2 HR Virginia Partnership for Long Term Care Insurance Self Study CE Course

Transcription

1 2 HR Virginia Partnership for Long Term Care Insurance Self Study CE Course Continuing Education Brought to You by: Sandi Kruise Insurance Training Sandi Kruise Inc Page1 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

2 Contents Virginia Long Term Care Insurance Partnership... 5 Virginia Long Term Care Partnership... 5 UNDERSTANDING LONG TERM CARE (LTC)... 5 The Need for Long Term Care... 5 How Long Do People Typically Stay in a Nursing Home?... 6 Cost of Long Term Care... 6 Virginia State Median Annual Care Costs in Home Care... 7 Adult Day Health Care... 7 Assisted Living Facility... 7 Nursing Home Care... 7 Payment Sources for LTC... 7 Purchasing LTC insurance... 8 Questions about LTC insurance: Medicare Premiums/Deductibles/Co insurance Part A (Hospital) Part B (Doctor) Skilled Nursing Facility (SNF) Questions about Medicare: Medicaid Applying for Medicaid Questions about Virginia Medicaid: Taxes and LTC Insurance Tax Qualified LTC Figures Long Term Care Insurance When Will a Long Term Care Policy Pay Benefits? What is Not Covered? What Could Disqualify a Policy as a Partnership Policy? The Virginia LTC Partnership Policy Dollar For Dollar Asset Protection LTC Partnership Dollar For Dollar Scenarios Agent Training Page2 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

3 Virginia LTC Partnership Policy IMPORTANT CONSIDERATIONS FOR CONSUMERS Questions about the Partnership and Partnership Policies: Suitability Designing Coverage to Best Meet Clients Needs What about the cost/premium? Cost Factors Age Elimination Period (deductible period) Daily Benefits Lifetime Benefits Covered Services Health Factors Inflation Protection Medical Underwriting PROHIBITED PRACTICES The Virginia Long Term Care Partnership Requirements for a Partnership Policy Virginia Partnership for LTC Dollar For Dollar Asset Protection Annual Compound Inflation Protection Grandfathered Policies Partnership Policy Issue Date Agent Training THE VIRGINIA LTC PARTNERSHIP POLICY LTC Partnership policy requirements: Questions about the Partnership and Partnership Policies: Virginia Tax Deduction Must be Tax Qualified Continuing Education for Agents Virginia Partnership for Long Term Care Why people should plan Income & Asset Protection Virginia Long Term Care Partnership Policies Page3 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

4 Virginia Partnership for Long Term Care policy benefits include: Policy Underwriting What Could Disqualify a Policy as a Partnership Policy? Guide Tax Breaks & Incentives for Long Term Care Insurance Federal & State Premiums Paid by an Individual Health Savings Accounts (HSAs) Medical Savings Accounts (Archer MSAs) Cafeteria Plan Premiums Paid by an Employer Health Reimbursement Accounts (HRAs) or Health Reimbursement Arrangements (HRAs) C Corporation or Entity with a 501 Trust Self Employed Business Owners Sole Proprietor Partnerships and LLCs Subchapter S Corporations Taxation of LTC Insurance Benefits Other Tax Incentives Overview State Tax Incentives Important Terms Page4 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

5 Virginia Long-Term Care Insurance Partnership The Virginia Long Term Care (LTC) Partnership is designed to reward Virginians who plan ahead for future long term care needs. With the Partnership's Dollar For Dollar Asset Protection, Virginians can protect personal assets if there is a need to apply for Medicaid. The VA LTC Partnership is a joint effort between the Bureau of Insurance, the Virginia Department of Medical Assistance Services, Virginia Department for the Aging, and private insurance companies. This innovative alliance between private insurance companies and the state government will protect Virginians from depleting all of their savings and assets to pay for long term care. The future demand for long term care services is expected to rise. Virginians need to plan ahead to ensure that the widest array and highest quality of services will be available to them. The Virginia LTC Partnership is here to help. Virginia Long Term Care Partnership The Virginia Long Term Care Partnerships are partnerships between private insurance companies and the State of Virginia. Started in 2007, they work similar to regular long term care insurance policies with the added benefit that if someone also qualifies for Medicaid they can keep more of their assets than the current $2,000. This can help singles and surviving spouses keep more of their assets for their heirs. The individual usually will be able to keep a dollar for dollar match based on what the insurance company pays. UNDERSTANDING LONG TERM CARE (LTC) The Need for Long Term Care More than 70% of Americans who live to retirement age will need long term care at some time in their lives [1]. In 2014, the national median cost of a semi private room in a nursing home was $212 per day [2]. With an average stay of 2.4 years [3], that's nearly $185,000 per stay. Home health care can be expensive as well. Few people can afford these costs without using their life's savings or having insurance. 1. "Americans Fail to Act on Long Term Care Protection," American Society on Aging, May Genworth 2014 Cost of Care Survey, Genworth, March The Henry J. Kaiser Family Foundation, "Health Care & The 2004 Elections," October 10, This year, about 9 million Americans over the age of 65 will need long term care services. By 2020, that number will increase to 12 million. While most people who need long term care are age 65 or older, a person can need long term care services at any age. Forty (40) percent of people currently receiving long term care are adults 18 to 64 years old Page5 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

6 How Long Do People Typically Stay in a Nursing Home? Families typically seek nursing home care when it is no longer possible to care for a person at home safely or when the cost of round the clock care at home becomes too great. Nursing homes are highly regulated. They must be licensed by state governments. Cost of Long Term Care Today, the cost of nursing home care in the US varies from $34,000 to nearly $300,000 per year. Home health care can be just as expensive as care in a nursing facility, depending on the frequency and type of home health care services required. Long term care is expensive. One year of care in a nursing home, based on the 2014 national average, costs over $77,000 for a semi private room. One year of care at home, i.e. periodic personal care help from a home health aide (the median is about 44 hours a week), would cost about $45,000 a year. Costs for long term care services vary greatly depending on the type and amount of care needed, the provider used, and where the policyholder lives. For example, many care facilities charge extra for services provided beyond the basic room and board charge, although some may have all inclusive fees. Home health and home care services are usually provided in two to four hour blocks of time referred to as visits. An evening, weekend or holiday visit may cost more than a weekday visit. Some community programs, such as adult day service programs, are provided at a per day rate, and rates may differ based on the type and variety of programs and services offered. The median costs in the United States (in 2014) are: $212/day for a semi private room in a nursing home $240/day for a private room in a nursing home $3,500/month for care in an Assisted Living Facility (for a one bedroom unit) $20/hour for a Home Health Aide $19/hour for a Homemaker services $65/day for care in an Adult Day Health Care Center Page6 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

7 Virginia State Median Annual Care Costs in 2014 Home Care Annual Cost 5 yr Annual Growth 3 Homemaker services $41,184 2% Home health aide $43,472 1% Adult Day Health Care Adult day health care $15,860 1% Assisted Living Facility Private, one bedroom $47,880 5% Nursing Home Care Semi private room $77,015 4% Private room $84,315 3% 3 Represents the compound annual growth rate based on Genworth Cost of Care Survey State Median is the median cost for care across the entire state. Payment Sources for LTC Long Term Care Service Nursing Home Care Assisted Living Facility (and similar facility options) Continuing Care Retirement Community Medicare Pays in full for days 0 20 if people are in a Skilled Nursing Facility following a recent hospital stay. If they need for skilled care continues, may pay for days 21 through 100 after paying a $157.50/day copayment (2015) Private Medigap Insurance May cover the $157.50/day copayment if a nursing home stay meets all other Medicare requirements. (2015) Medicaid May pay for care in a Medicaid certified nursing home for those who meet functional and financial eligibility criteria. Pay Out of Pocket For those who need only personal or supervisory care in a nursing home and/or have not had a prior hospital stay, or those who choose a nursing home that does not participate in Medicaid or is not Medicare certified. Does not pay Does not pay In some states, may Pay on their own pay care related except as noted costs, but not room under Medicaid if and board eligible. Does not pay Does not pay Does not pay Pay on their own Adult Day Services Not covered Not Covered Varies by state, Pay on their own Page7 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

8 Home Health Care Limited to reasonable, Not covered necessary part time or intermittent skilled nursing care and home health aide services, and some therapies that are ordered by their doctor and provided by Medicare certified home health agency. Does not pay for on going personal care or custodial care needs only (help with activities of daily living). financial and [except as noted functional eligibility under Medicaid if required eligible.] Pay for, but states Pay on their own have option to limit for personal or some services, such custodial care, as therapy except as noted under Medicaid, for those who are eligible. Purchasing LTC insurance Long term care insurance is available from any licensed insurance company that sells LTC insurance. To purchase it, contact a licensed insurance agent or an insurance company. The Commonwealth of Virginia and the Department Of Medical Assistance Services do not sell LTC insurance. Page8 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

9 Questions about LTC insurance: Q: Who is at risk for needing long term care? Everyone is potentially at risk. A national study found that almost 70% of people turning 65 will need some long term care. Women are at a higher risk than men with 79% of women turning 65 needing some long term care, and 58% of men turning 65 needing some long term care. Among those turning 65, over half will need long term care for at least one year, and 20% will need more than five years of care. Thirty one percent of Americans will not need long term care in their lifetime. Source: "Americans Fail to Act on Long Term Care Protection," American Society on Aging, May Q: What are some considerations to think about before purchasing a long term care insurance policy? While there are a number of different things to consider and evaluate to determine which policy is the best to buy, here are some questions to keep in mind: What is the maximum benefit of the policy (2 years, 5 years, a lifetime)? How long is the elimination period? The elimination period is the number of days paid out ofpocket before the policy begins to pay. Is the policy tax qualified? All Partnership policies are tax qualified. Does the policy provide for home health care or adult day services? Q: How much long term care insurance should someone buy? In order to determine how much LTC insurance to buy, the general rule of thumb is Cost of Care Income = Benefit Amount. The monthly cost of care will vary depending on where they live and the type of care they receive. Currently, home health care in Virginia averages $19.00 per hour and a semiprivate room in a nursing facility averages $ a day. Be mindful that this is a simple starting point for determining the appropriate amount of coverage. EXAMPLE: If monthly cost of care is estimated at $4,500 and the amount of monthly income that is available the cost of care is equal to $1,500, the client would want to purchase a policy with a $100 per day benefit. $4,500 $1,500 = $3,000/month $3,000/month divided by 30 = $100 daily benefit Q: Will health insurance cover long term care? Probably not. Long term care is not typically covered by traditional health insurance, disability insurance plans, Medicare, and Medicare supplemental insurance (Medigap). Page9 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

10 Q: Where is the care provided? Long term care can be provided in a variety of places including: a person's home; a nursing facility; through community based services (i.e., Adult Day Care), and in a variety of assisted living settings (i.e., Continuing Care Retirement Communities, Residential Care Homes, and Assisted Living Facilities). Q: What are the connections between LTC insurance and the tax laws? There are some tax deductible long term care expenses. The premiums charged for tax qualified LTC insurance policies are treated as medical expenses under Federal tax law. Check with a tax advisor about the tax implications for long term care expenses. Q: Who can consumers speak with to discuss LTC insurance needs? The Virginia Insurance Counseling and Assistance Program (VICAP). By phone: Virginia Department for the Aging at or the Virginia Department for the Aging online Medicare Premiums/Deductibles/Co insurance Part A (Hospital) Premiums (Part A is Premium Free for most individuals) Inpatient Deductible and Co insurance First 60 Days $1,260.00/benefit paid Day $315.00/per day Day $630.00/per day Beyond 150 All Costs Part B (Doctor) Premium: $104.90/Month Deductible: $147.00/Year Co insurance: 20% of the approved amount Skilled Nursing Facility (SNF) Co insurance per Benefit Period: First 20 days $0 Days $157.50/per day Beyond 100 All Costs Page10 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

