The life expectancy in the United States has doubled over the past 140 years, from only 39 in 1880 to almost 80 today. This increase is due in large part to advances in health care, along with a decline in accidental deaths and drops in mortality from some diseases like cancer.

Along with the increased life expectancy has come the introduction and expansion of long-term care (LTC) insurance. This type of policy reimburses people for care given in their home, a nursing home, an assisted living facility or an adult day care center.

Most health and disability insurances don’t cover long-term care services, also referred to as Activities of Daily Living (ADL). These services consist of support and assistance with everyday tasks, including bathing, dressing, getting in and out of bed, taking medication, housework, preparing meals, managing money, shopping for essentials and using the toilet.

Most LTC policies contain a premium waiver clause and won’t cover care needs resulting from drug and alcohol abuse or mental health disorders. However, such plans do help cover the costs of care for people with a chronic medical condition, disability or a disorder. The duration and level of LTC needed varies from person to person and might change over the years. An individual at the age of 65 has about a 70% chance of needing LTC services for the rest of his or her life.

The benefits included in LTC insurance vary by policy, and the individual using it has to meet specific “benefit triggers” to become eligible for them. Some LTC policies limit benefits to a certain number of years, some require a physician to certify such services are necessary and some pay a maximum total dollar amount.

Although not as oft-utilized, hybrid LTC policies combine life insurance and LTC coverage that return money to your heirs if you don’t end up needing long term care. Premiums don’t change, but this type of policy is typically two to three times more expensive than regular LTC insurance.

What about Medicare?

According to the U.S. Department of Health and Human Services, Medicare only pays for LTC if someone requires skilled services or rehabilitative care. It covers these services in a nursing home for a maximum of 100 days and at a person’s home if they are receiving skilled home health or other skilled in-home services.

Services for ADL aren’t paid, meaning people have to pay any costs not covered by a public or private insurance program. Federal and state health insurance programs are available to help pay for LTC for individuals with low income, but only after they’ve usually spent most of any savings they have.

Consider the costs

The cost for LTC insurance policies varies by age, health, gender and marital status. It also depends on which payer you select and the amount of coverage you want. LTC premiums average approximately $2,700 annually.

Although these premiums aren’t cheap, consider that the average cost of nursing home care in the U.S. is $85,800. Assisted living averages $48,600 annually, and home health aides charge about $144 per day. According to the Alzheimer’s Association, the estimated cost for end-of-life care in 2019 ranged between $233,000-$367,000.

AARP notes that typical LTC insurance terms include a daily benefit of $160 for nursing home coverage, a waiting period of about three months before insurance kicks in, and a maximum of three years’ worth of coverage. 

Complete claims appropriately

About 95% of long-term insurance claims are filed for individuals over the age of 70, and the average time from purchase of a policy to initiation of a claim is 13.4 years. Filing an LTC claim can be time-consuming and complex, so it’s recommended to enlist the help of an insurance expert. Most completed claims are either approved or denied within 30-45 business days, although some policies include a waiting period for nursing homes and assisted living facilities.

When filing an LTC insurance claim, you’ll need the policyholder, provider and attending physician statements, the nursing assessment and plan of care and the authorization to release information. Procure the necessary information before filing the claim, because filing it too early might result in the policyholder not having coverage if and when his or her health care needs increase.

Five common LTC insurance claim mistakes to avoid are:

  • Forms aren’t returned promptly
  • The chosen assisted living facility doesn’t meet LTCI policy standards
  • The chosen home care agency isn’t state-licensed
  • A cognitively impaired client fails his or her assessment
  • Failure to plan for a 90-day elimination period

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How Long-Term Care Insurance Claims, Coverage and Costs Work