2. What is the difference between Simple and Compound inflation protection.  

3. What is Indemnity vs. reimbursement?

4. What is the difference between informal care vs. formal care? 

5. What are the pros and cons of using a licensed health care agency?

6. What is the difference between an elimination period and a certification period?

7. What is Claims Offset?

1. How do I know if I need the inflation protection optional rider for my LTCI policy? 

LTCI industry standards suggest if you are under 70 years of age, then you should opt for compound inflation.  The reasoning behind this is that long-term care expenses are expected to triple over the next 20 years.  Without inflation protection, a policy purchased today for $200 per day, will not provide adequate coverage in 20 years.  If you are over 70, you still may want to opt for simple inflation coverage, as you may not need to use the benefits of your policy for another 10 or 20 years and by then, your current daily benefit period may not keep up with projected inflation.  For a detailed look at how inflation protection works, see our  30 yr Analysis of Inflation analysis.

2. What is the difference between Simple and Compound inflation protection.  

Most LTCI policies offer two types of inflation protection; Simple and Compound.  Simple inflation adds a % (usually 5%) each year to the original daily benefit.  For example. if you daily benefit is $100 per day, with this rider you would receive an additional $5 per day each year.  With compound inflation protection, you would receive a % increase each year on top of the previous years' increased daily benefit.  For the first year, the inflation protection is relatively equal, but in future years, compound inflation protection greatly increases your daily benefit. For a detailed look at how inflation protection works, see our  30 yr Analysis of Inflation analysis.

3. What is Indemnity vs. reimbursement?

Different LTC insurers use different methods to pay back expenses.  With a reimbursement type policy, you would be reimbursed for expenses up to your daily benefit.  This means if your daily expenses totaled $175 and your daily benefit is $200, you would only receive $175.  If the policy 'pooled' funds, then the left over $25 would go back into the pot and extend the life of the policy.  An indemnity policy reimburses the exact amount of the daily benefit regardless of the expense.  Given the same situation, even though your expenses totaled only $175, you would receive $200.  You can then choose how to spend or save the extra $25.

4. What is the difference between informal care vs. formal care? 

Some policies will pay for home care benefits if a friend, or family member provide services.  This is considered informal care.  Formal care is care that provided by a home health aide. Carriers may offer coverage for independent ‘aides’ that are not through a licensed agency.  Some carriers however, require that the aide be state ‘certified’

5. What are the pros and cons of using a licensed health care agency?

Licensed health care agencies generally have a large roster of aides so if one is not available they can quickly replace the aide.  Supposedly agencies 'supervise' their aides as well.  However, aides from a licensed health care agency do not necessarily have more experienced.  Agencies receive a fee for their services, which means the aides themselves do not receive the full payment which can sometimes be cause for a high staff turnover.  The cost of care though an agency is usually higher. 

6. What is the difference between an elimination period and a certification period?

In a tax qualified policy, the policy holder must be certified, by a licensed health care practitioner, that he or she will need care for at least 90 days.  The elimination period is more like a deductible in which the policy holder co-pays for the initial period which may be 30, 60 or 90 days.  You can have a 30 day elimination period with a tax qualified policy. Although you must be certified to needs care for 90 days, the policy would start paying your claim on day 31. 

7. What is Claims Offset?

Inflation protection options affect both the daily/monthly benefit and the ‘pot of money’.  With some carriers, the pot of money is reduced by claims paid.  This is called claims offset and results in less money to pay out for future claims. Policies with no claim offset actually provide a greater amount benefits.

For additional info on any of these topics or if you have other questions not listed above, please call us at 631-393-5039 or email us at info@ltcamerica.com.