11 Questions about Medicare: Q: Does Medicare cover the cost of long term care? Many assume Medicare will pay for their long term care expenses. The reality is, Medicare covers only a small portion of long term care costs. Medicare will pay for care in a nursing home only when certain conditions are met, and even then, the person are only fully covered for 20 days. In certain situations, some people qualify for partial payment up to 100 days. Medicaid Medicaid is a health insurance program jointly administered and funded by the federal and state government. It provides health care services for eligible, low income individuals. People qualify for Medicaid by meeting set financial standards and by fitting into a specific covered group such as children, pregnant women, or individuals who are elderly or who have disabilities. The Virginia Medicaid program is administered by the Virginia Department of Medical Assistance Services. Medicaid eligibility is extremely complex. Applicants may contact their local department of social services or visit the Virginia Department of Social Services to obtain information about Medicaid eligibility. Medicaid eligibility is determined on an individual, case by case basis. Financial requirements include an evaluation of income and resources (assets). Non financial requirements include Virginia residency, proof of citizenship, and meeting the required level of care for long term care services. Sometimes applicants must spend down (or use up) their personal resources (assets) before they qualify for Medicaid. Consumers may want to get more detailed information from the State Medical Assistance office or an attorney before spending down resources. Applying for Medicaid People can apply for Medicaid at any time, but most people choose to do so when they have problems paying for care. If other Medicaid program requirements are met, then the exhaustion of Partnership Policy benefits is not required in order to qualify for Medicaid. Applications for Medicaid can be made at the local Department of Social Services (in the city or county where the applicant lived before needing long term care services). Applicants should be sure to mention that they are in need of long term care services since eligibility rules are different for individuals needing long term care services. Applications can be obtained online or by contacting the local department of social services. Applying for Medicaid does not need to be done in person and a face to face interview is not required. Applications, however, should be filed at the local department of social services. More information is available from the Virginia Department of Social Services. Page11 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

12 Questions about Virginia Medicaid: Q: When should Partnership Policyholders apply for Medicaid? Apply for Medicaid when the policyholder is having a difficult time paying for care or when the Partnership Policyholder exhausts the benefits of his or her Partnership Policy. However, policy exhaustion is NOT required to apply for Medicaid in Virginia. Remember, everyone has the right to apply for Medicaid at anytime. Q: If someone exhausts the benefits in a Partnership Policy, will they automatically qualify for Medicaid? No. They must still apply for Medicaid and meet the eligibility requirements. Read the state's information on Eligibility Screening for more information on Medicaid. Q: If someone thinks they are eligible for Medicaid, should they cancel other health insurance they might already have? No. Medicaid does not require or recommend that someone cancel their other health insurance. Taxes and LTC Insurance The Internal Revenue Code allows favorable tax treatment of long term care policies that qualify under the law. Generally, benefits received from tax qualified policies will not be considered as taxable income under either federal or state law. The premiums charged for tax qualified policies are treated as medical expenses under a federal return for purposes of itemized deductions up to certain dollar limits that are indexed annually Tax Qualified LTC Figures Your Age Maximum Amount That You Can Claim 40 years old or younger $380 More than 40 but not more than 50 $710 More than 50 but not more than 60 $1,400 More than 60 but not more than 70 $3,720 More than 70 $4,660 Consumers should consult with an attorney, accountant, or tax advisor regarding the tax implications of purchasing a tax qualified policy. Virginia Association of Area Agencies on Aging Provides public education relevant to the needs of older Virginians. Page12 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

13 Virginia Department for the Aging (800) This state organization works with 25 local Area Agencies on Aging (AAAs) as well as various other public and private organizations to help older Virginians, their families and loved ones find the services and information they need. Virginia Easy Access Virginia Easy Access is the name of a website developed for seniors, adults with disabilities, their caregivers and the providers that support them. Virginia Easy Access is full of helpful information about services and supports that are available across the Commonwealth. Virginia State Corporation Commission Bureau of Insurance The Commonwealth's regulatory body for insurance and insurance companies. (877) Long Term Care Insurance Several insurance companies offer long term care policies. The National Association of Insurance Commissioners (NAIC) has set up many guidelines that insurance companies must follow, but there are still many differences among different companies policies. Underwriting Before an insurance company will issue a policy, it will require that the insured go through underwriting, which is a process that will help the insurance company determine the health of the proposed insured. The underwriting process will be less restrictive the younger they are or if they purchase a policy through their employer; however, applicants in poor health may be denied coverage at any age. Premiums All long term care policies will require that premiums be paid, either by the insured or someone else. In most cases, the premiums are assumed to be paid for the rest of the insured s life (as long as the insurance is to remain in force). However, some policies allow premium payments for shorter periods (for example, ten years). However, a shorter premium paying period will mean that the annual premiums due will be higher. The amount of the premium is based on age, amount, duration, and inflation protection (discussed below). Some insurance companies will offer a discount on premium payments if both spouses buy long term care. A portion of the premium may be deductible as a medical expense if they itemize on their income taxes, the policy meets tax guidelines, and they have medical expenses over 7.5 percent of their adjusted gross income. See IRS Publication 502 ( for more information. Page13 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

14 Age Some insurance companies set both lower and upper age limits for long term care insurance. However, if they are between the ages of 40 and 80, most insurance companies will issue them a policy if they are satisfied with their underwriting. If they are younger than 40, they may have to shop around, but they may still find an insurance company that will issue them a policy. Not many companies issue policies to those older than 85, though there may be rare exceptions. Amount Many policies will state their benefits as a certain dollar amount per day. For example a policy may pay a benefit of $150 per day. Generally, this dollar amount will apply to all institutional care but other care may not receive the full amount. For instance, many policies will only pay half of the benefit amount for home or community health care. Some policies will allow them to increase the in home care benefit to the nursing home benefit for an increase in premium. Waiting Period If their long term care policy has a waiting period, then benefits will not be paid out until the end of this period. Many policies will give them an option for their waiting period, but most average about 90 days. If they choose a longer waiting period, the costs (premiums) will be lower. Duration They will also have a choice of how long they would like benefits to be paid. If they want to have some long term care protection, but limit their costs, then they may choose a two year policy. However, if they want to fully protect against the risk of long term care, then they may choose an unlimited period. Inflation Protection Almost all insurance companies are required to offer some type of optional inflation protection. Inflation protection is usually offered as a fixed percentage increase per year usually around 5 percent. This increase can be computed using either simple or compound calculations. A simple benefit increase option will not increase as fast as a compound option, but will not cost as much as a compound option. Considering the high inflation rate of long term care expenses, it is a good idea to consider, at a minimum, a simple calculation option. If the costs are not too high for them to afford, a compound option is the best. Since they may not use their benefits for 20 or more years after purchasing the policy, the method used may make a big difference. See the example below of how a $100 per day policy will increase each year under both options. Simple Compound Year 1 Daily Benefit $ $ Year 2 Daily Benefit $ $ Year 3 Daily Benefit $ $ Year 4 Daily Benefit $ $ Year 5 Daily Benefit $ $ Year 20 Daily Benefit $ $ Page14 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

15 When Will a Long Term Care Policy Pay Benefits? Most long term care policies require an assessment by a company approved by the insurance company before any benefits will be paid. It is important that family members know who to contact and that contact is made as soon as possible as the process takes time. The insurance company may deny a claim if procedures are not followed. Most long term care policies have similar guidelines for when a policy owner will be eligible for benefits, but be sure to check that their policy is not too strict in its requirements. As a rule of thumb, most longterm care policies will only have them meet one of these two requirements before benefits are paid: 1. The insured is expected to be unable, without substantial assistance from another person, to perform two of the seven activities of daily living for at least 90 days due to loss of functional capacity. Activities of daily living include: Eating Transferring Dressing Bathing Using a toilet Bladder and bowel control issues (incontinent) 2. Substantial services are required to protect the individual from threats to health and safety due to substantial cognitive impairment. What is Not Covered? Mental and nervous disorders are usually not covered by long term care policies. Most insurance companies believe these areas to be too easily fraudulent. However, policies must cover Alzheimer s disease and other biologically related brain conditions and serious mental illnesses. Be sure to read the policy carefully. What Could Disqualify a Policy as a Partnership Policy? Certain types of changes to a Partnership Policy could affect whether or not such policy continues to be a Partnership Policy. If someone purchases a Partnership Policy and later decides to make any changes, they should first consult with us to determine the effect of a proposed change. In addition, if the policyholder moves to a state that does not maintain a Partnership Program or does not recognize their policy as a Partnership Policy, the insured would not receive beneficial treatment of their policy under the Medicaid program of that state. The information contained in this course is based on current Virginia and Federal laws. These laws may be subject to change. Any change in law could reduce or eliminate the beneficial treatment of the policy under Virginia s Medicaid program. Page15 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

16 The Virginia LTC Partnership Policy Virginia LTC Partnership Policies and non Partnership LTC insurance policies are similar. Partnership Policies have the added benefit of allowing policyholders to protect a portion of their assets if they choose to apply for Medicaid. Dollar For Dollar Asset Protection Dollar For Dollar asset protection for every dollar that a LTC Partnership Policy pays out in benefits, a dollar of assets can be protected for purposes of determining Medicaid eligibility. Therefore, if the policyholder receives $100,000 in benefits, they may then apply to Virginia's Medicaid program for assistance and still keep $100,000 in assets (in addition to the $2,000 everyone is allowed to keep and any other asset allowances under Medicaid). This Dollar For Dollar Asset Protection feature is not available under non Partnership Policies. The amount of the Dollar For Dollar Asset Protection is calculated based on: The amount of benefits paid by the LTC insurance company on the policyholder's behalf. It is not necessarily equal to the amount of the premiums paid or the maximum benefit. LTC Partnership Dollar For Dollar Scenarios Following are a few examples of how the Virginia LTC Partnership works (please note that amounts used in these examples are for illustration purposes only): Scenario 1 A policyholder utilizes $100,000 in LTC Partnership insurance benefits and has $100,000 in additional assets. He or she applies to the Medicaid program for assistance and DMAS disregards dollar for dollar the amount that the insurance policy paid (in this case $100,000) from his or her assets during the Medicaid eligibility determination process. Scenario 2 A policyholder utilizes $100,000 in LTC Partnership insurance benefits, but he or she has $300,000 in assets. The policyholder could be eligible for Medicaid when he or she reduces her assets to $102,000 ($100,000 in excluded assets plus the $2,000 Medicaid resource limit available to all Medicaid applicants). Page16 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

17 Scenario 3 This case is a bit tricky. In this example the LTC insurance policy does not cover the entire cost of care per day. So, the policyholder must use her own assets to subsidize the LTC insurance policy in order to afford care. The policyholder decreases assets by subsidizing her cost of care. As time goes by, the policyholder decreases her assets and accrues insurance benefits paid on her behalf (e.g. $50,000 of insurance benefits paid and $50,000 in assets remaining). The policyholder could be eligible for Medicaid since all of her remaining assets would be excludable. In this scenario, the policyholder is eligible for Medicaid before exhausting the LTC insurance benefit. The policyholder could receive all the Medicaid services covered in the state plan, but the LTC insurance policy would continue to pay for long term care until the policy is exhausted. Agent Training Those who sell Partnership Policies must take a training course that is approved by the state of Virginia. Virginia LTC Partnership Policy Virginia Partnership Policies for LTC insurance are only sold by certain insurance companies. These companies are listed on the Virginia Bureau of Insurance website. Partnership policies are only sold through licensed insurance agents who have completed special training required by the Commonwealth. A Partnership Policy, with its unique Dollar For Dollar Asset Protection feature assures that they will not be forced to spend their life's savings on long term care IMPORTANT CONSIDERATIONS FOR CONSUMERS It is important to know if the long term care insurance policy they buy is a Partnership qualified policy or not, since they can be the same as non Partnership policies. A Partnership qualified policy is one that is certified by the State, and it must include the level of inflation protection coverage set by the State. Only those who have a Partnership policy will be eligible for an asset disregard if and when they apply for Medicaid. A Disclosure Notice will be included with the policy if it is a Virginia Long Term Care Partnership policy. Confirm that the policy they purchased is, in fact, a Partnership Policy. Policies issued prior to a state Partnership Program s effective date will not be considered Partnership qualified; however there are circumstances under which current policyholders may be able to exchange a policy previously purchased for one that is Partnership qualified. Page17 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

18 It is important to buy a Partnership qualified policy from an agent who is specially trained to sell that type of coverage. States with Partnership Programs have additional educational requirements for agents who wish to sell Partnership policies. It is important to note that eligibility for Medicaid is not automatic. Policyholders must still apply and meet the income, functional and general eligibility requirements of the Medicaid program in their state. The long term care services provided by Medicaid vary by state and may not be the same as the services they are eligible to receive under their private Partnership long term care insurance policy (for example, many state Medicaid programs do not pay for room and board costs in an Assisted Living Facility even if they are also receiving personal care). States that have Partnership programs are automatically considered to have reciprocity with each other and to honor the asset disregard they earned under a Partnership policy purchased in a different state. However, States can opt out of this requirement at any time. Questions about the Partnership and Partnership Policies: Q: What is the advantage of a Partnership Policy over a non Partnership Policy? Partnership and non Partnership policies are virtually the same except that Partnership Policies have the added benefit of the Dollar For Dollar Asset Protection. This benefit allows policyholders to protect a portion of their assets if they choose to apply for Medicaid. Agents who wish to sell Partnership Policies are required to attend ongoing certification training on the Partnership. Q: How will the Dollar For Dollar Asset Protection amount be determined? Asset protection is based on what the insurance company has paid out in benefits. It is NOT based on the insurance premiums paid or the value of the policy. Q: How will owners of Partnership Policies and their family members know that a policy qualifies as a Partnership Policy? When the policy is issued, it will include a Partnership Disclosure Notice stating that it is a qualified Virginia LTC Insurance Partnership Policy. Q: Will the Virginia Partnership Policy qualify someone for Dollar For Dollar Asset Protection in other states? Yes. Virginia plans to participate in a national reciprocity agreement. It is currently under development. However, it is likely that not all states will participate in this program. Q: Which insurance carriers offer Partnership Policies? Virginia Partnership Policies are only sold by certain insurance companies. These companies are listed on the Virginia Bureau of Insurance website. The Commonwealth of Virginia does not endorse any specific insurance product or insurer. Page18 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

