Insuring Your Health

Long-Term Care Protection May Be Toothless

By Michelle Andrews

February 5th, 2013, 12:15 PM

There aren’t many investments people make to protect themselves against something that may happen 20 or 30 years down the road. Yet that’s exactly what long-term care insurance purchasers do.  But a provision in those policies that people rely on to help ensure their coverage will meet their needs decades hence may do nothing of the kind.

The clauses are called “alternative plan of care” benefits. They’re intended to provide coverage for services that aren’t spelled out in the policy but may emerge in the future, says Bonnie Burns, a policy specialist at California Health Advocates, a Medicare advocacy and education organization.

Long-term care policies that were sold 30 years ago, for example, didn’t cover care in an assisted living facility, she says, even though such coverage is common now.

Long-term care insurance offers financial protection if a person needs help with daily tasks such as eating and bathing. Policies typically cover care provided in different settings, whether it’s a nursing home, a private home or an assisted living facility. People usually buy a policy that provides up to a specified daily dollar amount—say $150—for between three and five years.

Burns says that although alternative plan of care clauses can be beneficial, they are honored at the insurance company’s discretion.

“It’s completely up to the company,” she says. “I’ve had situations where companies have refused to pay under that benefit.”

Alternative plan of care clauses may be increasingly important. In the past decade, the average age at which people buy a long-term care insurance policy has decreased from 68 to 59, according to a survey by America’s Health Insurance Plans, a trade group.

When considering a policy, people have to ask themselves: “What’s the long-term care landscape going to look like in 20 years?” says Burns. An alternative plan of care clause may help provide some sense of security, but it’s no panacea.

This article was produced by Kaiser Health News with support from The SCAN Foundation.

3 Responses to “Long-Term Care Protection May Be Toothless”

  1. Jim Groves says:

    Sure, policies purchased 30 years ago may have issues, but in the last decade, LTC policies surfaced again and were purchased as a benefit through work. These policies specifically were designed to cover home care, assisted living facility and nursing homes. I don’t think this article makes that clear enough that the majority of who purchased LTC DO have this coverage and have nothing to worry about. LTC plans are probably the MOST important benefit you can have…even if you have to pay for it all yourself. Those will LTC are far more prepared for retirement than those without.

  2. I’ve helped numerous people with older policies that did not have assisted living in them, but did have alternate plan of care. Once it is documented that the patient needs 2 of 6 ADL’s or has a cognitive impairment, and documentation showing that the assisted living facility can provide the needed care, benefits were paid in each case. Does this mean every policy will do the same? I can’t speak to “every” but when 2 ADL’s or cognitive impairment is documented, there is little to stop a claim.
    Besides, the alternative to the $3500/month assisted living facility is usually the $8000/month nursing home. Which do you supose the insurance company would rather pay?

  3. Nearly everyone who receives care today receives that care either at home or in some type of facility–care that is provided by loving, compassionate people.

    Since HIPAA standardized long-term care benefit triggers in 1996, nearly every LTCi policy pays benefits for care received at home or in a facility.

    I’m quite certain that 30 years hence, care will still be provided by loving, compassionate people either at home or in a facility–making the point of this article moot.

    Over 200,000 policyholders receive over $7 billion per year in long-term care claims benefits. And a federal audit of LTCi claims concluded that LTC insurance is working.

    Buying a long-term care policy because it has the “alternate plan of care” benefit is kind of like buying a car because it has “fuzzy dice” hanging from the rear view mirror. In other words, it’s meaningless.

    Just be sure to buy a policy that has good home care benefits and facility benefits. Don’t worry about the benefit triggers because they were standardized by the federal gov’t in 1996.

    Here’s a link to more information about the federal gov’t's audit of LTCi claims practices:

    Scott A. Olson