LTC Insurance Benefit Eligibility
Nothing happens in a LTC insurance policy until you are "benefit eligible". It's like an unwound watch - all the pieces are assembled, ready to keep time, but nothing happens until you wind it up. Think of this as a "definition of disability" in order for benefits to begin. These are also called a policy's "benefit triggers".
Most LTC policies measure eligibility one of two ways (either/or)*:
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1. If you need supervision for a COGNITIVE IMPAIRMENT. (Think Alzheimer's, dementia, stroke or even a head injury.)
OR 2. You need help performing at least two (2) out of a list of six (6) ACTIVITIES OF DAILY LIVING (ADLs). Let's examine each of these in detail: |
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COGNITIVE IMPAIRMENTA deterioration or loss in mental capacity which requires supervision to protect yourself or others. It is measured by impairment in the following areas:
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"SEVERE COGNITIVE IMPAIRMENT"
Since the passage of HIPAA in 1997 nearly every new policy meets the US Tax Code requirements as a "TAX-QUALIFIED" policy. HIPAA's tax qualification language requires that a COGNITIVE IMPAIRMENT be a "SEVERE" impairment. The definition of a SEVERE COGNITIVE IMPAIRMENT is explicitly defined in a policy as what is reflected above. This is not a vague, un-defined term, and it's practically no different than the definition used before 1997. "SUBSTANTIAL SUPERVISION"
TAX QUALIFIED policies written since 1997 also require that a COGNITIVE IMPAIRMENT require “SUBSTANTIAL SUPERVISION” as part of the COGNITIVE IMPAIRMENT BENEFIT TRIGGER. Substantial Supervision is interpreted as meaning 24/7 supervision. This does not mean round-the-clock, paid professional care, but simply that someone, anyone needs to be present at all times for the client's care and safety. This can include a spouse, family or friends. Policies issued before 1997 generally do not include the word "substantial" to gauge a COGNITIVE IMPAIRMENT claim. However some companies wrongly apply the "substantial", 24/7 standard to COGNITIVE IMPAIRMENT claims on these older, pre-HIPAA policies. Policies issued before 1997 that do not include the "substantial" language do not require that the supervision be 24/7 even though they are grandfathered as TAX QUALIFIED policies for income tax purposes. CLAIM TIP: The PLAN OF CARE for LTC insurance benefits should always describe all caregivers, professional and INFORMAL. This is critical to show that a person is receiving SUBSTANTIAL SUPERVISION under a post-1997 tax-qualified policy. |
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ACTIVITIES OF DAILIY LIVING (ADLs)The physical activities that policies use to measure your ability - or inability - to safely take care of yourself. The most common ADLs are:
• BATHING • DRESSING • TRANSFERRING • TOILETING • CONTINENCE • EATING (NOTE that the list of ADLs does not include "ambulating" or "walking". This is not an ADL used by LTC insurance for measuring benefit eligibility. "Ambulating" is often referred to and measured as an ADL by professional care providers, but should not be considered when evaluating a policy's BENEFIT ELIGIBILITY.) Policies issued since 1997 (HIPAA "TAX-QUALIFIED") require that the ADL help be certified by a doctor, nurse or licensed social worker as being expected to last at least 90 days. This is not a waiting period; it is simply a professional certification that the ADL assistance will be "long-term" (90+ days) vs. "short-term". The loss of an ADL is measured either by HANDS-ON ASSISTANCE or STAND-BY ASSISTANCE: |
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"HANDS-ON ASSISTANCE"
Direct, physical assistance of another person, without which the disabled individual would be unable to perform an ADL. A "guard assist" - for example, simply a hand on a gate belt - while performing an ADL like TRANSFERRING - would be considered Hands-On Assistance for that ADL. The photo above showing an aide helping her client stand up out of a chair (TRANSFERRING) shows an example of hands-on help. A policy that only looks for HANDS-ON ASSISTANCE is more restrictive - requires a greater degree of loss or impairment - than a policy that also considers STAND-BY ASSISTANCE: "STAND-BY ASSISTANCE"
The presence of another person within arm's reach that is necessary to prevent injury while the individual is performing an ADL. It is sometimes referred to as "Supervisory Assistance". An example is being close-by, ready, just-in-case to catch or steady an individual who may fall getting into or out of a bath or shower. The person is still capable of performing the ADL without HANDS-ON help, but may have balance, frailty, or other physical safety issues. Most policies include a STAND-BY definition of ADL loss. CLAIM TIP: Make sure a home care aide - or facility staff - is including chart or care notes that reference STAND-BY ASSISTANCE. Many times they will only check an ADL box or make a note if they provided hands-on help. |
NEXT: The Elimination Period >
* NOTE: This information is for educational, informational purposes only and is not meant to provide specific guidance for any particular policy, policyholder, or claim situation. LTCI claims eligibility is determined by the insurance carrier based on the specific criteria in the issued policy contract and the carrier's own guidelines.
The BENEFIT ELIGIBILITY criteria noted above applies generally to most policies sold as "long-term care", but there are exceptions and differences, particularly in older policies (pre-1997) including these more-restrictive provisions:
- The loss of three (3) ADLs.
- Using only five (5) ADLs for consideration.
- Defining the need for ADL help to be only direct, HANDS-ON assistance.
- Require that a COGNITIVE IMPAIRMENT also require help with ADLs.
Some newer "chronic illness" benefits may require that the ADL losses be considered "permanent". Many annuity plans that offer enhanced benefits like a doubling of an annuitized income stream exclude any definition of COGNITIVE IMPAIRMENT, requiring just a loss of ADLs - this is more restrictive for cognitive issues as it is not until later stages of the disease progression when physical functioning is compromised.
The BENEFIT ELIGIBILITY criteria noted above applies generally to most policies sold as "long-term care", but there are exceptions and differences, particularly in older policies (pre-1997) including these more-restrictive provisions:
- The loss of three (3) ADLs.
- Using only five (5) ADLs for consideration.
- Defining the need for ADL help to be only direct, HANDS-ON assistance.
- Require that a COGNITIVE IMPAIRMENT also require help with ADLs.
Some newer "chronic illness" benefits may require that the ADL losses be considered "permanent". Many annuity plans that offer enhanced benefits like a doubling of an annuitized income stream exclude any definition of COGNITIVE IMPAIRMENT, requiring just a loss of ADLs - this is more restrictive for cognitive issues as it is not until later stages of the disease progression when physical functioning is compromised.