19 Q: Will my current LTC policy automatically convert to a Partnership Policy? No. Contact an insurance agent to purchase a Partnership Policy. Q: Can people who have an illness still qualify for a Partnership Policy? Insurance companies who sell LTC insurance use medical underwriting to determine if applicants qualify for a policy. Medical underwriting is when an insurance company reviews a number of factors including health and health history and determines if they will provide LTC coverage. Insurance companies are not required to sell consumers a LTC insurance policy if they do not meet their underwriting standards. Q: Who can purchase a Partnership Policy? Any Virginia resident can alzheimer s for a Partnership Policy. The ideal applicant is generally healthy, meets the insurance company's issue age limit, and is able to afford the cost of the insurance. Suitability Designing Coverage to Best Meet Clients Needs Customize long term care insurance coverage to match the amount they can pay. Below is an example of different long term care insurance options all from the same program (as illustration only) to help show how different coverage choices can influence the monthly premium cost. To keep it simple, the illustration only changes one coverage element at a time. The price associated with some of these changes varies by age, while for some other types of changes, the savings do not vary based on the applicant s age at the time they buy. The basic coverage design depicted in Plan A is as follows: Comprehensive Coverage (Facility and at home and community care) Facility care daily benefit of $150/day Home Health Care Benefits paid at $112/day (75% of the facility care amount). Elimination period of 30 days Lifetime coverage maximum equivalent to 5 years (or just under $275,000 for a policy paying $150/day) Automatic Compound Annual Inflation Protection Page19 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

20 Age at Plan A Plan B Plan C Plan D Plan E Purchase 40 $90 $79 $74 $60 $24 45 $108 $95 $89 $72 $32 50 $130 $114 $107 $86 $43 55 $159 $140 $131 $106 $59 60 $195 $170 $160 $130 $83 65 $248 $216 $204 $165 $ $324 $282 $267 $216 $ $520 $299 $427 $347 $327 Note: The monthly premiums shown here are based on one long term care insurance program s rates and represents premium costs. Premiums for the exact same coverage described here from a different company will, for a variety of reasons, vary from the rates shown here. These monthly premiums are based on the Federal Long Term Care Insurance Program ( Can use the premium calculator there to see how other types of coverage changes would impact the rates, or to explore sample rates for other ages. Plans B through E show different ways to reduce premium costs compared to the coverage described in Plan A. Agents should examine how the compared to the coverage described in Plan A. Consumers should examine how the premium changes for Plans B through Plans E based on the Plan A (base plan). Plan B: Same as Plan A, except the elimination period is 90 days instead of 30 days. Plan C: Same as Plan A, except the lifetime maximum is equal to 3 years, or just under $165,000 Plan D: Pays benefits at $100/day for facility care and, correspondingly, $75/day. All other elements remain the same. Plan E: Same as Plan A, except it does not include Compound Annual Inflation Protection. Instead, each year they can elect to increase coverage by a set amount (generally 5% of the prior years benefit amount) and to pay for that additional amount at the time they elect it. What about the cost/premium? For LTC insurance, the applicant s age at the time of purchase is the single most important factor. The younger someone is when they purchase LTC insurance, the lower the premium. The premium also depends on the benefits and features they choose. Each insurance company sets its own rates. Ultimately applicants must make sure they can pay the premiums and still have enough money for basic needs such as housing, food, medicine, etc. Premiums can vary greatly across companies and within companies depending on what features are included in the policy. Cost Factors Factors that influence the cost and quality of LTC insurance policies: Page20 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

21 Age The younger someone is when they buy the policy, the less they pay in initial premiums. The premium may increase with age (after age 65 a long term care insurer cannot use age to increase cost). Elimination Period (deductible period) Premiums are lower for longer elimination periods. (The elimination period is the number of days of care they pay for out of pocket before the insurance company begins paying benefits for their care.) This is the number of days that the insured is responsible for their long term care costs before qualifying for payments from the LTC insurance policy. The shorter the elimination period, the more expensive the premium will be. Daily Benefits The higher the daily benefit, the less the insured may need to pay out of pocket for care, but their premium will be higher. Lifetime Benefits This is the total amount the policy will pay out for long term care services. Covered Services Some policies provide a comprehensive pool of dollars that can be used to pay for care received in the home, in the community, or in a nursing facility. Others only pay for care received in a nursing facility or assisted living facility. The more comprehensive the policy, the more choices they will have, and the more expensive the premium will be. Health Factors Some companies charge lower premiums for applicants in very good health and higher premiums for applicants with particular health conditions or health histories. Inflation Protection This increases the benefit levels to account for anticipated increases in the cost of services over time. It is important to know that long term care costs have been increasing about 5% per year. Inflation protection can dramatically reduce their out of pocket expenses for long term care services. All Partnership Policies purchased by individual under age 76 must include inflation protection. Page21 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

22 Medical Underwriting To purchase LTC insurance, applicants must pass the medical underwriting requirements of the insurer this applies to Partnership Policies and non Partnership policies. In the event of rejection, they may apply for coverage from another insurance company since underwriting standards vary by company. Insurance companies are not required to sell someone a policy if they do not meet their underwriting standards. The best way to avoid medical underwriting problems is to purchase LTC insurance when their overall health is good. PROHIBITED PRACTICES Insurance companies and agents may not engage in unfair and deceptive trade practices including: Twisting to knowingly make any misleading representation or comparison causing someone to cancel a policy with one company and buy a replacement from another company, High Pressure Tactics to use force, fright or threat to pressure someone into purchasing a policy, and Cold Lead Advertising to develop sales leads for a policy using deceptive advertising techniques. Insurers also may not advertise a product as long term care insurance if it provides less than twelve consecutive months of benefits. The Virginia Long Term Care Partnership Some long term care insurance policies sold in Virginia may qualify for the Virginia Long Term Care Insurance Partnership Program (the Partnership Program ). This Partnership Program is a partnership between state government and private insurance companies to assist individuals in planning for their long term care needs. Insurance companies voluntarily agree to participate in the Partnership Program by offering long term care insurance coverage that meets certain State and Federal requirements. Long term care insurance policies that qualify under the Partnership Program, referred to as Partnership Policies, may protect the policyholder s assets through a feature known as Asset Disregard, under Virginia s Medicaid program. Asset Disregard means that an amount of the policyholder s assets equal to the amount of long term care insurance benefits received under a qualified Partnership Policy will be disregarded for the purpose of determining the insured s eligibility for Medicaid after the policy benefits are exhausted. This generally allows a person to keep assets equal to the insurance benefits received under a qualified Partnership Policy without affecting the person s eligibility for Medicaid. All other Medicaid eligibility criteria will apply and special rules may apply to persons whose home equity exceeds $500,000. Asset Disregard is not available under a long term care insurance policy that is not a Partnership Policy. Page22 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

23 Therefore consumers should consider if Asset Disregard is important to them, and whether a Partnership Policy meets their needs. The purchase of a Partnership Policy does not automatically qualify the buyer for Medicaid. Requirements for a Partnership Policy In order for a policy to qualify as a Partnership Policy, it must, among other requirements: be issued to an individual after September 1, 2007; cover an individual who was a Commonwealth of Virginia resident when coverage first becomes effective under the policy; be a tax qualified policy under 7702(B)(b) of the Internal Revenue Code of 1986; meet stringent consumer protection standards; and meet the following inflation requirements: o for ages 60 or younger provides compound annual inflation protection; o for ages 61 to 75 provides some level of inflation protection; and o for ages 76 and older no purchase of inflation protection is required. Virginia Partnership for LTC The population of the Commonwealth of Virginia is aging fast. In just two decades, one in five Virginians will be over age 65 and a larger proportion of our population will be senior citizens than Florida claims today. This demographic imperative will bring challenges, opportunities and change to all aspects of life in our communities. Businesses will face an aging workforce and aging consumers; more and better community services for older residents will be in high demand; the health care system could be strained beyond capacity; senior friendly housing and public transportation systems will need to expand; educational institutions will see more aging students wanting to learn; tourism, recreation and the arts will need to appeal to a grayer audience, and; an army of better educated volunteers eager to give back to the community could be a windfall for community programs. Failure to prepare now will not only adversely affect today s seniors and the aging boomers, but younger generations as well if our future economy and service infrastructure is ill equipped to support an older population. In response to this reality, the Virginia General Assembly mandated this four year planning process for aging services. Previously, in 2006 the legislature required all state agencies to prepare annual reports on the impact of an aging population on their ability to deliver services and required VDA to summarize these reports for the Governor and General Assembly. Again, in 2009, the legislature adopted budget language requiring the Secretary of Health and Human Resources to develop a comprehensive blueprint that spans to the year 2025, builds on the Four Year Plan for Aging Services and other aging initiatives and encompasses broad based issues of active, daily life in our communities. It is clear that the intent of the Virginia legislature is that the Commonwealth be ready. Given today s climate of shrinking budgets and downsized organizations, we must be efficient in our use of resources and yet comprehensive in our approach to addressing aging issues. Multiple planning efforts and reporting requirements should be well coordinated and consolidated whenever practical leading to a clear and shared vision of how we need to proceed. Page23 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

24 The Virginia Long Term Care (LTC) Partnership is designed to reward Virginians who plan ahead for future long term care needs. With the Partnership's Dollar For Dollar Asset Protection, Virginians can protect personal assets if there is a need to apply for Medicaid. This innovative alliance between private insurance companies and the state government will protect Virginians from depleting all of their savings and assets to pay for long term care. The future demand for long term care services is expected to rise. Virginians need to plan ahead to ensure that the widest array and highest quality of services will be available to them. The Virginia LTC Partnership is here to help. Dollar For Dollar Asset Protection Dollar For Dollar asset protection for every dollar that a LTC Partnership Policy pays out in benefits, a dollar of assets can be protected for purposes of determining Medicaid eligibility. Therefore, if they receive $100,000 in benefits, they may then apply to Virginia's Medicaid program for assistance and still keep $100,000 in assets (in addition to the $2,000 everyone is allowed to keep and any other asset allowances under Medicaid). This Dollar For Dollar Asset Protection feature is not available under non Partnership Policies. Annual Compound Inflation Protection Inflation protection helps to adjust the policy's benefits to keep up with the rising cost of long term care services. Grandfathered Policies No existing LTC policies will be "grandfathered" into the program. Current LTC policyholders who wish to obtain a Partnership Policy should contact their insurance agent or broker. Partnership Policy Issue Date All Partnership Policies must be issued after the program start date of September 1, Agent Training Those who sell Partnership Policies must take a training course that is approved by state officials. The VA LTC Partnership is a joint effort between the Bureau of Insurance, the Virginia Department of Medical Assistance Services, Virginia Department for the Aging, and private insurance companies. Page24 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

