Long-term Care

The decision to purchase long-term care insurance is a very important financial decision that should not be rushed. Long-term care can range from simple help with daily activities at home to highly skilled nursing care in a nursing home. It can be expensive depending on the amount and type of care needed and the setting in which it is provided. Medicare, the federal health insurance program for people over 65 and some disabled people, covers nursing home care only under extremely limited circumstances. Individuals should not depend on Medicare to pay for any nursing home care.

Many long-term care policies provide benefits in addition to coverage for a nursing home stay. Policies may provide coverage for in-home care, assisted living, adult day care and other alternatives. Long-term care insurance is not standardized and there is no guarantee of coverage. Based on your answers to questions about your medical history, a company can choose whether or not to sell you a policy. Benefits available under a long-term care insurance policy vary widely. The premium depends on a number of factors including the benefits you select and your age at the time of purchase.

State regulations require that you receive the National Association of Insurance Commissioners (NAIC) A Shopper's Guide to Long-Term Care Insurance and written notice of the North Dakota Insurance Department's State Health Insurance Counseling (SHIC) program when you are offered a long-term care policy.

The North Dakota Insurance Department has compiled a list of Approved North Dakota Long-term Care Plans. This list includes historic companies and therefore, may not be actively selling these plans.

Questions to Ask Before You Buy
  • Do I have enough income to pay my own way without insurance?
  • Is it reasonable to spend my own money, delete my assets and then apply for Medicaid?
  • Is there any reason to preserve my assets for heirs?
  • Do I have enough income to pay a portion of the nursing home costs and then rely on a small long-term care policy for the remainder?
Purchasing Long-term Care Insurance

If you decide to purchase long-term care insurance:

  • Take your time and compare several policies before buying. You may want to check with several companies and agents. Some agents may sell for more than one company.
  • Ask questions and be sure you understand what the policy covers and when.
  • When you receive the policy, read it carefully to be sure you understand all the terms and conditions. What is written in the policy is what will determine the benefits you receive. From the time you receive the policy, you have 30 days to review it and return it for any reason and for a full refund of the premium paid. If you return a policy, return it to the company and not the agent.
  • Always pay by check payable to the company. Do not pay for a premium with cash.
  • Do not submit to high pressure tactics.
  • Don't buy more than one policy. If you have a policy and feel you need more coverage, check to see if the company will allow you to increase your coverage.
  • Be sure you get your agent's name, address and telephone number.
  • Be sure the insurance company's product is approved for sale in North Dakota by contacting the North Dakota Insurance Department.
  • There are three primary ways of paying for long-term care services. You can:
    • Use your income and savings to pay for the care and services you need. People with substantial income, assets or savings may be able to cover all costs from their own resources.
    • Use your income and savings until you qualify for Medicaid. Medicaid, or Medical Assistance, is a combination, federal, state and local, program that covers nearly half of all nursing home care nationally. To receive Medicaid assistance for a nursing home stay, you must meet certain financial eligibility requirements. North Dakota provides some protections for married couples when one spouse must enter a nursing home. For eligibility questions or applications for Medicaid, contact your local county social service office.
    • Buy a long-term care insurance policy to cover some or all of the costs for long-term care.
  • Private, long-term care insurance is an option for people to consider, particularly if they have assets they wish to protect. You should not buy this type of insurance unless you can afford to pay the premiums every year. Long-term care insurance premiums can and often do go up. Long-term care insurance policies are designed to provide coverage for the most catastrophic expense of long-term care which is room and board in a nursing home.
Key Facts

The median age of the U.S. population is at an all-time high. Adults over the age of 65 have surpassed the number of teenagers, and people in their 50's and 60's can expect to live longer than previous generations. As life expectancy continues to rise in the U.S., more and more Americans between the ages of 40 and 84, especially those in their mid 50's, are preparing for their golden years by purchasing long-term care insurance.

According to some estimates, long-term care policies cost Americans, on average, $1,877 per year at ages 55-64, $2,003 per year at ages 65-69, $2,234 per year at ages 70-74 and $2,604 at ages 75 and up. On a national average, nursing home care costs more than $79,000 a year. With costs rising with age, it is important for consumers to fully understand long-term care insurance and when it should be purchased to best prepare them for the future.

What is long-term care?
Long-term care refers to a wide range of medical, personal and social services. You may need this type of care if you have a prolonged illness or disability. This care may include help with daily activities, as well as home health care, adult daycare, nursing home care or care in a group living facility. Long-term care insurance is one way to pay for long-term care. It is designed to cover all or some of the services provided by long-term care.

When will benefits be available? 
Long-term care policies have an elimination period, which is the number of days you must need nursing home care or home health care before your policy pays benefits. A shorter elimination period will mean you pay a higher premium. Elimination periods may range from zero to 180 days. In addition, a long-term care policy does not guarantee coverage unless you satisfy certain requirements. For example, most policies require that you be unable to perform a given number of daily living activities, such as dressing, bathing and eating without assistance. Also, most policies have a benefit trigger for cognitive impairment. For example, as a policyholder, you can only qualify for these benefits if you are unable to pass a test assessing your mental function.

How much in benefits will the policy pay? 
The benefit amount usually is a daily benefit ranging from $50 to $250 per day. You may choose a benefit period that is a specific number of days, months or years. A maximum benefit period may range from one year to the remainder of your lifetime. It is important to ask the person selling the policy if the benefit amounts will increase with inflation and if that coverage increases your premium.

