Long-Term Care Insurance

The long-term care insurance definition is coverage that provides home health care, assisted living care, nursing home care, and hospice care for people 65 and older. Typical health insurance policies do not provide long-term care coverage, and you will need to shop around for long-term care insurance quotes in the private market to find an affordable policy that meets your needs.

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jun 29, 2022

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  • The total annual cost of long-term care benefits over $11 billion in the United States.
  • Traditional healthcare policies, disability insurance, Medicare, and Medicare do not cover long-term custodial healthcare and will often. exclude skilled nursing care once those benefits expire.
  • Long-term care policies are private insurance that anyone with the resources to afford them can buy.

The possibility that a person will require long-term healthcare and support in their golden years will be about 70%. Typical health insurance plans will not provide coverage for nursing homes, hospice care, or any other long-term healthcare needs you may have as you get older.

To be covered later in life, you must purchase a long-term care insurance policy from the private market. Read this guide to learn the history of insurance law and long-term care, which companies offer long-term care insurance, what kinds of policies are available, and which affordable alternatives to long-term healthcare may work for you.

If you need help with a long-term care insurance claim or are facing an insurance company in court over a long-term care claim, enter your ZIP code above to speak with a local insurance attorney for free.

What types of long-term care insurance are available?

The type of long-term care insurance policy you choose depends on the provider you have and where you intend to stay during your long-term care. Most people receive long-term healthcare in their own homes as long as possible. Other long-term healthcare options include community service organizations, assisted living homes, and nursing homes.

For long-term healthcare provided in the home, covered services include:

  • Unpaid caregivers who may be family members or friends;
  • A nurse, home health aide, or physical or occupational therapist.

For long-term healthcare provided by community-based organizations, covered services include:

  • Adult daycare center assistance
  • Transportation services
  • Agencies that provide home care on a daily or as-needed basis.

Long-term healthcare services outside the home are provided in the following facilities:

  • Nursing homes that provide nursing care 7/24/365,
  • Assisted Living homes,
  • Board and Care Homes, also known as Residential Care facilities or group homes, and;
  • Continuing Care Retirement Communities, sometimes referred to as life plan communities, provide independent living, assisted living, and skilled nursing services.

In addition, there are also Participant Directed Services which allow the person covered for long-term healthcare to select the type of services they receive, who provides the services, and when and how the healthcare provider delivers those services.

Are there alternatives to long-term care insurance?

Yes, there are other ways to cover long-term healthcare costs in your senior years. Depending on your personal financial and health situation, it may make sense to consider them. Long-term care is expensive and may not work for your needs if you do not qualify for long-term care coverage through your current provider.

A professional financial advisor and insurance lawyer may help you decide if any of the following alternatives to long-term care insurance are viable options for your situation.

Alternatives to long-term care insurance are:

Health Savings Plans (HSA)

Available to people covered under high deductible health insurance plans, the HSA permits people to put tax-deferred dollars into a savings account to pay medical expenses. If you do not want a long-term care insurance policy, and you can put the premium amount for a long-term policy into an HSA, you may build savings to pay for long-term healthcare if and when you need it.

If you never need the money to pay for long-term healthcare expenses, you may use it for other out-of-pocket medical needs. IRS limits the amount you may save each year. In 2020, the amount for an individual was limited to $3,600 and $7,200 for families. If you are over age 55, you can put in an extra $1,000.

Depending on your age when you start the HSA, you may not build up enough savings to cover long-term healthcare expenses.

Health Insurance That Covers Critical Illnesses

One type of supplemental healthcare insurance pays the covered person a lump-sum payment in the event that they become ill with a critical illness. There are no restrictions on how you use the money. The lump-sum may come in handy to pay deductibles, prescription drugs, or long-term healthcare costs. It may also cover other bills while you are ill.

The most common critical illness coverage applies to cancer, heart disease, stroke, organ transplants. Less common are policies that cover blindness, ALS, head trauma, or coma. Critical illness policies do not cover chronic diseases like diabetes or multiple sclerosis or pre-existing conditions. Insurers generally offer a variety of lifetime maximum benefit amounts.

Blended or Hybrid Long-Term Care Insurance

Some insurance companies offer long-term care that also provides life insurance. Other carriers offer long-term care insurance that also provides an annuity. They take the form of a rider to the life insurance or the annuity contract.

These blended benefits pay a monthly payment if you are living in a nursing home or other long-term care facility. The linked hybrid provides money for long-term care expenses. If you die without using the money, your heirs receive either the plan’s cash value or a life insurance death benefit.

Short-Term Care Insurance

A short-term healthcare policy pays benefits for a shorter period of time, but pays immediately and generally costs less than long-term care insurance. In contrast to long-term care insurance, a short-term policy pays benefits while you are on Medicare.

Short-term healthcare pays benefits for a year or less. Long-term healthcare policies pay benefits for two to five years or even lifetime benefits. The higher premium for long-term care takes into account the higher risk.