25 THE VIRGINIA LTC PARTNERSHIP POLICY Virginia LTC Partnership Policies and non Partnership LTC insurance policies are similar. Partnership Policies have the added benefit of allowing policyholders to protect a portion of their assets if they choose to apply for Medicaid. The Partnership program was established as a public/private partnership to address the anticipated fiscal challenges that will be caused by the financial burden of long term care in the twenty first century. Long term care (LTC) insurance has been around for years. Effective September 1, 2007, Virginians now have a new alternative to traditional LTC insurance policies. Virginia's LTC Partnership Policy now allows them to access long term care services while protecting more of their assets if they ever need to apply for Medicaid. A Partnership Policy in Virginia is comparable in cost to other long term care insurance policies. However, the added value associated with the purchase of a Partnership Policy if they ever choose to apply for Medicaid. The Medicaid resource limit is $2,000 for someone receiving long term care services. Yet with a Partnership Policy, assets equal to the amount of benefits paid out are not counted in the Medicaid eligibility determination or estate recovery process. This makes the Partnership Policy a great opportunity for Virginians to help provide for their long term care needs while protecting their assets and family legacy. The LTC Partnership is an innovative alliance between the private insurance industry and federal and state governments. States are required to use the same "dollar for dollar" model. This means that in determining Medicaid eligibility, Medicaid applicants can protect one dollar of personal assets for every dollar that the Partnership Policy pays for them in benefits. The idea behind Partnership Policies is to help Virginian's afford long term health services without having to deplete all of their assets and savings in order to pay for their long term care. Nationwide, Virginia is in the forefront of this movement. For every dollar that a LTC Partnership insurance policy pays out in benefits, a dollar of personal assets can be protected (disregarded during the Medicaid eligibility review) if the individual chooses to apply for Medicaid. NOTE: While asset protection when determining eligibility is a core component to the LTC Partnership program, individuals must meet all Virginia Medicaid eligibility criteria in order to be determined eligible for Medicaid. As of September 1, 2007, Virginians are now able to purchase a new type of long term care (LTC) insurance policy a LTC Partnership policy. The LTC Partnership is an alliance between the private insurance industry and Virginia state government to help Virginians afford future long term care services without depleting all of their assets to pay for care. LTC Partnership policy holders who use their LTC Partnership insurance policy benefits and who eventually apply for Medicaid coverage are able to maintain some level of assets (equal to the LTC insurance benefit paid) above the $2,000 Medicaid asset limit currently in place for eligibility purposes. Page25 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

26 LTC Partnership policy requirements: LTC Partnership policies look very similar to traditional LTC insurance policies except that all Partnership policies must include annual compound inflation protection for individuals under age 61 and some form of inflation protection for individuals ages Inflation protection helps the policy keep up with the rising cost of LTC services. All Partnership policies must be issued after the program began in Virginia (September 1, 2007). Per federal law, Virginia is not allowed to grandfather policies. Questions about the Partnership and Partnership Policies: What is the advantage of a Partnership policy over a non Partnership LTC insurance policy? Partnership and non Partnership policies are virtually the same except that Partnership policies have the added benefit of allowing policyholders to protect a portion of their assets if they choose to apply for Medicaid. Will my Virginia Partnership policy qualify me for dollar for dollar asset protection in other states? Most likely, although the answer to this question is not fully known at this time. Virginia plans to participate in a national reciprocity agreement that is currently under development, but it is likely that not all states will participate in this. Also, the applicant will need to meet all Medicaid requirements for the new state of residence. If I exhaust my LTC Partnership policy, will I automatically qualify for Medicaid? No! they must still meet level of care requirements (for LTC) and the income and resource requirements (minus the amount of assets they can protect from their Partnership policy, i.e., the amount of benefits paid out by the insurer on their behalf). Virginia Tax Deduction If the tax qualified policy was purchased after January 1, 2006, an individual may be eligible for a tax credit equal to 15% of the total premiums paid in the year. Certain limitations apply. Must be Tax Qualified TAX QUALIFIED POLICIES NON TAX QUALIFIED POLICIES Premiums can be included with other uncompensated medical expenses for deductions from income in excess of 7.5% of adjusted gross income up to a maximum amount adjusted for inflation. Can t deduct any portion of premiums. Page26 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

27 Benefits that you may receive will not be counted as income. The federal law requires you be unable to do 2 of 5 out of 6 possible ADLs without substantial assistance. Medical necessity can t be used as a trigger for benefits. Disability from ADLs must be expected to last for at least 90 days. For cognitive impairment to be covered, a person must require substantial supervision. Benefits that you may receive may or may not be counted as income. Policies can offer different types of benefit triggers. Benefit triggers not restricted to 2 of 6 ADLs. Medical necessity and/or other benefit triggers can be offered. Policies don t require that disability be expected to last for at least 90 days. Policies don t have to require substantial supervision for cognitive impairments. Continuing Education for Agents The NAIC consumer protection provisions specify that anyone selling Partnership Policies must have continuing education: A one time 8 hour course on LTC insurance in general and curriculum specific to the new Partnership program A 4 hour refresher course to be taken during each license period The exact requirements and deadlines for training may vary from state to state This may also be approved for CE credit by states Virginia Partnership for Long Term Care Why people should plan Because, at least 70 percent of people over age 65 will require some long term care services at some point in their lives. And, contrary to what many people believe, Medicare and private health insurance programs do not pay for the majority of long term care services that most people need help with personal care such as dressing or using the bathroom independently. Planning is essential for them to be able to get the care they might need. With the Deficit Reduction Act of 2005, the federal government sent a clear message to Americans paying for long term care is their responsibility. The Act made it more difficult to qualify for Medicaid paid long term care. It also expanded the Partnership Program. A Partnership Program is a collaboration or partnership among a state government, the private insurance companies selling long term care insurance in that state, and state residents who buy longterm care Partnership policies. Page27 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

28 The purpose of the Virginia Long Term Care Insurance Partnership program is to make the purchase of shorter term more comprehensive long term care insurance meaningful by linking these special policies (called Partnership qualified policies) with Medicaid for those who continue to require care. Partnership qualified policies must meet special requirements that can differ somewhat from state to state. Most states require Partnership policies to offer comprehensive benefits (cover institutional and home services), be Tax Qualified, provide certain specific consumer protections, and include state specific provisions for inflation protection. Often the only difference between a partnership qualified policy and other long term care insurance policies sold in a state is the amount and type of inflation protection required by the state. Income & Asset Protection A Virginia Partnership for Long Term Care qualified policy provides them, as the purchaser, with the right to apply for Medicaid under modified eligibility rules that include a special feature called an asset disregard. This allows them to keep assets that would otherwise not be allowed if they need to apply, and qualify, for Medicaid in order to receive additional long term care services. The amount of assets Medicaid will disregard is equal to the amount of the benefits actually received under their long term care Partnership qualified policy. Since these policies must include inflation protection, the amount of the benefits received can be higher than the amount of insurance protection they originally purchased. If they have a Partnership qualified long term care insurance policy and receive $200,000 in benefits, they can apply for Medicaid and, if eligible, retain $200,000 worth of assets over and above the State s Medicaid asset threshold. In most states the asset threshold is $2,000 for a single person. Asset thresholds for married couples are typically more generous. Years ago they could protect their assets by creating a trust, but today only an irrevocable trust would be exempt and it would still be subject to the 60 month "look back" period. To be exempt, assets must be transferred 60 months before they apply for Medicaid. Under a qualified partnership policy, personal assets in the amount of the total benefits paid are disregarded when Medicaid asset eligibility is calculated. For each dollar of benefits paid, one dollar of assets is not counted toward the eligibility limit. This means they get to keep those assets and don't have to spend them before qualifying for Medicaid. It also means that the state will not seek to recover those amounts from their estate. Estate recovery means that the state can require repayment from their estate for any costs paid by Medicaid. Thirty states have "filial laws" that give the state the right to require their children to reimburse Medicaid for their expenses. The following is an example of how a Virginia Partnership for Long Term Care Qualified policy works. Let's say John purchases a Virginia Partnership for Long Term Care policy with a value of $200,000. Some years later he receives benefits under that policy up to the policy s lifetime maximum coverage (adjusted for inflation) equaling $250,000. John eventually requires more long term care services, and applies for Medicaid. If John's policy was not a Partnership qualified policy, in order to qualify for Medicaid, he would be entitled to keep only $2,000 in assets. He would have to spend down any assets Page28 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

29 over and above this amount. However, because John bought a Partnership qualified policy, if he needs to apply for Medicaid and is deemed eligible, he can keep $252,000 in assets and the State will not recover those funds after his death. However, any assets John has over and above the $252,000 would have to be spent in order for him to be eligible for Medicaid. For a couple the exempt amounts would be more. Virginia Long Term Care Partnership Policies Virginia Partnership for Long Term Care qualified policies are designed to preserve their independence, quality of life and protect assets. Partnership long term care policies offer the same benefits and options as non Partnership policies and cost the same as non Partnership policies. Virginia Partnership for Long Term Care policy benefits include: daily or monthly benefit choice of elimination period or deductible comprehensive coverage including home, adult day care and facility coverage benefit period (pool of money) discounts Policy Underwriting Applicants must qualify medically for a Virginia Partnership for Long Term Care policy just as they would for traditional long term care insurance. The younger they are, the better the chance to qualify at favorable rates and lower premium. What Could Disqualify a Policy as a Partnership Policy? Certain types of changes to a Partnership Policy could affect whether or not such policy continues to be a Partnership Policy. If they purchase a Partnership Policy and later decide to make any changes, they should first consult with their insurer to determine the effect of a proposed change. In addition, if they move to a state that does not maintain a Partnership Program or does not recognize their policy as a Partnership Policy, they would not receive beneficial treatment of their policy under the Medicaid program of that state. The information contained in this notice is based on current Virginia and Federal laws. These laws may be subject to change. Any change in law could reduce or eliminate the beneficial treatment of their policy under Virginia s Medicaid program. Page29 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

30 2015 Guide Tax Breaks & Incentives for Long Term Care Insurance Federal & State Introduction This guide is intended to help people understand what incentives are available both in the federal tax code and in most states. The federal government has offered tax breaks since 1997 for the purchase of qualified long term care insurance policies. Most states offer incentives for those who purchase long term care insurance (LTCI). The two primary incentives are: state credits or deductions; and asset retention incentives via Partnership insurance policies. Premiums Paid by an Individual Long term care (LTC) insurance premiums can be itemized as a medical expense. However, the amount of premium that can be itemized is limited based on age. This is called the Eligible Premium, shown on the table below. for Individual Premium Deductibility Limits: 2015 Attained age before the close of the taxable year Maximum deduction for year 40 or under $ 380 Over 40 but not greater than 50 $ 710 Over 50 but not greater than 60 $1,430 Over 60 but not greater than 70 $3,800 Over 70 $4,750 For taxpayers under age 65, if total medical expenses including the Eligible LTC insurance premium exceed 10% of their Adjusted Gross Income (AGI), the excess is deductible. For taxpayers over age 65, the AGI threshold the medical expense deduction remains at 7.5% until 2017 when it rises to 10%. Only Tax Qualified LTC insurance as defined by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) is eligible for a federal tax deduction. Most, but not all, LTC insurance policies currently available are Tax Qualified. Most policies issued before HIPAA s effective date of January 1, 1997 were granted a grandfathered Tax Qualified status. Health Savings Accounts (HSAs) LTC insurance premiums are an acceptable, tax free, health care expense from an HSA, but only up to the age based Eligible Premium limit, and only for Tax Qualified policies. Page30 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

31 Medical Savings Accounts (Archer MSAs) LTCI premiums are an acceptable expenditure. Cafeteria Plan LTC insurance is not allowed in a pre tax Section 125 (Cafeteria) Plan. Voluntary premiums paid through payroll deduction must be withheld on an after tax basis. If applicable, the employee may be able to take an itemized deduction or a reimbursement from an HSA. Premiums Paid by an Employer Employers (including non profits) who pay some or all of a non owner employee s LTC insurance premium may take a deduction for the expense. In addition, the employer can also deduct the LTC premium paid for a spouse or other tax dependent of the employee. There is no limit on the amount of premium an employer can pay and deduct, and premiums paid by an employer are excluded from the employee s gross income. This applies to ANY business entity as long as the employer is paying for a non owner employee Health Reimbursement Accounts (HRAs) or Health Reimbursement Arrangements (HRAs) LTC insurance premiums are an acceptable, tax free, health care expense from an HRA, but only up to the age based Eligible Premium limit, and only for Tax Qualified policies. C Corporation or Entity with a 501 Trust Shareholders (owners) who are also W 2 employees are treated for LTC insurance as any other employee. All premiums paid for shareholder/employees, their spouse and tax dependents are deductible, and no age based Eligible Premium limits apply. There is no requirement that long term care insurance be provided on a non discriminatory basis. Premiums paid for shareholders who are not employees are treated as a dividend taxable to both the corporation and the shareholder. Self Employed Business Owners Business owners who are treated as being self employed can deduct LTC insurance like health insurance without itemizing as part of the Self Employed health Insurance Deduction. This is an above the line deduction, not subject to the AGI threshold for non business owner individuals. Sole Proprietor Premium paid by the business for the owner, spouse and other tax dependents must be recognized as a draw, and is reported as business income. The owner can take up to the age based Eligible Premium as a Self Employed Health Insurance Deduction for each person covered. Page31 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

