Often long term care insurance companies determine home care coverage for policy holders based on the six ADLs needed.

ADLs is an acronym which stands for activities of daily living.

Two out of the six ADLs

Six ADLs are used to measure your physical abilities to determine if you qualify for benefits.

The law requires tax-qualified policies to pay or reimburse benefits if you are impaired in two out of the following six ADLs:

• bathing
• dressing
• transferring
• eating
• toileting
• continence

Long term care insurance provides benefits for those who need care in nursing homes, assisted living facilities or at home.

Benefits are typically triggered when policyholders suffer from cognitive impairment or when they can no longer perform activities of daily living (ADLs).

Which ADL limitation is reported most often?

The most frequently reported ADL limitation is bathing.

Most veterans need help performing ADLs for one of three reasons:

1. paralysis or loss of physical function
2. weakness or decreased endurance due to disease process or surgery
3. confusion or cognitive disorders

The American Veterans Aid describes bathing as “any assistance needed with washing the body, such as getting in and out of a tub or shower, adjusting shower heads or changing water temperature. It can also include stand-by assistance when the person is considered a fall risk.”

The concept of ADL measurement and the first activities of daily living assessment tool (Katz Index of INdependence in Activities of Daily Living) was developed by physician and scientist Sidney Katz more than 50 years ago.

These tools are still used today as a way of determining a person’s independence versus dependence.

What is not considered an activity of daily living (ADL)?

Medication management, transportation, meal preparation, housework and shopping are not considered activities of daily living.

They fall under a different category called Instrumental Activities of Daily Living (IADLs).

Instrumental Activities of Daily Living (IADLs) includes more complex independent living tasks such as:

• Housework
• Meal preparation
• Shopping
• Using a telephone
• Traveling
• Managing personal finances
• Taking medication

LTC insurance pays a set benefit

You can decide how much coverage you want when you buy LTC insurance.

It’s usually a maximum daily or monthly benefit such as up to $6,000 per month for a nursing home or a home care worker (caregiver and/or home care aid).

Some policies will only reimburse you for what you spend on care, while others will send you cash for the value of the benefit once you start needing care, regardless of the actual cost.

You also pick a waiting period, when you need to cover costs before the coverage begins.

Ninety days is most common.

For an added charge, your coverage amount can increase over time so your coverage keeps up with rising costs.

Lifetime benefits are capped

Insurers used to offer unlimited benefits for long-term-care policies, but today, they usually limit payments to three to five years.

You also pick the maximum possible payout from the policy.

For example, a policy might pay out $165,000 total for care.

If you spend past the policy limits, you’ll be paying out of pocket.

But remember, out of pocket costs such as home care are tax deductible and counts as qualified unreimbursed medical care expenses that exceed 7.5% of adjusted gross income.

The LTC policy limits fit the needs of most retirees.

Statistically, men on average need 2.2 years of long-term care, while the women on average need 3.7 years.

About 20% of 65-year-olds end up needing care for five years or longer.

Supplement government benefits

If you have long-term-care insurance, you can use the policy to pay for a better facility that wouldn’t accept Medicaid.

If your LTC policy runs out and you do end up going onto Medicaid, some state governments consider whether you bought insurance beforehand.

For example, say you buy $250,000 of LTC insurance coverage and spend down the entire policy, forcing you to pay for care with your personal savings.

Depending on the state, the government might let you qualify for Medicaid benefits before you spend the last $250,000 of your other assets.

Costly premiums

Long-term-care insurance is not cheap.

The cost depends heavily on age and gender.

For example, a 55-year-old male in standard health would pay $2,100 a year for a policy offering $165,000 of total lifetime coverage with a 3% inflation rider, according to a 2023 survey of insurers by the long-term-care association.

A 55-year-old female would pay $3,600 per year.

Nevertheless, when comparing the cost of premiums to costs of home care services or even facility fees, LTC may stand as the more affordable option.

Men vs. Women

Women pay more than men because they typically live longer and are more likely to need extended long-term care.

Another example is: a 65-year-old male would pay $3,135 per year for the same coverage, while a 65-year-old female would pay $5,265 per year.