Home Equity

Depending on your home’s value compared to the amount you still owe the mortgage company, you may find it possible to tap into your home’s value. There are basically three ways to do this: a home equity line of credit, a reverse mortgage, or selling your home. The problem may come in if the home market is on the downward path, you may not find it easy to sell your house or take out a large enough loan or reverse mortgage.

Each of these alternatives to long-term care insurance may help defray the costs of long-term healthcare without the hefty price tag.

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Which insurance companies offer long-term care insurance?

The following insurance carriers offer long-term care insurance products:

  • Lincoln Financial Group
  • Pacific Life
  • Genworth
  • Mass Mutual
  • Transamerica
  • State Farm
  • Mutual of Omaha
  • New York Life
  • Brighthouse Financial

This list of providers is not extensive, and you may find affordable long-term care insurance coverage with a local company. Always shop around with multiple companies before you buy long-term care insurance to guarantee you’re getting the best price for your coverage.

Top Questions to Ask Insurance Companies Before You Buy Long-Term Care Insurance

Like any other major purchase in life, it pays to ask questions. What to look for in a long-term care insurance policy can be answered by asking the following key questions as you shop around for long-term care insurance quotes:

  • Are premiums guaranteed to charge one individual at the same rate as the premiums charged to others in the same age group?
  • Does the plan cover skilled nursing care, intermediate care, home health care, and custodial care? What is the benefit amount for each?
  • How long does each benefit last?
  • Does the plan provide comprehensive benefits on the same basis for in-home care as it does for nursing homes?
  • Is the maximum benefit period at least one year?
  • Does the plan’s deductible match your pocketbook?
  • Does the plan make you wait less than 100 days before coverage kicks in?

Prospective buyers should also investigate the insurance company’s financial stability and customer reviews before making a final decision.

How much does long-term care insurance cost?

If you’ve used a long-term care insurance calculator, then you know that rates can be very expensive. Genworth reported that the average charge for a private room in a skilled nursing facility or a nursing home was $102,000 a year. The average cost for the annual services of a home health aide was $52,624. Naturally, these costs vary by geographic region.

Avoid high long-term health care insurance prices by shopping for policies with long-term care premiums that do not exceed 7% of your income at the time of purchase. The last thing the buyer wants to do is buy a long-term healthcare insurance policy for an unaffordable premium. Unaffordable premiums increase the buyer’s chances to default on the payments and face forfeiture of the benefits.

What happens to my rates if I stop paying long-term care premiums?

The premiums required under long-term healthcare insurance policies last throughout the covered person’s lifetime. If the required premium payments under the insurance contract stop, the insurance company’s obligation to pay benefits also stops. In other words, the insured forfeits the benefit.

Fortunately, some long-term healthcare insurance companies write policies with a non-forfeiture provision. A non-forfeiture provision means that if payments stop for some reason, the insurance company will continue to pay at least a portion of the promised benefits. A non-forfeiture provision is a good hedge against unforeseeable circumstances.

Another premium-related question is whether the insurance company guarantees a policy renewal if you pay the premiums on time. A guaranteed renewable policy means the insurance company guarantees to renew coverage, usually up to a stated age of 65. As long as premiums are paid, the company cannot cancel coverage.

Will my long-term care insurance rates increase if a new diagnosis happens after purchase?

The wise buyer will seek the answer to this question before buying. The issue often arises in the context of a dementia diagnosis. The important question to ask before you buy long-term care insurance is whether the plan includes dementia coverage if the diagnosis comes after the long-term healthcare coverage goes into effect.

You can expect your long-term care insurance rates to increase with a new diagnosis, and be sure to shop around for a policy that includes a non-forfeiture provision so you don’t lose coverage.

When considering which long-term healthcare policy to buy, a wise buyer looks for a policy that gives the best value for the dollars spent. In other words, the buyer wants the premium paid each month to buy coverage that is worthwhile, many years from the purchase date.

Will my long-term care insurance rates come with inflation protection?

Economic inflation decreases the purchasing power of dollars over time. With respect to healthcare insurance, the rate of inflation means the premium dollars spent buy fewer benefits over time. One way to guard against the decrease in benefits is to purchase an inflation rider on long-term care insurance.

Inflation protection refers to the policy feature that increases the value of the policy benefits by an agreed-upon specified percentage at specific times throughout the policy period as a hedge against inflation.

Inflation protection is an added feature to insurance policies that increases the premium the buyer pays for coverage. Companies may offer various inflation protection rate options per year, which also means various premium options.

The lower the inflation rate option, the lower the premium. That is because insurance companies face difficulties administering inflation protection features because they also face regulatory restrictions against increasing policy premiums. As a result, carriers may offer lower premium increases in exchange for lower inflation protection rates

What age should you consider buying long-term care insurance?

Long-term care is less expensive if you buy it when you are younger. The 2020 average annual premium for a couple age 55 was $3,050 as reported by the American Association for Long-term Care Insurance. So, bear in mind that premiums reflect an increase in long-term care insurance cost by age.