32 Partnerships and LLCs Premiums paid for a partner, spouse and other tax dependents are included as income, and reported on the partner s K 1. The partner can then take up to the age based Eligible Premium as a Self employed Health Insurance Deduction for each insured. Subchapter S Corporations Shareholders who own more than 2% of the stock of a sub S corporation are generally treated as partners for health and LTC insurance deductibility purposes. Individual LTC insurance policies must be paid by the S corporation directly to the insurance company (or reimbursed with a formal, written agreement). The shareholder/employee must include the LTC insurance premium paid in their AGI; however, they may deduct up to 100% of the age based Eligible Premium amount, without regard to the 10% AGI threshold. Taxation of LTC Insurance Benefits Benefits are normally tax free as long as the insured is chronically ill and the benefits are used to pay for qualified long term care services. Benefits received on a per diem basis may be taxable, if they exceed both the cost of qualified care services and a daily threshold of $330 (2015 amount). Other Tax Incentives While the decision whether or not to purchase long term care insurance is usually not made based on tax deductibility only, many incentives are available. The Pension Protection Act of 2005 includes provisions allowing for a tax free 1035 exchange of individually owned life insurance or annuity policies into Qualified LTCI policies. In some cases, this allows existing policyholders to obtain LTCI protection with no out of pocket expense. Overview State Partnership State Tax Policies Incentive Available Virginia Credit/Deduction Yes State Tax Incentives Virginia CREDIT: A state tax credit is available up to 15% of LTCI premiums, to the extent a deduction has not been claimed for federal income tax purposes. DEDUCTION: Taxpayers can take a deduction for LTCI premiums from federal Adjusted Gross Income to compute VA taxable income, but only if the taxpayer didn t deduct LTCI premiums for federal income tax purposes. Page32 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

33 Important Terms Accelerated Death Benefit A life insurance policy feature that lets them use some of the policy's death benefit prior to death. Activities of Daily Living (ADLs) Basic actions that independently functioning individuals perform on a daily basis: Bathing Dressing Transferring (moving to and from a bed or a chair) Eating Caring for incontinence Many public programs determine eligibility for services according to a person's need for help with ADLs. Many long term care insurance policies use the inability to do a certain number of ADLs (such as 2 of 6) as criteria for paying benefits. Acute Care Recovery is the primary goal of acute care. Physician, nurse, or other skilled professional services are typically required and usually provided in a doctor's office or hospital. Acute care is usually short term. Adult Day Services Services provided during the day at a community based center. Programs address the individual needs of functionally or cognitively impaired adults. These structured, comprehensive programs provide social and support services in a protective setting during any part of a day, but not 24 hour care. Many adult day service programs include health related services. Adult Day Health Care centers can offer a much needed break to caregivers. This type of care provides service at a community based center for adults who need assistance or supervision during the day but who do not need round the clock care. The centers may provide health services, therapeutic services and social activities. Advanced Directive (also called Health Care Directive, Advanced Health Care Directive, Living Will, or Health Care Directive) Legal document that specifies whether they would like to be kept on artificial life support if they become permanently unconscious or are otherwise dying and unable to speak for themselves. It also specifies other aspects of health care they would like under those circumstances. Aging and Disability Resource Centers (ADRCs) ADRCs serve as single points of entry into the longterm supports and services system for older adults and people with disabilities. Through integration or coordination of existing aging and disability service systems, ADRC programs raise visibility about the full range of options that are available, provide objective information, advice, counseling and assistance, empower people to make informed decisions about their long term supports, and help people more easily access public and private long term supports and services programs. Alzheimer s Disease Progressive, degenerative form of dementia that causes severe intellectual deterioration. First symptoms are impaired memory, followed by impaired thought and speech, and finally complete helplessness. Page33 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

34 Annuity A contract in which an individual gives an insurance company money that is later distributed back to the person over time. Annuity contracts traditionally provide a guaranteed distribution of income over time, until the death of the person or persons named in the contract or until a final date, whichever comes first. Arthritis Disease involving inflammation of a joint or joints in the body. Assisted Living Facility Residential living arrangement that provides individualized personal care, assistance with Activities of Daily Living, help with medications, and services such as laundry and housekeeping. Facilities may also provide health and medical care, but care is not as intensive as care offered at a nursing home. Types and sizes of facilities vary, ranging from small homes to large apartment style complexes. Levels of care and services also vary. Assisted living facilities allow people to remain relatively independent. Attained Age Rating Premiums are based on the covered individual s age at the time of application of the policy or certification. Premiums will increase as he or she ages regardless of his or her age when first enrolled. Bathing Washing oneself by sponge bath or in the bathtub or shower. One of the six Activities of Daily Living (ADLs) Benefit Triggers (Triggers) Insurance companies use benefit triggers as criteria to determine when they are eligible to receive benefits. The most common benefit triggers for long term care insurance are: 1. Needing help with two or more Activities of Daily Living 2. Having a Cognitive Impairment such as Alzheimer's Disease Benefits Monetary sum paid by an insurance company to a recipient or to a care provider for services that the insurance policy covers. Board and Care Home (also called Group Home) Residential private homes designed to provide housing, meals, housekeeping, personal care services, and supports to frail or disabled residents. At least one caregiver is on the premises at all times. In many states, Board and Care Homes are licensed or certified and must meet criteria for facility safety, types of services provided, and the number and type of residents they can care for. Board and Care Homes are often owned and managed by an individual or family involved in their everyday operation. Caregiver A caregiver is anyone who helps care for an elderly individual or person with a disability who lives at home. Caregivers usually provide assistance with activities of daily living and other essential activities like shopping, meal preparation, and housework. Charitable Remainder Trust Special tax exempt irrevocable trust written to comply with federal tax laws and regulations. They transfer cash or assets into the trust and may receive some income from it for life or a specified number of years (not to exceed 20). The minimum payout rate is 5 percent and the maximum is 50 percent. At their death, the remaining amount in the trust goes to the charity that they designated as part of the trust arrangement. Chronically Ill Having a long lasting or recurrent illness or condition that causes them to need help with Activities of Daily Living and often other health and support services. The condition is expected to last for at least 90 consecutive days. The term used in tax qualified long term care insurance policies to Page34 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

35 describe a person who needs long term care because of an inability to do a certain number of Activities of Daily Living without help, or because of a severe cognitive impairment such as Alzheimer's Disease. Cognitive Impairment Deficiency in short or long term memory, orientation to person, place and time, deductive or abstract reasoning, or judgment as it relates to safety awareness. Alzheimer's Disease is an example of a cognitive impairment. Community Spouse Spouse of a nursing home resident applying for or receiving Medicaid long term care services. Community Based Services Services and service settings in the community, such as adult day services, home delivered meals, or transportation services. Often referred to as home and community based services, they are designed to help older people and people with disabilities stay in their homes as independently as possible. Continence Ability to maintain control of bowel and bladder functions, or when unable to maintain control of these functions, the ability to perform associated personal hygiene such as caring for a catheter or colostomy bag. This is one of the six Activities of Daily Living. Continuing Care Retirement Communities (CCRC) Retirement complex that offers a range of services and levels of care. Residents may move first into an independent living unit, a private apartment, or a house on the campus. The CCRC provides social and housing related services and often also has an assisted living unit and an on site or affiliated nursing home. If and when residents can no longer live independently in their apartment or home, they move into assisted living or the CCRC's nursing home. Countable Assets Assets whose value is counted in determining financial eligibility for Medicaid. They include: Vehicles other than the one used primarily for transportation Life insurance with a face value over $1,500 Bank accounts and trusts Their home provided that their spouse or child does not live there and its equity value is greater than $500,000 ($750,000 in some states) CPR (Cardiopulmonary Resuscitation) Combination of rescue breathing (mouth to mouth resuscitation) and chest compressions used if someone isn't breathing or circulating blood adequately. CPR can restore circulation of oxygen rich blood to the brain. Custodial Care (also called personal care) Non skilled service or care, such as help with bathing, dressing, eating, getting in and out of bed or chair, moving around, and using the bathroom. Dementia Deterioration of mental faculties due to a disorder of the brain. Disabled For Medicaid eligibility purposes, a disabled person is someone whose physical or mental condition prevents him or her from doing enough work or the type of work needed for self support. The condition must be expected to last for at least a year or be expected to result in death. Persons receiving disability benefits through Supplemental Security Income (SSI), Social Security, or Medicare automatically meet this criterion. Page35 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

36 Dollar For Dollar Asset Protection Normally people become eligible for Medicaid when their assets are below $2,000. Partnership Policyholders are allowed to protect assets equal to the LTC insurance benefits paid on their behalf. This amount of assets is disregarded in the eligibility determination. Do Not Resuscitate Order (DNR) Written order from a doctor that resuscitation should not be attempted if a person suffers cardiac or respiratory arrest. A DNR order may be instituted on the basis of an Advance Directive from a person, or from someone entitled to make decisions on the person's behalf, such as a health care proxy. In some jurisdictions, such orders can also be instituted on the basis of a physician's own initiative, usually when resuscitation would not alter the ultimate outcome of a disease. Any person who does not wish to undergo lifesaving treatment in the event of cardiac or respiratory arrest can get a DNR order, although DNR orders are more common when a person with a fatal illness wishes to die without painful or invasive medical procedures. Dressing Putting on and taking off all items of clothing and any necessary braces, fasteners, or artificial limbs. This is one of the six Activities of Daily Living. Duplicate Coverage People should not buy duplicate coverage. Consider increasing current coverage instead. If they replace a policy with another new policy, Virginia Bureau of Insurance regulations require agents or insurance companies to: a) offer to check on all their other policies for possible duplicate coverage, b) warn them in writing not to cancel any policy until the free look period is over and they are satisfied with the new one, and c) give credit for time spent under their previous policy toward satisfying pre existing condition waiting periods. Durable Power of Attorney Legal document that gives someone else the authority to act on their behalf on matters that they specify. The power can be specific to a certain task or broad to cover many financial duties. They can specify if they want the power to start immediately or upon mental incapacity. For the document to be valid, they must sign it before they become disabled. Eating Feeding oneself by getting food into the body from a receptacle or by a feeding tube or intravenously. It is one of the six Activities of Daily Living. Elimination Period (also known as a Deductible Period or Benefit Waiting Period) Specified amount of time at the beginning of a disability during which they receive covered services, but the policy does not pay benefits. A Service Day Deductible Period is satisfied by each day of the period on which they receive covered services. A Calendar Day or Disability Day Deductible Period doesn't require that they receive covered services during the entire deductible period, but only requires that they meet the policy's benefit triggers during that time period. Elimination Periods A type of deductible; the length of time the individual must pay for covered services before the insurance company will begin to make payments. The longer the elimination period in a policy, the lower the premium. Equity Value Fair market value of property minus any liabilities on the property such as mortgages or loans. Estate Recovery When Medicaid recovers an amount of money from the estate of a person who received Medicaid. The maximum amount Medicaid recovers is limited to the amount it spent on the person's medical care. Assets protected under a Partnership Policy are also protected in estate recovery. Page36 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

37 Estate Recovery Process by which Medicaid recovers an amount of money from the estate of a person who received Medicaid. The amount Medicaid recovers cannot be greater than the amount it contributed to the person's medical care. Exempt Assets (also called Non countable Assets) Assets whose value is not counted in determining financial eligibility for Medicaid. They include: Personal belongings One vehicle Life insurance with a face value under $1,500 Their home provided that their spouse or child lives there and its equity value is less than $500,000 ($750,000 in some states) Federal Poverty Level Income standard that the federal government issues annually that reflects increases in prices, measured by the Consumer Price Index. Financial Eligibility Assessment of a person's available income and assets to determine if he or she meets Medicaid eligibility requirements. Free Look All long term care policies must provide a free look period of at least 30 days that will allow consumers to review their purchase. For a full refund of any premium paid, return the policy before the end of the 30 day period. Functional Eligibility Assessment of a person's care needs to determine if he or she meets Medicaid eligibility requirements for payment of long term care services. The assessment may include a person's ability to perform Activities of Daily Living or the need for skilled care. General Medicaid Eligibility Requirements They must be: A resident of the state in which they are applying Either a United States citizen or a legally admitted alien Age 65 or over Or meet Medicaid's rules for disability, or blind Group Home (also called Board and Care Home) Residential private homes designed to provide housing, meals, housekeeping, personal care services, and supports to frail or disabled residents. At least one caregiver is onsite at all times. In many states, group homes are licensed or certified and must meet criteria for facility safety, types of services provided, and the number and type of residents they can care for. Group homes are often owned and managed by an individual or family involved in their everyday operation. Guaranteed Renewable Long term care insurance policies sold in Virginia must be at least guaranteed renewable. Under a guaranteed renewable policy, the insured is the only one who voluntarily can cancel the policy. The easiest and most common way the insured does that is to simply stop paying the premiums. The company may not change policy provisions or refuse to continue their coverage. Premiums, however, may be raised for an entire class of policyholders. Policies may not increase rates based on attained age after their 65th birthday. Page37 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

