One of the most gratifying things about working in the long term care insurance industry is helping to address the concerns of people all across the nation about the possibility that they will one day need extended health care. Knowing that we make a difference in the lives of thousands of people nationwide by providing them with financial resources and peace of mind makes ours a truly valuable profession.
Carriers in the industry are always trying to improve each generation of product. This has led to a number of different approaches to solve the same problem. Take, for instance, the home health care benefits available under the various LTC insurance policies offered for sale today. There are a number of approaches, each designed to tackle the problem from a different angle.
Traditional approaches
Is your client looking to maximize his or her benefit dollars? Then look no further than a policy with a tried-and-true reimbursement style home health care benefit.
For those not familiar with this kind of plan, a reimbursement style policy repays the insured up to the daily benefit limit for expenses incurred in receiving qualified LTC services under the terms of the contract.
The key to a reimbursement policy is that the insured receives dollars for only those qualified expenses that he or she incurs. So if after becoming benefit-eligible, the insured requires covered home health care services for only 12 days per month, the daily benefit home health care feature would reimburse the insured for those 12 days, up to the policy's daily benefit maximum. Any remaining benefit dollars unspent on any given day would remain in the policy for use as needed. You can think of this kind of policy as a pool of money or an escrow, as illustrated in Table 1.
The daily benefit model works well when the insured's home health care expenses are less than or equal to the selected daily benefit. However, if the expenses exceed the daily benefit, the insured may have out of pocket expenses, as illustrated in Table 2.
An even stronger form of reimbursement policy pays its home health care benefits on a monthly basis, thereby minimizing the insured's risk of incurring out-of-pocket expenses. The monthly benefit home health care feature multiplies the insured's selected daily benefit amount by the number of days in the month and makes the resulting total available for the insured's use each month (see Table 3). To illustrate, let's assume the same facts as in the above example, substituting a $3,000 monthly benefit home health care feature (the same $100 daily benefit x 30 days).
The last two examples clearly show the advantages of a monthly benefit home health care feature over a daily benefit model–a greatly reduced risk to incur un-reimbursable expenses. That's a pretty strong feature. But without minimizing the high quality of LTC insurance policies that feature monthly benefit home health care, there is still a significant hole that these policies fail to address–flexibility.
To qualify for payment, reimbursement policies require the insured to incur expense for a service covered by the policy.
Day by day