If you’re married or in a committed relationship, you can qualify for a discount on a joint policy that covers both of you.

Long-term-care insurance policies use level premiums, meaning that after you sign up, the insurer cannot increase the cost based on your age and health.

Buying younger can lock in a better deal.

Insurers can increase rates for all policyholders but only if they can prove to the government that it’s needed to support future payouts, not for extra profits.

Stabilized prices for newer policies

When LTC insurance first came out, the trend shows that companies didn’t properly understand this market and charged too little versus the payouts.

As a result, they ended up repricing and raising rates for existing policyholders.

The new policies today have factored in the things that caused issues with older policies.

Use partial protection

If you’re concerned about the cost, getting a policy for a lower amount with the plan to cover the remaining costs with your savings is recommended.

For example, if you think long-term care will cost you about $6,000 a month, you could get a policy for $3,000 and pay the remaining $3,000 out of your assets.

There are also short-term care policies that only pay out benefits for one year but cost much less than long-term-care insurance.

These policies charge both genders the same prices, making them a better deal for women.

Medicare provides short-term care in a facility for a stay of up to 100 days, but not beyond 100 days.

Pass health underwriting to buy

LTC insurance companies do not accept every applicant.

You must meet the health underwriting standards and apply for LTC insurance while still reasonably healthy.

Waiting until the LTC insurance is needed for home care or in a facility may be too late.

People aged 55 to 69 in reasonably good health are generally the best fit for LTC insurance.

Eighty is the maximum age to apply at most companies.

Once you qualify for LTC insurance, the coverage is usually guaranteed renewable for your entire life as long as you keep paying the premiums.

If you let the policy lapse and reapply, you would need to pass health underwriting again.

Alternative ‘hybrid’ products

You have options to buy a life insurance policy that includes long-term-care policy coverage.

If you need care, the policy pays out some or all of the death benefit while you’re still alive.

If you pass away without needing long-term care, your heirs receive the full policy death benefit.

In other words, there’s a payout either way.

It is possible that one could qualify for life insurance well into one’s seventies if in good health.

Life insurance policies usually pay a lower total benefit for care versus similarly priced LTC insurance policies.

You must also read the fine print for when your life insurance would pay.

Another option is to buy an annuity.

You pay for the annuity upfront and in exchange, it gives you future income payments that can be guaranteed to last your entire life.

Some annuities offer a long-term-care benefit.

For instance, some annuities might double one’s monthly payment for several years when long-term care is needed.

As such, adding this benefit could reduce your starting monthly annuity payments.

Research insurers before buying

Each insurance company has its own rates and health underwriting standards.

Before signing up, you should get a few quotes from different companies.

Mangaliman suggests using an insurance broker representing multiple insurance companies to speed up the process.

When comparing, consider each insurance company’s A.M. Best rating for financial stability to pay future claims and J.D. Power score for customer satisfaction.

The long-term-care insurance market is small, with only six insurers selling stand-alone policies:

1. Mutual of Omaha
2. Thrivent
3. National Guardian Life
4. New York Life
5. Northwestern
6. Bankers Life

In terms of quality, insurers tend to offer similar levels of coverage, and the main difference is the price they quote for you.

More options for ADL care

If you have a long-term-care insurance policy, and you qualify with at least the six ADLs, you have more flexibility to decide how you receive treatment and where.

For example, you could spend the money on a home health care worker rather than go into a nursing home under Medicaid.

LTC insurance policy holders are more willing to pay for better care and get help sooner as trends show, whereas those without insurance may tend to hold off.

A good analogy with using LTC insurance looks like this – if a natural disaster such as an earthquake causes significant damage to a home, it probably would be best to invest in quality repairs though is may be a little costly is the homeowner has homeowner’s insurance.

Individuals with LTC insurance should consider the same as it’s your life and well-being that’s at stake.

Call us today and we’ll be happy to guide you through the home care process, what compassionate caregiving looks like, share more information about LTC insurance, and anything else we can assist to make your situation lighter and smoother!

Refer a friend who needs a home care provider.

While we are located in Placentia, CA in Orange County, in between Fullerton and Yorba Linda, we serve our broader surrounding cities and counties, so don’t hesitate to call us!