Are Hybrid LTC Home Care Plans Right For Your Client?

The benefits of receiving cash are plentiful. Without claims to submit, the money can be used for any type of care selected. This is the ultimate in flexibility.

The downside to cash plans is the cost. Depending on the carrier, cash plans are usually 25%-70% more costly than reimbursement programs with a similar level of benefits. That premium increase causes many consumers either to delay purchase until they are older or to purchase the standard reimbursement plan.

The hybrid home health concept varies from carrier to carrier, but it can be defined in 2 general benefit categories: replacement benefits and enhancement benefits. Here's a brief look at each of these plans.

Replacement benefits. A replacement benefit allows policyholders to decide that instead of using their monthly home care benefit for reimbursement of professional home care, they can take a cash amount. That amount is typically a percentage of the monthly policy limit. For example, the amount could be 40% of the monthly benefit maximum. Rules vary by carrier. Some have month-to-month payments, while others may have limits on their flexibility.

Enhancement benefits. An enhancement benefit gives an above-the-limit amount of cash to the policyholder that can be used for any purpose. For example, a policyholder with one carrier may choose a benefit such as $250, $500 or $750 per month, while another carrier may instead offer their customers an additional 15% of the monthly benefit amount.

As a further explanation of replacement vs. enhancement, let's say someone has one insurer's LTC plan with a $5,000 monthly home health care benefit. Let's say a client had a stroke and is recovering at home and needs a professional home health care agency that costs $4,000 per month. The plan would pay $4,000 to the home health care agency. However, since this insurer has a flexible home care benefit, that client could also choose to take a $2,000 cash benefit instead of receiving professional home care. Perhaps the at-home spouse feels they can take care of the stroke victim and wants the cash instead. In that case, the $2,000 cash benefit replaces the reimbursement benefit.

Now let's look at the same situation with the enhancement benefit, where that client owned a plan with an enhanced cash benefit. The client would still get the professional care at home, but it would be enhanced by a 15% of the benefit amount cash payment. The client would receive an additional $750 ($5,000 x 15%) each month above the normal monthly benefit limit.

Benefits are expressed in terms of cost-per-day, with the buyer selecting the amount at time of purchase (obviously, higher benefits cost more.) According to the National Council on Aging, current home care costs average $140 per day nationwide but can exceed $300 per day in areas with higher living costs.

Typically, the first priority is a good balance of benefit amount and benefit period, based on a client's budgeted premium. Only after providing a good base of adequate benefit amount and benefit period should you discuss the cash enhancement options.

Many times a client will choose to self-insure some of the costs with the LTC insurance coverage to provide a catastrophic base. Experience suggests that loading up on too many bells and whistles can be a red flag for consumers, who may feel they are being oversold. Instead, it is best to handle objections by recommending riders as options to the current plan or for future consideration.

Remember, care providers never replace the care that friends and family can provide, but with a strong LTC insurance policy that addresses consumers' specific home health care needs, they are assured better care for a longer time. The bottom line is this: Take a look at these new home care options for LTC insurance, but be realistic about what they provide.