Questions About Long-Term Care

1) What is long-term care?

A: Individuals with a prolonged illness, disability or cognitive condition (for example, Alzheimer’s

disease) often need help with daily activities (such as dressing, bathing, and eating), as well as

needing skilled medical attention. Long-term care services may include care management,

rehabilitation services, adult day care, or hospice. These long-term care services may be delivered

in an assisted living facility, at home or in a nursing home.

2) How much will long-term care cost me?

A: The cost of long-term care depends on a number of factors, including the type of care you

receive, where you receive this care, who provides this care and how long you need to receive this

care. According to data available from the U.S. Department of Health and Human Services, the

national average costs for long-term care services in 2016 were:

 $225/day or $6,844/month for a semi-private room in a nursing home

 $253/day or $7,698/month for a private room in a nursing home

 $119/day or $3,628/month for care in an assisted living facility (for a one-bedroom unit)

 $20.50/hour for a health aide

 $20/hour for homemaker services

 $68/day for care in an adult day health care center

Source: https://longtermcare.acl.gov/costs-how-to-pay/costs-of-care.html

3) What can I do to pay for my long-term care?

A: Paying for long-term care does not need to be overwhelming. Several options are available to

make paying for long-term care more manageable. Some of the options include:

1. You may choose to fund the costs of your long-term care through investments you have

made, such as an annuity. For more information about annuities, see the Maryland

Insurance Administration’s publication, A Consumer Guide to Annuities, available

online: http://insurance.maryland.gov/Consumer/Documents/publicnew/consumerguidetoann

uities.pdf

2. You may decide to sell certain assets, such as your home or other real estate.

3. You may decide to obtain a reverse mortgage. See: www.longtermcare.gov/costs-how-to-

pay/paying-privately/reverse-mortgages/.

4. You may be able to use your life insurance policy to pay for your long-term care by using one

of the following methods:

a. Combination life/long-term care insurance policies.

b. Accelerated death benefits from a life insurance policy.

c. Life settlement.

d. Viatical settlement.

5. You could purchase a long-term care insurance policy. Find out more

at: www.naic.org/documents/prod_serv_consumer_ltc_lp.pdf

6. You may buy a long-term care insurance partnership policy. Find out more

at: http://insurance.maryland.gov/Consumer/Documents/publications/longtermcare.pdf

4) Will Medicare pay for my long-term care?

A: If you are eligible for Medicare, Medicare may provide limited coverage for skilled nursing and

rehabilitation services in an approved facility. But, Medicare does not cover custodial care services,

intermediate care or services for a prolonged period of time. For more information about Medicare,

visit the Center for Medicare and Medicaid web site, www.cms.gov/home/medicare.asp.

5) Will my Medicare supplemental policy pay for my long-term care?

A: If you have a Medicare supplemental policy, keep in mind that while some supplemental policies

provide a limited benefit to help pay for at-home recovery on a short-term basis, not all Medicare

supplemental policies cover this expense. Also, while some Medicare supplemental policies provide

a limited benefit while you are in a skilled nursing facility, the benefit only will be payable for the 20th

through the 100th day of skilled nursing care in a nursing home. Under such a policy, you would not

receive any benefits if you are receiving custodial or intermediate care, or if you need care after the

100th day of confinement. It is important that you carefully review and understand the terms of your

Medicare supplemental policy, what it covers, and how much it pays.

6) Will Medicaid pay for my long-term care?

A: Maryland’s Medical Assistance Program (Medicaid) provides coverage for some long-term care

services, but this program is only available if you satisfy certain eligibility requirements. You may be

eligible for Medicaid depending upon your income, available assets and/or health status. For more

information about the eligibility rules for Maryland’s Medical Assistance Program, visit the

Department of Health and Mental Hygiene’s website, http://mmcp.dhmh.maryland.gov. The link for

Medical Care Program Eligibility explains the eligibility requirements. The link for Long-Term Care

gives an overview of which long-term care services are covered.

7) What does long-term care insurance pay for?

A: Long-term insurance policies, long-term care insurance riders to life insurance policies and

annuity contracts provide coverage for certain long-term care expenses that usually are not covered

by traditional health insurance and HMO contracts, Medicare, or Medicare supplemental policies.

Coverage is provided when you are unable to do a certain number of activities of daily living (such

as bathing, eating, or dressing yourself) or are cognitively impaired. While the exact terms and

conditions of coverage depend upon your individual policy, long-term care insurance generally

covers services such as nursing home stays for custodial, intermediate and skilled nursing care.