The earlier a buyer enters into the contract for coverage, the lower the premium. To lock in the most affordable long-term care insurance rates, start shopping for policies now with our free research tool below.

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Long-Term Care Insurance History

Not everyone can afford to spend long periods of time in a nursing home or assisted living facility without an insurance policy to help defray the costs. Medicare does not cover long-term care, and it wasn’t until 1965 that Medicaid began covering long-term care in institutions. Today, Medicaid’s covered expenses still do not include long-term home care.

Over the past 50 years or so, Congress addressed some issues inherent in providing long-term healthcare for seniors. The following timeline shows the development of long-term healthcare in the US:

Long-term Care Insurance in the 1960s

  • In 1967, Congress amended the Social Security Act (SSA) to make states responsible for the licensing of nursing home administrators.

Long-term Care Insurance in the 1970s

  • In 1974, Congress amended the SSA to provide grants to states to provide home health care, protective services, adult daycare, nutrition, and health support. Regulators finalized the regulations for skilled nursing facilities, and facilities are required to comply with standards for staffing and services.
  • In 1975, Title XX required states to prevent or reduce unsuitable institutional care and replace it with long-term care in the home and long-term healthcare provided through community services (HCBS).
  • In 1978, amendments to the Older Americans Act (OAA) required the states to create ombudsman programs and to prioritize community-based services as an alternative to long-term healthcare.

Long-term Care Insurance in the 1980s

  • In 1980, the Mental Health Systems Act created federal funding for more community-based mental health programs, and the Act also favored releasing elders from institutions.
  • In 1981, amendments to the SSA created the HCBS waivers that allow states to change Medicaid so that it offers community-based and home healthcare services that are not necessarily medical services.
  • In 1982, the Tax Equity and Fiscal Responsibility Act (TEFRA) allowed states to modify their Medicare programs to fund care for disabled children who live in the community if the treatment was in lieu of institutionalized care.
  • In 1987, the Omnibus Budget Reconciliation Act (OBRA ’87) added standards to ensure quality care in Medicare and Medicaid nursing homes; reauthorized the OAA by adding additional funding for Ombudsman programs, in-home services for seniors, and to avert elder abuse and neglect.
  • Also in 1987, the Robert Wood Johnson Foundation began encouraging partnerships between private and public long-term healthcare programs to offset long-term healthcare costs.
  • In 1988, the Medicare Catastrophic Act expanded skilled nursing facility benefits and created protections against spouse impoverishment. The Act also required Medicaid to pay Medicare premiums and the cost-sharing fees for Medicare beneficiaries whose income fell less than 100% of the federal poverty level with few assets.
  • In 1989, Congress repealed the Medicare Catastrophic Act and created the Pepper Commission to recommend ideas for legislation addressing healthcare and long-term healthcare solutions.

Long-term Care Insurance in the 1990s

  • In 1990, Congress passed the Omnibus Budget Reconciliation Act (OBRA ’90) directing Medicaid to pay Medicare premiums when a Medicare beneficiary’s income fell between 100%-120% of the federal poverty level and cover some hospital services in community-based mental health centers.
  • In 1990, Congress enacted the Americans with Disabilities Act (ADA) which advocated ending the exclusion and segregation of people with disabilities and integrating them into communities.
  • In 1999, the U.S. Supreme Court rendered its Olmstead decision, in a case that advocated wide-ranging HCBS coverage for disabled people.

Long-term Care Insurance in the 2000s

  • In 2000, the Americans Act Caregiver Program provided for grants that would allow states to support the healthcare assistance provided by family members and other informal caregivers, so elders could receive their healthcare at home.
  • In 2001, the Centers for Medicare and Medicaid Services (CMS) and the Administration on Aging changed grants applicable to states and non-profit organizations, so they could pursue integrated long-term healthcare services and support systems.
  • In 2005, the Deficit Reduction Act (DEFRA) expanded federal funding to states to advance the implementation of community-based care and changed some Medicaid rules, including an optional plan for HCBS, self-directed personal care services, lengthening the look-back period for asset transfers, and permitting Medicaid to motivate people to buy long-term healthcare care insurance policies while still qualifying for Medicaid if their medical expenses outstripped the end of the long-term care policy term.
  • In 2006, OAA amendments provided consumer information on long-term healthcare planning and community-based services for elders at risk for institutionalized care.
  • In 2010, the Affordable Care Act (ACA) added new ways that states could improve long-term healthcare groundwork and expand HCBS. Congress also enacted rules toward providing a national, voluntary long-term healthcare program funded by individual premium payments, known popularly as The CLASS Act.
  • In 2013, Congress repealed The CLASS Act portion of the ACA.
  • In 2013, the American Taxpayer Relief Act created a bipartisan “Commission on Long-term Care.” newly-minted Commission issued a report suggesting funding approaches to long-term healthcare.
  • In 2014, for the purposes of Medicaid services, CMS issued new rules that require settings to meet certain requirements in order for CMS to consider them as home and community-based.
  • In 2015, CMS revised its rating for nursing homes, upgrading performance standards.

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