38 Health Care Proxy Legal document in which they name someone to make health care decisions for they if, for any reason and at any time, they become unable to make or communicate those decisions for themselves. High Blood Pressure Blood pressure is the force of blood pushing against their blood vessel walls. High blood pressure is when that force, as measured by a blood pressure cuff, is elevated above normal limits. Home Health Benefits Do not confuse at home recovery benefits with more extensive home health care benefits. Recovery benefits often are limited to short periods, usually no longer than their hospital or nursing home stay. Home Health Care Medical and non medical services provided to ill, disabled or infirm persons in their home. Such services may include homemaker services, assistance with activities of daily living and respite care services. Home Health Aides help those who are elderly, disabled, or too ill to live in their own homes or in a residential care facilities instead of in nursing homes. Home health aides may offer care to people who need more extensive personal care than family or friends are able to or have the time or resources to provide. Homemaker Licensed Homemaker Services provides "hands off" care such as helping with cooking and running errands. Often referred to as "Personal Care Assistants" or "Companions." This is the rate charged by a non Medicare certified, licensed agency. Homemaker Services make it possible for people to live in their own homes or to return to their homes by helping people complete household tasks that they can't manage alone. Homemaker services aides may clean houses, cook meals or run errands. Homemaker or Chore Services Help with general household activities such as meal preparation, routine household care, and heavy household chores such as washing floors or windows or shoveling snow. Hospice Care Short term, supportive care for individuals who are terminally ill (have a life expectancy of six months or less). Hospice care focuses on pain management and emotional, physical, and spiritual support for the patient and family. It can be provided at home or in a hospital, nursing home, or hospice facility. Medicare typically pays for hospice care. Hospice care is not usually considered long term care. Inflation Protection The Virginia Bureau of Insurance requires companies to offer them at least one of three methods of increasing the daily benefit amount to offset the effect of inflation. They may reject or accept the offer. The three methods available are: a) annual benefit level increases of at least 5%, b) the guarantee of periodic opportunities to increase benefit levels, or c) coverage of a specific percentage of actual reasonable charges. If they reject the inflation protection, it MUST be in writing. Inflation Protection Benefit Increases the daily benefit amount and policy maximums over time to help keep pace with inflation and increased cost of expenses. Partnership policies must include inflation protection benefits when issued to a person under age 76. Page38 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

39 Incontinence Inability to maintain control of bowel and bladder functions as well as the inability to perform associated personal hygiene such as caring for a catheter or colostomy bag. Continence is one of the six Activities of Daily Living. Informal Caregiver Any person who provides long term care services without pay. Instrumental Activities of Daily Living Activities that are not necessary for basic functioning, but are necessary in order to live independently. These activities may include: Doing light housework Preparing and cleaning up after meals Taking medication Shopping for groceries or clothes Using the telephone Managing money Taking care of pets Using communication devices Getting around the community Responding to emergency alerts such as fire alarms Living Will (also called Health Care Directive, Advanced Health Care Directive, Living Will, or Health Care Directive) Legal document that specifies whether they would like to be kept on artificial life support if they become permanently unconscious or are otherwise dying and unable to speak for themselves. It also specifies other aspects of health care they would like under those circumstances. Long Term Care Services and supports necessary to meet health or personal care needs over an extended period of time. Long Term Care Necessary diagnostic, preventative, therapeutic, curing, treating, mitigating, rehabilitative services and maintenance and personal care services, required by a chronically ill individual pursuant to a plan of care prescribed by a licensed health care practitioner. These services are not limited to a facility. This definition is used for "qualified long term care services" in the Internal Revenue Service code. Long Term Care Facility (also called Long Nursing Home or Convalescent Care Facility) Licensed facility that provides general nursing care to those who are chronically ill or unable to take care of daily living needs. Long Term Care Insurance Insurance policy designed to offer financial support to pay for long term care services. Long Term Care Services Services that include medical and non medical care for people with a chronic illness or disability. Long term care helps meet health or personal needs. Most long term care services assists people with Activities of Daily Living, such as dressing, bathing, and using the bathroom. Longterm care can be provided at home, in the community, or in a facility. For purposes of Medicaid eligibility and payment, long term care services are those provided to an individual who requires a level of care equivalent to that received in a nursing facility. Look Back Period Five year period prior to a person's application for Medicaid payment of long term care services. The Medicaid agency determines if any transfers of assets have taken place during that Page39 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

40 period that would disqualify the applicant from receiving Medicaid benefits for a period of time called the penalty period. Medicaid Joint federal and state public assistance program for financing health care for low income people. It pays for health care services for those with low incomes or very high medical bills relative to income and assets. It is the largest public payer of long term care services. Medical Power of Attorney Legal document that allows them to name someone to make health care decisions for them if, for any reason and at any time, they become unable to make or communicate those decisions for themselves. Medicare A federal government insurance program to assist those 65 and older and individuals with disabilities with medical and hospital expenses. Medicare covers only skilled care in a skilled nursing facility and limited nursing care at home. It does not usually provide benefits for personal or custodial care, and for this reason provides limited assistance in a program of long term care. Medicare requires co payments and deductibles. Medicare Supplement Insurance (also called Medigap coverage) Private insurance policy that covers gaps in Medicare coverage. Medigap Insurance (also called Medicare Supplement Insurance) Private insurance policy that covers gaps in Medicare coverage. Mental And Nervous Disorders Long term care policies may limit or exclude coverage of some mental or nervous disorders. However, they must provide coverage of Alzheimer s disease and related disorders of biologically caused brain diseases and serious mental illness, including progressive dementing illness, organic brain disorders and degenerative brain disorders. National Association of Insurance Commissioners (NAIC) Membership organization of state insurance commissioners. One of its goals is to promote uniformity of state regulation and legislation related to insurance. Noncancelable A long term care policy that cannot be cancelled by the insurance company and for which the rates cannot be changed by the insurance company. Non countable Assets (also called exempt assets) Assets whose value is not counted in determining financial eligibility for Medicaid. They include: Personal belongings One vehicle Life insurance with a face value under $1,500 Their home provided that their spouse or child lives there and its equity value is less than $500,000 ($750,000 in some states) Nonforfeiture Benefits A nonforfeiture benefit provides that after a policyholder has paid into a policy for a specified period of time, the policyholder continues to have some benefits even if he/she is unable to continue paying premiums. Those benefits take different forms and affect the policy price. Page40 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

41 Nursing Home (also called Long Term Care Facility or Convalescent Care Facility) Licensed facility that provides general nursing care to those who are chronically ill or unable to take care of daily living needs. Nursing Home Care is for people who may need a higher level of supervision and care than in an assisted living facility. They offer residents personal care, room and board, supervision, medication, therapies and rehabilitation, as well as skilled nursing care 24 hours a day. Osteoporosis Bone disease characterized by a reduction in bone density. Bones become porous and brittle as a result of calcium loss. People with osteoporosis are more vulnerable to breaking bones. Partnership Long Term Care Insurance Policy Private long term care insurance policy that allows them to keep some or all of their assets if they apply for Medicaid after using up their policy's benefits. The Deficit Reduction Act of 2005 allows any state to establish a Partnership Program. Under a Partnership policy, the amount of Medicaid spend down protection they receive is generally equal to the amount of benefits they received under their private Partnership policy. (State specific program designs vary.) Partnership Policy A private LTC insurance policy that allows Virginia policyholders to protect (keep) some or all of their assets if they apply for Medicaid after using their policy's benefits. Virginia is one of only a few states to currently have a Partnership program. Personal Care (also called custodial care) Non skilled service or care, such as help with bathing, dressing, eating, getting in and out of bed or chair, moving around, and using the bathroom. Portability Group long term care insurance also guarantees coverage that is fully portable. The insurer cannot terminate an individual s coverage because they no longer meet the eligibility requirements for the group insurance. This might occur when an employee leaves the company, divorces a spouse, or retires. The insurer may require the insured to elect a method of paying premiums directly, rather than through the sponsoring group. Pre Existing Condition A pre existing condition is an illness or disability for which they received medical advice or treatment during a period of time before they apply for insurance. Most policies do not pay for pre existing conditions during the waiting period after they become insured. State law limits the long term care pre existing policy waiting period to six months. Respite Care Temporary care which is intended to provide time off for those who care for someone on a regular basis. Respite care is typically 14 to 21 days of care per year and can be provided in a nursing home, adult day service center, or at home by a private party. Reverse Mortgage Type of loan based on home equity that enables older homeowners (age 62 or older) to convert part of their equity in their homes into tax free income without having to sell the home, give up title, or take on a new monthly mortgage payment. Instead of making monthly payments to a lender, as they do with a regular mortgage, a lender makes payments to them. The loan, along with financing costs and interest on the loan, does not need to be repaid until the homeowner dies or no longer lives in the home. This is NOT insurance. Skilled Care Nursing care such as help with medications and caring for wounds, and therapies such as occupational, speech, respiratory, and physical therapy. Skilled care usually requires the services of a licensed professional such as a nurse, doctor, or therapist. Page41 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

42 Skilled Care Needs Services requiring the supervision and care of a nurse or physician, such as assistance with oxygen, maintenance of a feeding tube, or frequent injections. Spend Down Requirement that an individual spend most of his or her income and assets to pay for care before he or she can satisfy Medicaid's financial eligibility criteria. Supervisory Care Long term care service for people with memory or orientation problems. Supervision ensures that people don't harm themselves or others because their memory, reasoning, and orientation to person, place, or time are impaired. Supplemental Security Income (SSI) Program administered by the Social Security Administration that provides financial assistance to needy persons who are disabled or aged 65 or older. Many states provide Medicaid without further application to persons who are eligible for SSI. Transfer of Assets Giving away property for less than it is worth or for the sole purpose of becoming eligible for Medicaid. Transferring assets during the look back period results in disqualification for Medicaid payment of long term care services for a penalty period. Transferring Moving into and out of a bed, chair, or wheelchair. Transferring is one of the six Activities of Daily Living. Page42 Copyright 2015 Sandi Kruise Insurance Training, Sandi Kruise Inc, All rights reserved

43 RESCISSION REPORTING FORM FOR LONG-TERM CARE POLICIES FOR THE COMMONWEALTH OF VIRGINIA FOR THE REPORTING YEAR 20[ ] Company Name: Company NAIC Number: Address: Phone Number: Due: March 1 annually Instructions: The purpose of this form is to report all rescissions of long-term care insurance policies or certificates. Those rescissions voluntarily effectuated by an insured are not required to be included in this report. Please furnish one form per rescission. Policy Form # Policy and Certificate # Name of Insured Date of Policy Issuance Date/s Claim/s Submitted Date of Rescission Detailed reason for rescission: Form A Signature Name and Title (please type) Date

44 Long-Term Care Insurance Personal Worksheet People buy long-term care insurance for many reasons. Some don t want to use their own assets to pay for long-term care. Some buy insurance to make sure they can choose the type of care they get. Others don t want their family to have to pay for care or don t want to go on Medicaid. But long-term care insurance may be expensive, and may not be right for everyone. By state law, the insurance company must fill out part of the information on this worksheet and ask you to fill out the rest to help you and the company decide if you should buy this policy. Policy Form Number(s) Premium Information The premium for the coverage you are considering will be [$ per month, or $ per year,] [a one-time single premium of $.] Type of Policy (noncancellable/guaranteed renewable) The Company s Right to Increase Premiums: [The company cannot raise your rates on this policy.] [The company has a right to increase premiums on this policy form in the future provided it raises rates for all policies in the same class in this Commonwealth.] [Insurers shall use appropriate bracketed statement. Rate guarantees shall not be shown on this form.] Rate Increase History The company has sold long-term care insurance since [year] and has sold this policy since [year]. [The company has never raised its rates for any long-term care policy it has sold in this Commonwealth or any other state.] [The company has not raised its rates for this policy form or similar policy forms in this Commonwealth or any other state in the last ten years.] [The company has raised its premium rates on this policy form or similar policy forms in the last ten years. Following is a summary of the rate increase(s).] Questions Related to Your Income How will you pay each year s premium? (Check One)! From my income! From my savings/investments! My family will pay [! Have you considered whether you could afford to keep this policy if the premiums went up, for example, by 20%?] Form B, Page 1 of

