How well do you understand the long term care insurance policies you are selling? The working chosen for the tax qualified language was a heated topic of debate across the country for many years after the Health Insurance Portability and Accountability Act (HIPAA) was passed. There was a lot of confusion, and much of the industry was at a standstill on how to proceed. Non-tax qualified plans were still being offered through mainstream carriers and strong opinions on which was the better coverage, TQ or NTQ, were commonplace. Fast-forward 12 years and we are in a completely different environment today. The vast majority of LTCI companies in the marketplace only make tax qualified plans available for sale. And the amount of time spent debating this once hot topic has been drastically reduced.
The issue now is not whether one is better than the other or which carrier is offering what, it is how these plans work and what the language actually says. We need no surprises at claim time, but based on the way 90-day precertification language is written, there is certain to be confusion.
When HIPAA was put into effect on 01/01/97, most of the industry understood the meaning of the 90-day precertification expectation requirement in the law. For those who may not know, the law says that in order for an insured, who has a two-ADL loss, to trigger a claim on a TQ LTC policy, he/she must get a certification from a licensed health care practitioner (defined by HIPAA as a doctor, nurse or social worker) which says that the claim is expected to last 90 days. If the insured gets the certification and the claim only lasts 80 days, it would still be paid, according to the law, because he/she had that expectation. Therefore, agents have had a legitimate reason to sell low elimination periods (zero-day, 30-day, etc.) with a TQ policy.
An example would be as follows: Mary purchases a TQ LTC policy with a "zero-day" elimination for home health care. She breaks a hip and cannot bathe or dress herself. Her doctor gives her a precertification in writing saying that she is "expected" to need care for a period of at least 90 days. Mary needs the care, but only for 70 days. The way the law reads, her policy should pay benefits to her for the 70 days.
It is very important to note, though, that not all TQ policies read this way. There are a number of policies in the LTCI marketplace that do not have the word "expected" in the precertification language. Many of them are older policy versions, but even some of the newer plans being sold today have the limited wording. The way they read, the claim must actually last the full 90 days for it to get paid. Some claims have already been denied based on the fact that the claim had the precertification from the doctor, but didn't actually last 90 days.
Please note that just because the plan you are selling does not have the "expectation" language, it does not mean that the claims referenced above won't be paid. Some companies will pay and others fully intend to do so. Many marketing department executives will swear by it. What it does mean though, is that the insurance carrier has a way out if they want it. Thirty years from now, when a claims adjuster is making a decision on a tax qualified claim, they may deny it based on expected language that just isn't there. The marketing representatives have good intentions, but they are not going to be there when the claims department is reviewing the medical records. Some LTCI companies do not even realize that their contracts read this way. They even insist that it is not what they meant to say. Others know very well and are denying claims based on this fact. Remember, whether your policy has the "expected" wording or not, the carrier is still adhering to the law. A contract can be more stringent than the law, it just can't be more liberal.
Please recognize that none of this matters if you are selling 90-day elimination periods, but make an effort to read and examine your specimen contracts closely. Also, it is interesting to note that when looking at long term care insurance one of the most common complaints at claim time is the elimination period. No matter what is being said at the time the sale takes place, we generally have a very unhappy claimant if there is any waiting period at all when the claim begins.
Therefore, it is a good idea to sell LTCI plans with first day coverage if at all possible. The bulk of mainstream products being sold today offer a waiver of the home health care elimination period. Many times, it is a perfect answer for people since they can typically combine this with a 90-day elimination period in a facility to keep the premiums affordable. Just be sure to identify and understand the way these elimination periods work, especially alongside the tax qualified certification language. This industry wants and needs knowledgeable and educated LTCI agents. Pay attention to detail. Know your stuff!
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