Carrier´s "Most Popular" Policy
These are individual combination nursing home and home health care policies. Each policy will likely have different daily benefit amounts, elimination periods, benefit periods, and other features. These policies are the ones that each company identified as its most popular, or most frequently purchased, policy.
For More Information or Assistance
For answers to general insurance questions or for information on filing an insurance-related complaint, call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday, or visit our website
1-800-252-3439
463-6515 in Austin
www.tdi.texas.gov
You can also visit HelpInsure.com to help you shop for automobile, homeowners, condo, and renters insurance, and TexasHealthOptions.com to learn more about health care coverage and your options.
For printed copies of free consumer publications, call the 24-hour Publications Order Line
1-800-599-SHOP (7467)
305-7211 in Austin
Help us prevent insurance fraud. To report suspected fraud, call our toll-free Fraud Hot Line
1-888-327-8818
To report suspected arson or suspicious activity involving fires, call the State Fire Marshal´s 24-hour Arson Hot Line
1-877-4FIRE45 (434-7345)
The information in this publication is current as of the revision date. Changes in laws and agency administrative rules made after the revision date may affect the content. View current information on our website. TDI distributes this publication for educational purposes only. This publication is not an endorsement by TDI of any service, product, or company.
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