45 What is your annual income? (check one)! Under $10,000! $[10-20,000]! $[20-30,000]! $[30-50,000]! Over $50,000 How do you expect your income to change over the next 10 years? (check one)! No change! Increase! Decrease If you will be paying premiums with money received only from your own income, a rule of thumb is that you may not be able to afford this policy if the premiums will be more than 7% of your income. Will you buy inflation protection? (check one)! Yes! No If not, have you considered how you will pay for the difference between future costs and your daily benefit amount?! From my income! From my Savings/Investments! My family will pay The national average annual cost of care in [insert year] was [insert $ amount], but this figure varies across the country. In ten years the national average annual cost would be about [insert $ amount] if costs increase 5% annually. What elimination period are you considering? Number of days Approximate cost $ for that period of care. How are you planning to pay for your care during the elimination period? (Check one)! From my Income! From my savings/investments! My family will pay Questions Related to Your Savings and Investments Not counting your home, about how much are all of your assets (your savings and investments) worth? (check one)! Under $20,000! $20,000-$30,000! $30,000-$50,000! Over $50,000 How do you expect your assets to change over the next ten years? (check one)! Stay about the same! Increase! Decrease If you are buying this policy to protect your assets and your assets are less than $30,000, you may wish to consider other options for financing your long-term care. Form B, Page 2 of

46 Disclosure Statement! The answers to the questions above describe my financial situation. or! I choose not to complete this information (check one)! I acknowledge that the company and/or its agent (below) has reviewed this form with me including the premium, premium rate increase history and potential for premium. increases in the future. [For direct mail situations, use the following: I acknowledge that I have reviewed this form including the premium, premium rate history and potential for premium increases in the future.] I understand the above disclosures. I understand that the rates for this policy may increase in the future. (This box must be checked). Signed: (Applicant) (Date) [! I explained to the applicant the importance of completing this information. Signed: (Agent) (Date) Agent s Printed Name: ] [Note: In order for us to process your application, please return this signed statement to [name of company], along with your application.] Form B, Page 3 of

47 [My agent has advised me that this policy does not seem to be suitable for me. However, I still want the company to consider my application. Signed: (Applicant) ] (Date) The company may contact you to verify your answers. Form B, Page 4 of

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61 Long-Term Care Policies This list is given to you for informational purposes only and does not constitute an endorsement by the State Corporation Commission of any policy or service or of any person or organization offering any policy or service. Part I of this list identifies companies with one or more individual long-term care policy forms approved for sale in Virginia as of January 1, Part II of this list identifies companies with approved individual long-term care partnership policies. Long-term care partnership policies may be issued in Virginia on and after September 1, For more detailed information about long-term care insurance and the Long-Term Care Partnership program in Virginia, please refer to the Bureau of Insurance s Facts About Long-Term Care Insurance in Virginia. The fact that a company has one or more approved forms does not necessarily mean the company is actively selling these policies in Virginia. You should contact the listed companies for verification of availability in Virginia. All of the information provided is subject to change. Please note the date of revision at the top of each page. Any company that has only group long-term care policy and certificate forms approved for sale in Virginia or has issued a policy to an association (i.e., AARP) or to a group policyholder not located in Virginia may not appear on this list. Also, there may be other companies that offer long-term care insurance in this state. You can contact the Bureau of Insurance for further information at (Richmond residents dial ). Companies on Part I of this list with one or more federally qualified long-term care policies are designated with a in the column entitled Qualified Long-Term Care Policies. No such designation appears on Part II of the list because long-term care partnership products are all qualified. Premiums and/or benefits under Qualified Long-Term Care Policies may qualify for favorable tax treatment. If you have questions about the tax status of the long-term care policy that you are considering purchasing, you should contact your agent or the insurance company. If you have questions on how the purchase of a qualified long-term care policy will impact the taxes you pay, you should consult with your tax advisor. Page 1 of 7

62 Part I Companies with Approved Individual Long-Term Care Policies in Virginia Company Name Telephone Number 04/12/2013 Allianz Life Insurance Company of North America 5701 Golden Hills Drive Minneapolis, MN (800) American Family Life Assurance Company of Columbus 1932 Wynnton Road Columbus, GA American Fidelity Assurance Company 2000 N Classen Blvd. Oklahoma City, OK American General Life Insurance Company 2727-A Allen Parkway Houston, TX American Network Insurance Company 3440 Lehigh Street Allentown, PA Assurity Life Insurance Company Long Term Care Administrative Office P. O. Box 4243 Woodland Hills, CA Auto-Owners Life Insurance Company P. O. Box Lansing, MI Bankers Life and Casualty Company 600 West Chicago Ave Chicago, IL CMFG Life Insurance Company P. O. Box 391 Madison, WI Combined Insurance Company of America 1000 Milwaukee Avenue Glenview, IL Continental General Insurance Company 6201 Johnson Drive Mission, KS Equitable Life & Casualty Insurance Company P. O. Box 2460 Salt Lake City, UT (800) (706) (800) (888) (800) (610) (800) (888) (800) (517) (800) (608) (800) (800) (800) (800) (801) Page 2 of 7

63 Genworth Life Insurance Company 6604 W Broad Street Richmond, VA Great American Life Insurance Company P. O. Box 5420 Cincinnati, OH John Hancock Life Insurance Company (U.S.A.) P. O. Box 111 Boston, MA Knights of Columbus P.O. Box 1670 New Haven, CT Lafayette Life Insurance Company P.O. Box 7007 Lafayette, IN LifeSecure Insurance Company Citation Drive Ste 300 Brighton, MI Loyal American Life Insurance Company P. O. Box Austin, TX (888) (804) (866) (513) (800) (800) (617) (800) (203) (800) (765) (810) (800) Madison National Life Insurance Company, Inc. P. O. Box 5008 Madison, WI (608) Massachusetts Mutual Life Insurance Company 1295 State Street Springfield, MA MedAmerica Insurance Company P. O. Box Rochester, NY Metropolitan Life Ins. Company Crane Nest Drive Tampa, FL Minnesota Life Insurance Company 400 Robert Street North St. Paul, MN Mutual of Omaha Insurance Company Mutual of Omaha Plaza Omaha, NE (800) (888) (413) (800) (800) (212) (800) (651) (800) (402) Page 3 of 7

64 National Life Insurance Company 1 National Life Drive Montpelier, VT New York Life Insurance Company 51 Madison Avenue New York, NY Northwestern Long Term Care Insurance Co 720 East Wisconsin Avenue Milwaukee, WI Penn Treaty Network America Insurance Company 3440 Lehigh Street Allentown, PA Provident Life and Accident Insurance Company 1 Fountain Square Chattanooga, TN Prudential Insurance Company of America (The) 213 Washington Street-9 th Floor Newark, NJ Southern Farm Bureau Life Insurance Company P. O. Box 78 Jackson, MS State Farm Mutual Automobile Insurance Company One State Farm Plaza Bloomington, IL State Life Insurance Company (The) One America Financial Partners P. O. Box 406 Indianapolis, IN (800) (802) (800) (800) Ext (212) (800) (414) (800) (800) (800) (423) (800) (877) (800) (601) (309) Contact your local State Farm Agent (800) (317) Sun Life Assurance Company of Canada 1 Sun Life park Wellesley Hills, MA (781) Teachers Protective Mutual Life Insurance Co N Prince Street P. O. Box 597 Lancaster, PA (717) Page 4 of 7

65 Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA United American Insurance Company P. O. Box 810 Dallas, TX United of Omaha Life Insurance Company Mutual of Omaha Plaza Omaha, NE United Teacher Associates Insurance Company P. O. Box Austin, TX Unum Life Insurance Company of America 2211 Congress Street Portland, ME Woodmen of the World Life Ins. Society 1700 Farnam Street, 22nd Floor Omaha, NE (319) (800) (972) (402) (800) (512) (800) (877) (207) (402) Woodmen of the World Life Ins. Society is a fraternal benefit society. Policies are only available to members of the association. Page 5 of 7

66 Part II Companies with Approved Individual Long-Term Care partnership Policies in Virginia Company Name Telephone Number 04/12/2013 Allianz Life Insurance Company of North America P.O. Box 1292 Minneapolis, MN (800) American General Life Insurance Company 2727-A Allen Parkway Houston, TX Assurity Life Insurance Company Long Term Care Administrative Office P. O. Box 4243 Woodland Hills, CA Bankers Life and Casualty Company 600 West Chicago Ave Chicago, IL CMFG Life Insurance Company P. O. Box 391 Madison, WI Equitable Life & Casualty Insurance Company 3 Triad Center, Suite 200 Salt Lake City, UT Genworth Life Insurance Company P. O. Box Lynchburg, Virginia Great American Life Insurance Company P. O. Box Austin, Texas John Hancock Life Insurance Company (U.S.A.) P.O. Box Congress Street Boston, MA LifeSecure Insurance Company Citation Drive, Suite 300 Brighton, MI Massachusetts Mutual Life Insurance Company Long Term Care Administrative Office P. O. Box 4243 Woodland Hills, CA (888) (888) (800) (608) (800) (800) (800) (800) mcare.com (866) (800) Page 6 of 7

67 MedAmerica Insurance Company 165 Court Street Rochester, NY Metropolitan Life Insurance Company 7805 Hudson Road, Suite 180 Woodbury, MN Minnesota Life Insurance Company Long Term Care Administrative Office P. O. Box 4243 Woodland Hills, CA Mutual of Omaha Insurance Company Mutual of Omaha Plaza Omaha, NE New York Life Insurance Company 6200 Bridge Point Parkway Suite 400 Austin, TX Northwestern Long Term Care Insurance Company 720 E. Wisconsin Avenue Milwaukee, WI Prudential Insurance Company of America (The) P. O. Box 8519 Philadelphia, PA State Farm Mutual Automobile Ins. Company One State Farm Plaza Bloomington, IL Transamerica Life Insurance Company 4333 Edgewood Road NE Cedar Rapids, IA United of Omaha Life Insurance Company Mutual of Omaha Plaza Omaha, NE (800) (888) (888) (800) (800) (877) (800) (866) (319) (800) Page 7 of 7

68 Long-Term Care Insurance: The Choice Is Yours Virginia Department for the Aging & Virginia Insurance Counseling and Assistance Program Virginia Bureau of Insurance Life and Health Consumer Outreach Virginia Long-Term Care Partnership National Clearinghouse for Long-Term Care Information Introducing LTC Partnership Insurance Long-term care (LTC) insurance has been around for a long time. Effective September 1, 2007, Virginians have a new alternative the LTC Partnership Policy (Partnership Policy). What makes the Partnership Policy unique is that it allows you to access services and keep more of your assets if you ever need to apply for Medicaid. A Partnership Policy in Virginia is comparable in cost to other long-term care policies. However, you realize the added value associated with the purchase of a Partnership Policy when you apply for Medicaid coverage. The Medicaid resource limit is $2,000 for someone receiving long-term care services. Yet with a Partnership Policy, assets equal to the amount of benefits paid are not counted in the Medicaid eligibility determination. That makes this policy a great opportunity for Virginians to help provide for their long-term care needs and retain more of their assets. Virginia s Long-Term Care Partnership Brochure design: Office of Graphic Communications

69 Why You Need Long-Term Care Insurance Planning for long-term care is vital, because the future is uncertain. You could have a serious accident, develop a chronic disease (such as diabetes) or a condition (such as Alzheimer s), or become unable to live on your own. The idea of long-term care insurance is to help maintain your quality of life. Here are some reasons to purchase a Partnership Policy: Long-term care services can easily cost $60,000 or more per year. Understanding Medicaid Medicaid is a health insurance program jointly administered by the federal and state governments. It is primarily intended for low-income people in the following categories: children; pregnant women; elderly adults; and those with disabilities. The Virginia Department of Social Services determines who is eligible for Medicaid assistance by looking at income, assets, and necessary level of care. You can apply for Medicaid at any time, but most people choose to do so when they have problems paying for health care. Protect Your Assets Today The Story Behind the Policy The LTC Partnership is an alliance between the private insurance industry and state governments. States are required to use the same dollar-for-dollar model. That means Medicaid applicants can protect one dollar of personal assets for every dollar that the Partnership Policy pays for them in benefits. Most health insurance policies do not cover long-term care. Disability insurance pays for lost income, but not for long-term care services. Medicare only pays for long-term care under limited circumstances and for a short period of time. Medicaid rules only allow you to have $2,000 in personal assets. What Long-Term Care Insurance Provides The type of long-term care you receive depends on the policy you purchase, your needs, and the coverage provided under your policy. However, most long-term care insurance policies cover care in your home, an assisted living community, or a nursing facility. You can buy a Partnership Policy from any authorized insurance company. If you already have long-term care insurance, consult your current insurance agent before changing your policy. For a list of companies offering the Partnership Policy, visit or call toll-free The idea is to help Americans afford long-term health services without using up all their assets to pay for care. Virginia is in the forefront of this movement. Benefits Specific to a Partnership Policy If you choose a Partnership Policy and are under the age of 76, your insurance includes inflation protection to keep up with the rising cost of longterm care services. If you are 76 or older, you can choose to add inflation protection on your own. Most important of all, a Partnership Policy allows you the opportunity to keep more than $2,000 in assets and still be eligible for Medicaid.