Are there exclusions?
Every policy has an exclusion section. Some states do not allow certain exclusions. Many long-term care policies exclude coverage for the following:

  • Mental and nervous disorders or diseases (except organic brain disorders)
  • Alcoholism and drug addiction
  • Illnesses caused by an act of war
  • Treatment already paid for by the government
  • Attempted suicide or self-inflicted injury

Considerations Before Buying Long-term Care Insurance
Whether you should buy long-term care insurance depends on your age and life expectancy, gender, family situation, health status, income and assets.

  • Age and life expectancy - the longer you live, the more likely it is that you will need long-term care. The younger you are when you buy the insurance, the lower your premiums will be.
  • Gender - women are more likely to need long-term care because they have longer life expectancies and often outlive their husbands.
  • Family situation - if you have a spouse or adult children, you may be more likely to receive care at home from family members. If family care is not available and you cannot care for yourself, paid care outside the home may be the only alternative. Different policies may cover different types of long-term care. It is important to buy a policy that will cover the type of care you expect to need and will be available in your area.
  • Health status - if chronic or debilitating health conditions run in your family, you could be at greater risk than another person of the same age and gender.
  • Income and assets - you may choose to buy a long-term care policy to protect assets you have accumulated. On the other hand, a long-term care policy is not a good choice if you have few assets or a limited income. Some experts recommend you spend no more than five percent of your income on a long-term care policy.

Do you qualify for Medicaid? 
As an older adult, you may qualify for Medicaid, which pays almost half of the nation's long-term care bills. To qualify for Medicaid, your monthly income must be less than the federal poverty level and your assets cannot exceed certain limits. Medicaid will cover you only in Medicaid-approved nursing homes that offer the level of care you need. Under certain circumstances, Medicaid will pay for home health care.

Some states have long-term care insurance programs designed to help people with the financial impact of spending down to meet Medicaid eligibility standards. Under these partnership programs, when you buy a federally qualified partnership policy, you will receive partial protection against the normal Medicaid requirement to spend down your assets to become eligible. Check with the North Dakota Insurance Department to see if these policies are available to you.

Key Things to Understand

  • Long-term care insurance policies cover a wide range of medical, personal and social services.
  • Understand what must happen for a policy to begin paying benefits.
  • Understand the elimination period.
  • Understand the daily benefits provided.
  • Understand your coverage and exclusions.
  • Match your need for long-term care with your need to protect assets and your ability to pay premiums.
  • Understand how much your premium will be and how often it must be paid.
  • Your premium may increase after you purchase a plan.

The U.S. Department of Health and Human Services also features a number of resources to help individuals start the planning process for long-term care.

North Dakota Long-term Care Partnership Program

The North Dakota Long-term Care Partnership Program is a collaboration between state government and insurance companies. Under this partnership, applicants who purchase qualifying long-term care insurance policies can access Medicaid coverage while retaining assets they would normally be required to spend on their long-term care.

Only long-term care insurance policies issued after Jan. 1, 2007, the effective date of North Dakota's Medicaid Plan Amendment, are eligible for the program.

North Dakota Long-Term Care Partnership policies also qualify for an annual $250 North Dakota income tax credit. The tax credit appears on line 16 of Schedule ND-1TC. You are allowed a tax credit for premiums you pay for a partnership plan long-term care insurance policy that covers you or your spouse, or both. To qualify, you must be a North Dakota resident at the time you pay the premiums.

A partnership plan policy is a special type of long-term care insurance policy that:

  • Meets specific consumer protection and federal income tax law requirements;
  • Is recognized by North Dakota for Medicaid benefit purposes; and
  • Provides the proper inflation protection based on the insured individual's age at the time of purchase.

An insurance company is required to provide you with a notice certifying the policy as a partnership policy at the time of issuance. Upon audit, you must be able to provide a copy of that notice (or a more current notice, if requested) to support the credit claimed.

There are long-term care insurance policies that are not partnership plan policies for which the premiums are not eligible for this credit. Therefore, you must check your policy or contact your insurance company to confirm that it is a partnership plan policy.

The credit is equal to the premiums you paid during the tax year, up to a maximum credit of $250 (or $500, if both you and your spouse are insured by the policy). For more information, contact the Office of the North Dakota Tax Commissioner.

More information about the Long-term Care Partnership Program may be obtained by contacting the North Dakota Department of Human Services.

Tax Credit

House Bill 1209 was passed during the 2009 legislative session. The bill provides a tax credit up to $250 for individuals paying premiums on a partnership-qualified long-term care insurance plan purchased on or after Jan. 1, 2007. The credit is effective for taxable years beginning after Dec. 31, 2008.

The tax credit appears on line 16 of Schedule ND-1TC. You are allowed a tax credit for premiums you pay for a partnership plan long-term care insurance policy that covers you or your spouse, or both. To qualify, you must be a North Dakota resident at the time you pay the premiums.

A partnership plan policy is a special type of long-term care insurance policy that:

  • Meets specific consumer protection and federal income tax law requirements;
  • Is recognized by North Dakota for Medicaid benefit purposes; and
  • Provides the proper inflation protection based on the insured individual's age at the time of purchase.

An insurance company is required to provide you with a notice certifying the policy as a partnership policy at the time of issuance. Upon audit, you must be able to provide a copy of that notice (or a more current notice, if requested) to support the credit claimed.

There are long-term care insurance policies that are not partnership plan policies for which the premiums are not eligible for this credit. Therefore, you must check your policy or contact your insurance company to confirm that it is a partnership plan policy.

The credit is equal to the premiums you paid during the tax year, up to a maximum credit of $250 (or $500, if both you and your spouse are insured by the policy).

For more information, contact the Office of the North Dakota Tax Commissioner.

The National Association of Insurance Commissioners has additional information and resources available to consumers regarding Long-term Care Insurance.