LTCI Policy Options
Once insurers have designed their policies, consumers must choose among the LTCI products in the marketplace – and then tailor the selected product to meet their specific needs and circumstances.
The Elimination Period
An elimination period (sometimes called a waiting period or deductible period) is the time between when the benefit trigger occurs and when the policy begins to pay benefits. In other words, when an insured begins to need long-term care services, she normally has to pay for them herself for a certain time before benefits begin. Most policies offer applicants a choice of elimination periods -- 30, 60, 90, 180 and 365 days are common options. The elimination period functions like a deductible in other forms of insurance. It is designed to reduce an insurer's benefit and administrative costs and thereby enable the insurer to offer a lower premium.
By selecting a longer elimination period, the policyholder will pay a lower premium. However, the longer the elimination period, the more the insured will pay out of pocket if she needs care. Each individual must weigh paying a higher premium for a short elimination period against paying a lower premium but having to fund care out of her own pocket during a long elimination period.
While the purchaser sets the length of the elimination period, the insurer determines how it functions. For some insurers, the elimination period begins as soon as the insured meets a benefit trigger, whether he incurs expenses covered by the policy or not. For others it starts only when the insured meets a benefit trigger and begins incurring covered expenses.
Dave has a 90-day elimination period that begins as soon as he meets a benefit trigger, whether or not he receives any paid services. He meets the policy's physical impairment benefit trigger, and for 90 days his wife takes care of him and he does not pay for any services. At the end of 90 days, the elimination period is satisfied and he can begin receiving benefit for covered services.
Margaret also has a 90-day elimination period, but hers does not begin until she both meets a benefit trigger and is receiving paid services covered by the policy. Unlike Dave, she must pay for care for 90 days before she can receive benefits.
Companies that require insureds to receive paid services during the elimination period differ in how they count days toward satisfying the period. Some take the service day approach -- they count only the days on which services are provided. Others take the calendar day approach -- they count all days while services are received, whether these services are provided every day or not. Typically the insurer gives the insured credit for every day of any week in which he received services on at least one day, or sometimes two or three days. Some insurers allow the purchaser to choose the approach to counting days, with the calendar day option costing more since benefits begin sooner.
Judy has a 60-day elimination period that counts only service days. On May 1 she begins receiving home healthcare services three days a week, so that it takes her 20 weeks (or five months) to satisfy her elimination period.
David has a 60-day elimination period that gives him credit for every day of any week in which he receives covered services on at least one day. On May 1 he begins receiving home healthcare services three days a week. Every day of the week is counted, and he satisfies his elimination period in 60 calendar days (two months).
Most newer policies allow days to be accumulated over the life of the policy. For example, if a person with a 90-day elimination period receives covered services for 70 days but then no longer needs care, the next time he meets a benefit trigger, the original 70 days will count and he will need only 20 more days to satisfy the elimination period. But some policies have an accumulation period -- if the insured does not accumulate 90 days within a certain time (such as two years), he loses any days he has accumulated and must begin again.
Under most policies today the elimination period must be satisfied only once during the life of the policy. That is, an insured who satisfies the elimination period, receives benefits, then stops needing care, and after an extended time needs care again is not required to satisfy the elimination period again. But a few older policies require the insured to begin a new elimination period under these circumstances.
Some insurers offer the option of no elimination period (called a zero elimination period). Many newer policies offer the option of a zero elimination period for home care combined with a regular elimination period (often 90 days) for facility care. Sometimes under this approach the days on which home care is received are counted toward the facility elimination period, so that if a person receives home care for at least a few months before going into a nursing home, she will have already satisfied her facility elimination period.
The 90- Day Certification Requirement
Under HIPAA’s standardized benefit trigger for tax-qualified policies, a licensed healthcare practitioner must certify that the insured's inability to perform ADLs is expected to last at least 90 days. This 90-day certification requirement should not be confused with an elimination period. The two are separate and distinct concepts -- the 90-day certification requirement does not establish an elimination period. Elimination periods are chosen by the policyholder.
Doug has an LTCI policy with a zero elimination period. He becomes unable to perform two ADLs, and a licensed healthcare practitioner certifies that this inability results from a physical condition that is expected to last more than 90 days. Doug is eligible for benefits and begins receiving them immediately, since he does not have to satisfy an elimination period.
Betty has an LTCI policy with an elimination period of 180 days. A licensed healthcare practitioner certifies that she cannot perform two ADLs and is expected to be unable to do so for more than 90 days. Betty is eligible for benefits, but she will begin receiving them only after 180 days have elapsed.
Larry has an LTCI policy with a 30-day elimination period. He becomes unable to perform two ADLs. However, this inability is the result of an accident, and he is expected to be fully functional in a few weeks. Since Larry's impairment is not expected to last 90 days, he is not eligible for LTCI benefits.
In other words, the 90-certification period determines whether an insured is eligible to receive benefits, the elimination period determines when those benefit payments will start.