For those of your clients who have purchased a Long-Term Care Insurance Plan (“LTCI”) which is more than 5 years old, a LTCI audit is now a necessity. The purpose of the LTCI audit is to address the following issues:
- Is the current coverage sufficient to meet today's Long-Term Care costs?
- Does the LTCI policy cover all levels of LTC care, including home health care, assisted living care, and nursing home care?
- What must happen in order to trigger the payment of LTCI benefits?
- Is there a limitation on the amount of LTCI benefits?
- Should the LTCI policy be supplemented by a second LTCI policy?
With respect to Question 1, above, I have found that with many of my clients the current coverage available to them under their existing LTCI policy is insufficient in light of today's costs. For 2008, the national average hourly rate for home health aids ranges from $14.00 to $35.00, and each visit lasts 1.5 hours. For 2008, the per month cost for assisted living ranges from $625.00 in Detroit, MI to $8,610.00 in New York, NY. For 2008, nationally, the average daily rate for a semi-private room is $213.00.
With respect to Question 3, above, in light of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), HIPAA established 6 core activities of daily living (“ADL's”), and requires that a tax qualified LTCI policy must include at least 5 of the 6 ADL's. The 6 ADL's are: bathing, dressing, toileting, transferring, eating, and continence. Additionally, in order for a tax qualified LTCI policy to pay benefits, the individual must be unable to perform at least 2 of the ADL's.
With respect to Question 4, above, it has been my general experience that most LTCI policies were sold on the basis of limited benefits - 2 to 3 years worth of coverage. With DRA '05 having a 60 month look back period for all gifts made after February 8, 2006, in high net worth cases, an individual may want to secure LTCI coverage for a minimum of 5 years.
With respect to Question 5, above, if a review of the policy indicates that the per diem rate is so low in light of today's costs, it will become a necessity to obtain a second LTCI policy.