70 Facts About Long-Term Care Insurance In Virginia Shop Carefully and Avoid Pitfalls Long-term care insurance is designed to assist individuals with some or all of the costs of medical and personal care provided in the home, an assisted living facility, a nursing home, or through a community program such as adult day-care. Long-term care insurance often provides coverage for costs associated with personal care when the covered individual is unable to perform activities of daily living such as bathing, eating, dressing or toileting. Long-term care insurance may also assist people in need of skilled care because of a prolonged medical condition, a disability or a cognitive impairment, such as Alzheimer s disease. Some long-term care insurance policies provide more coverage than others. Before you buy long-term care insurance, decide what coverage you need and can afford. Long-term care insurance can help to safeguard your assets and protect your financial independence, but it can be expensive. Depending on your level of income and the value of your assets, long-term care insurance may or may not be the most appropriate option for your long-term care financing. It is also important to consider the rising costs of health care when purchasing long-term care insurance. In Virginia, these policies must offer inflation protection. Requirements for Long-Term Care Insurance Policies Issued in Virginia There can be no requirement for a prior hospital or skilled nursing home stay as a trigger for benefits. All pre-existing conditions must be covered after six months. Policies must be guaranteed renewable or noncancellable. Portability is required for all group contracts. Inflation protection coverage must be offered. After age 65, no attained age rating is allowed. Policies must provide benefits for a minimum of 12 months. Policies may not use waivers or riders to exclude coverage for pre-existing conditions. Policies cannot require that home health care be provided by an RN or LPN. All policies must have a 30-day free-look provision. No policy may exclude or limit benefits based on Alzheimer s disease, senility, dementia, organic brain disorder, or other similar diagnoses. An option for the insurer to notify an individual designated by the insured before a policy lapses or terminates is available with long-term care policies. Rate revisions must be approved by the Bureau of Insurance prior to implementation. No new waiting period for pre-existing conditions is required when replacing policies. See Important Terms on next page. 1

71 Important Terms ATTAINED AGE RATING Premiums are based on the covered individual s age at the time of application of the policy or certification. Premiums will increase as he or she ages regardless of his or her age when first enrolled. DUPLICATE COVERAGE Do not buy duplicate coverage. Consider increasing current coverage instead. If you replace a policy with another new policy, Virginia Bureau of Insurance regulations require agents or insurance companies to a) offer to check on all your other policies for possible duplicate coverage, b) warn you in writing not to cancel any policy until the free look period is over and you are satisfied with the new one and c) give credit for time spent under your previous policy toward satisfying pre-existing condition waiting periods. ELIMINATION PERIODS A type of deductible; the length of time the individual must pay for covered services before the insurance company will begin to make payments. The longer the elimination period in a policy, the lower the premium. FREE LOOK All long-term care policies must provide a free look period of at least 30 days that will allow you to review your purchase. For a full refund of any premium paid, return the policy before the end of the 30 day period. GUARANTEED RENEWABLE Long-term care insurance policies sold in Virginia must be at least guaranteed renewable. Under a guaranteed renewable policy, the insured is the only one who voluntarily can cancel the policy. The easiest and most common way the insured does that is to simply stop paying the premiums. The company may not change policy provisions or refuse to continue your coverage. Premiums, however, may be raised for an entire class of policyholders. Policies may not increase rates based on attained age after your 65 th birthday. HOME HEALTH BENEFITS Do not confuse at home recovery benefits with more extensive home health care benefits. Recovery benefits often are limited to short periods, usually no longer than your hospital or nursing home stay. INFLATION PROTECTION The Virginia Bureau of Insurance requires companies to offer you at least one of three methods of increasing the daily benefit amount to offset the effect of inflation. You may reject or accept the offer. The three methods available are a) annual benefit level increases of at least 5%, b) the guarantee of periodic opportunities to increase benefit levels, or c) coverage of a specific percentage of actual reasonable charges. If you reject the inflation protection, it MUST be in writing. MENTAL AND NERVOUS DISORDERS Long-term care policies may limit or exclude coverage of some mental or nervous disorders. However, they must provide coverage of Alzheimer s disease and related disorders of biologically caused brain diseases and serious mental illness, including progressive dementing illness, organic brain disorders and degenerative brain disorders. NONCANCELABLE A long-term care policy that cannot be cancelled by the insurance company and for which the rates cannot be changed by the insurance company. NONFORFEITURE BENEFITS A nonforfeiture benefit provides that after a policyholder has paid into a policy for a specified period of time, the policyholder continues to have some benefits even if he/she is unable to continue paying premiums. Those benefits take different forms and affect the policy price. PORTABILITY Group long-term care insurance also guarantees coverage that is fully portable. The insurer cannot terminate an individual s coverage because they no longer meet the eligibility requirements for the group insurance. This might occur when an employee leaves the company, divorces a spouse or retires. The insurer may require the insured to elect a method of paying premiums directly, rather than through the sponsoring group. PRE-EXISTING CONDITION A pre-existing condition is an illness or disability for which you received medical advice or treatment during a period of time before you apply for insurance. Most policies do not pay for pre-existing conditions during the waiting period after you become insured. State law limits the longterm care pre-existing policy waiting period to six months. 2

72 Prohibited Practices Insurance companies and agents may not engage in unfair and deceptive trade practices including: 1. Twisting to knowingly make any misleading representation or comparison causing someone to cancel a policy with one company and buy a replacement from another company, 2. High Pressure Tactics to use force, fright or threat to pressure someone into purchasing a policy, and 3. Cold Lead Advertising to develop sales leads for a policy using deceptive advertising techniques. Insurers also may not advertise a product as long-term care insurance if it provides less than twelve consecutive months of benefits. Premium Pricing The initial premium for a long-term care insurance policy is based on: your age at policy purchase, the elimination period, and policy benefits and duration. AGE The younger you are when you buy the policy, the less you pay in initial premiums. The premium may increase with age (after age 65 a long-term care insurer cannot use age to increase cost). ELIMINATION PERIOD Premiums are lower for longer elimination periods. (The elimination period is the number of days of care you pay for out-ofpocket before the insurance company begins paying benefits for your care.) BENEFITS A policy paying $50 per day for three years will cost less than one paying $100 a day for five years. Questions to Ask Before Buying Questions to Ask Before Buying (cont d.) How much would you pay in premium each year? Is there a lifetime maximum on the benefits? How long before pre-existing conditions are covered? Are the insurance company and agent licensed in Virginia to market long-term care policies? What conditions must be met in order to receive benefits under the policy? o inability to perform Activities of Daily Living o doctor s certification Shopping Tips Shop around check with different companies because long-term care policies can be different in the benefits provided and in the price. What types of care are covered? Don t sign a blank application. What are my choices for the following: Daily Maximum, Elimination Period, and Inflation Rider? Don t purchase long-term care unless you know that you can afford the coverage. How much is the daily benefit for nursing home, home health care, adult day care, or assisted living care? For how many years does the policy provide benefits for nursing home care, home health care, adult day care, or assisted living care? Understand what you are getting. If you do not understand, ask questions. Do not pay cash. Don t make checks payable to the agent; make them payable to the company. How does the policy keep up with inflation? An Outline of Coverage must be provided. 3

73 What is a Federally Qualified Plan? The Health Insurance Portability and Accountability Act, effective January 1, 1997, established the tax treatment of the premiums paid for long-term care policies as well as the benefits paid by long-term care policies that meet certain federal standards. The federal act requires that the long-term care policy and outline of coverage state that the policy is tax qualified. If you have questions about the tax status of the long-term care policy that you are considering purchasing, you can contact your agent or the insurance carrier. If you have questions on how the purchase of a longterm care tax qualified policy will impact the taxes you pay, you may want to consult with your tax advisor. Benefits In a tax-qualified policy, premiums paid by an individual can be counted as unreimbursed medical expenses and may be deducted if total expenses exceed 7.5 percent of adjusted gross income. There are limitations based on age. Benefits paid under a federally qualified plan are generally excluded from taxable income. Consult with a tax advisor if you have questions about how tax-qualified policies could affect you. Policies approved as long-term care insurance before January 1, 1997 are grandfathered under the Act; therefore, premiums paid for these policies are also subject to favorable tax treatment. Requirements To be a federally qualified long-term care plan the contract must meet the following criteria: must be guaranteed renewable and cannot have a cash surrender value; there must be an offer of a nonforfeiture benefit; individuals must be unable to do two activities of daily living (ADL s) without substantial assistance; for cognitive impairment to be covered, a person must require substantial supervision; and disability must be expected to last for at least 90 days, and verification must be from a certified health care provider. Consult with a tax advisor if you have questions about how tax-qualified policies could affect you. Virginia Tax Deduction If the tax-qualified policy was purchased after January 1, 2006, an individual may be eligible for a tax credit equal to 15% of the total premiums paid in the year. Certain limitations apply. Other credits may be available for previously purchased policies. Consult your tax advisor. Individual Vs. Group Long-Term Care Insurance An individual long-term care policy is a contract between you and the insurer. The long-term care benefits provided can vary from insurance company to insurance company. Therefore, it is important that you shop around to find the long-term care insurance coverage that is best for you. Group long-term care insurance is a contract between the insurer and a group, such as an employer or professional trade association. Individuals may be eligible for coverage under the Federal Long-Term Care insurance program. Federal employees, members of the uniform services, and other qualified individuals may be eligible to apply for the long-term care coverage. Some state governments may also make long-term care coverage available to state employees and their relatives. If you are covered under a group policy, you will receive a certificate of insurance and not a policy. Also, the group policyholder (i.e. employer, association, etc.) negotiates the terms of the policy and has the option to terminate the policy. If you choose to purchase group long-term care coverage, check what options are available to you if the group should terminate the coverage. 4

74 Virginia s Long-Term Care Partnership As of September 1, 2007, Virginians are able to purchase a new type of long-term care (LTC) insurance policya LTC Partnership policy. The LTC Partnership is an alliance between the private insurance industry and Virginia state government to help Virginians afford future long-term care services without depleting all of their assets to pay for care. LTC Partnership policyholders who use their LTC Partnership insurance policy benefits and who eventually apply for Medicaid coverage are able to maintain some level of assets (equal to the LTC insurance benefit paid) above the $2,000 Medicaid asset limit currently in place for eligibility purposes. How Will The Long-term Care Partnership Work? For every dollar that a LTC Partnership insurance policy pays out in benefits, a dollar of personal assets can be protected (disregarded during the Medicaid eligibility review) if the individual chooses to apply for Medicaid. LTC Partnership Policy Requirements: LTC Partnership policies look very similar to traditional LTC insurance policies except that all Partnership policies must include annual compound inflation protection for individuals under age 61 and some form of inflation protection for individuals ages 61 to 76. Inflation protection helps the policy keep up with the rising cost of LTC services. All Partnership policies must be issued after the program begins in Virginia (September 1, 2007). Per federal law, Virginia is not allowed to grandfather policies. Current long-term care insurance policyholders who wish to obtain a Partnership policy should contact their agent, carrier, or the carrier of their choice regarding issuance of a new Partnership qualified policy. Frequently Asked Questions What is the advantage of a Partnership policy over a non-partnership LTC insurance policy? Partnership and non-partnership polices are virtually the same except that Partnership polices have the added benefit of allowing policyholders to protect a portion of their assets if they choose to apply for Medicaid. Will my Virginia Partnership policy qualify me for dollar-for-dollar asset protection in other states? Most likely, although the answer to this question is not fully known at this time. Virginia plans to participate in a national reciprocity agreement that is currently under development, but it is likely that not all states will participate in this. Also, the applicant will need to meet all Medicaid requirements for the new state of residence. If I exhaust my LTC Partnership policy, will I automatically qualify for Medicaid? No! You must still meet level of care requirements (for LTC) and the income and resource requirements (minus the amount of assets you can protect from your Partnership policy, i.e., the amount of benefits paid out by the insurer on your behalf). Which companies offer Partnership policies in Virginia? A listing of approved long-term care partnership policies is available from the Bureau of Insurance. To obtain a copy, call or the Bureau of Insurance, or a copy may be down loaded at: 5

75 Additional Resources for Information Relating to Long-Term Care and Long-Term Care Insurance National Resources National Association of States United on Aging and Disabilities (NASUA) (202) or Medicare MEDICARE or Centers for Medicare and Medicaid Services or National Alzheimer s Association or National Association of Insurance Commissioner s or Federal employees or State Resources Virginia Insurance Counseling and Assistance Program (VICAP) or Virginia Department for the Aging or Virginia Department of Social Services (804) or Virginia Bureau of Insurance or A Shopper s Guide to Long-Term Care Insurance State of Virginia employees or VA Association of Area Agencies on Aging (804) or VA Office of the State Long-Term Care Ombudsman (804) /14 6