In the world of care giving, there are many different types of people who can fit the bill. When the average consumer thinks of long term care at home, of course they think of nurses, aides, therapists and home health care agencies -- but they also think about friends and family in addition to community services that might be available. There is a common misconception that long term care insurance (LTCI) policies will cover care from all of the above. As an advisor, you need to be aware of the fact that every insurance policy reads differently on this particular subject. In addition, this tends to be a very important detail from the buyer's perspective. Generally speaking, there are four distinct types of LTCI policy definitions when it comes to qualified caregivers.
Licensed individual working through a home care agency
Let's begin with the most conservative definition available. Most of the older LTCI policies in the marketplace, as well as some of the newer versions, specifically read that the only type of approved caregiver would be a licensed individual working through a home care agency. This is not to say in any way that home care agencies are undesirable, or that people who utilize their services are not fully satisfied. As a matter of fact, it would be considered good advice to recommend that your client call the local home care agency when he or she is in need of care. These agencies can be a great help in many ways: They contact the insurance carrier and work through the details of what is covered as well as what isn't covered. They assess your situation regularly to determine if your plan of care is working as it should be. They work with the family members as much as possible. And, most importantly, they find the right caregiver for the person in need -- even if that means sending a different aide each week until the patient is comfortable with the situation.
The reason that this is the most conservative definition of the term is that it does not allow for any flexibility whatsoever. For example, no family and friends will be covered unless they are licensed through an agency -- not a very common occurrence.
Licensed, but independent of home health care agency
The second definition reads that the individual delivering the care must be licensed but that they may be independent of a home health care agency. What this does is add a bit of that flexibility I alluded to earlier. Consumers tend to like having more options. It may also save your client money in the long run; for example, if the caregiver is not working through the agency, they will typically charge less for the services they render. There is a downside, though; if there is no agency to oversee this caregiver, then there is no one to protect your client if something in the house gets stolen or if a mistake is made and the caregiver inadvertently hurts the patient.
Once again, even with this type of definition, a family member generally must still be licensed and working through an agency in order to be covered as an approved caregiver. But, the plus side is that a friend can be independently licensed to provide care for your client.
Unlicensed nonfamily member
As the language gets more and more liberal, the buyer of the policy is almost always extremely pleased. In this third definition, the LTCI contract says that it will allow for the caregiver to be an unlicensed nonfamily member. And again, here, any family members will typically have to be licensed through an agency. This means that if your client has a neighbor, a friend or a fellow church member, for example, who may be willing to help take care of them -- the plan will cover that expense. In these circumstances, a bill for services rendered still must be sent to the insurance carrier for reimbursement and a plan of care must be in place. As a matter of fact, if the consumer purchases a tax-qualified LTCI policy (representing 98 percent of all policies sold today), they will always need to have a plan of care in place -- no matter who serves as the caregiver.
Interestingly enough, this definition is seen only in a few policies, but those tend to be the most widely sold contracts in America today. The language is much less restrictive than others at a similar price point; therefore, it is a great buy for the consumer.
Lastly, the most liberal of all LTCI policies in the industry state that anyone can take care of your client. This would be considered a "cash benefit" LTCI plan or a "disability model indemnity" plan. With these policies, the client receives a check once a month and can use it for anything they so choose. No bills are required to be submitted, and the benefit is total freedom. And yes, family members are covered just like anyone else. The only negatives here are that these plans tend to be pricey and not as widely available. The positives certainly outweigh the negatives, though, as it's a simple and completely flexible approach, which is ideal in the minds of many consumers. In addition, we are now, more than ever before, seeing a variety of hybrid cash-benefit policies on the market.
These plans will allow the client to use 100 percent of the benefit if there is a licensed caregiver in place, or choose to take a portion in cash if they would prefer to have an unlicensed person or family member take care of them. The great news about these policies is that the premium is usually a lot less than what a full 100-percent cash plan would normally cost the consumer. There seems to be a very happy medium.
Insurance agents and financial advisors should always be aware of the specific contract language differences among the LTCI policies they are selling, especially since there are so many variations out there and you are regularly going to be comparing apples to oranges. Do your homework and you'll see results. If this is not your comfort zone, don't fret: Partner with an agent or agency specializing in the LTCI marketplace and you will be a sure success.
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