These policies also may cover home health care and adult day care. Long-term care insurance can

be purchased as a separate stand-alone policy or as a rider to a life insurance policy or annuity

contract. For more information on long-term care insurance, see A Shopper’s Guide to Long-Term

Care Insurance, produced by the National Association of Insurance Commissioners

at: www.naic.org/documents/prod_serv_consumer_ltc_lp.pdf.

8) Should I buy long-term care insurance or a long-term care insurance rider to my life

insurance policy or annuity contract?

A: Long-term care insurance is not for everyone. Before buying a long-term care insurance policy or

a rider to your life insurance policy or annuity contract, it is important to understand what the policy

or contract covers, know the limits of the policy or contract and understand any conditions the policy

or contract may exclude. It is also important to make sure you can afford the premium payments.

It is also a good idea to consult with a tax advisor, as well as an insurance advisor, when deciding

whether a long-term care insurance policy is right for you. You may be eligible for federal and state

tax benefits. Maryland law provides for a one-time tax credit of up to $500 after you purchase a long-

term care insurance policy. In addition, federal law provides tax advantages if you purchase a

qualified long-term care insurance plan.

9) What questions should I ask before buying long-term care insurance or a long-term care

insurance rider to my life insurance policy or annuity contract?

A: Before making a decision to buy a long-term care insurance policy or a long-term care insurance

rider to your life insurance policy or annuity contract, you should consider asking:

 What type of care is covered?

 Is there a waiting period before I can start using the benefits?

 What happens if I am late paying the premium?

 Is there a maximum number of days the policy or contract covers?

 Does the policy or contract have a per-day limit? If so, does it take inflation into account?

 What are the rules about pre-existing conditions?

 What must happen in order for me to receive benefits under the policy or contract, i.e.

doctor’s certification, unable to perform daily activity?

 Has the insurer received approval to sell long-term care insurance in Maryland?

10) What is the Maryland Long-Term Care Insurance Partnership Program?

A: The Maryland Long-Term Care Insurance Partnership Program is an innovative partnership

between Maryland and private insurance companies that issue long-term care insurance policies. A

policy sold under the Long-Term Care Insurance Partnership Program, by law, must meet the same

standards as a long-term care policy not sold under the program. In addition, a partnership policy

must meet certain specific federal and state requirements, and be certified as a “long-term care

partnership policy” by the Commissioner of the Maryland Insurance Administration

(MIA). Partnership policies provide an additional level of protection, when compared to regular long-

term care insurance policies. In particular, Partnership policies permit you to protect additional

assets from spend-down requirements under Maryland’s Medicaid program if you should need

assistance under this program, and you qualify. For more information on the Maryland Long-Term

Care Insurance Partnership, go

to www.insurance.maryland.gov/Consumer/Documents/publications/longtermcare.pdf.

11) Where can I find the Maryland regulations about long-term care insurance?

A: Long-term care insurance regulations are found in the Code of Maryland Regulations (COMAR)

section 31.14 Long-Term Care Insurance. COMAR 31.14.01 relates in general to long-term care

insurance. COMAR 31.14.02 relates to long-term care insurance premium rates and

reserves. COMAR 31.14.03 relates to long-term care partnership policies.

12) Why are long- term care insurance premiums increasing?

A: When long-term care insurance policies were initially introduced across the country in the late

1970’s and early 1980’s, they were the first of their kind. Insurance companies had no prior data

from which to draw assumptions and make predictions about how the insurance market would

behave 30 to 40 years into the future. Unfortunately, many of these assumptions and predictions

were inaccurate and resulted in companies being unable to price the long-term care insurance

products appropriately. As a result, long-term care insurers are raising premiums, to ensure that

they will be sufficient to pay future claims. Some original incorrect pricing assumptions and

predictions included:

 Higher than anticipated persistency: Fewer policyholders have allowed their policies to lapse

than originally anticipated.

 Policyholders are living longer than originally assumed, resulting in a higher rate of utilization

of long-term care benefits. Additionally, the length of time a policyholder utilizes long-term

care benefits is much longer than originally assumed.

 Long-term care insurers’ investment return rates are significantly lower than originally

assumed.

13) What factors do insurance companies consider to determine the premium rates?

A: When insurance companies initially develop rates for long-term care insurance premiums, the

main actuarial assumptions taken into account include lapse assumptions, mortality assumptions,

morbidity assumptions and interest rate assumptions. Additionally, an insurance company may offer

you discounts when you are initially purchasing a long-term care insurance policy, for being a very

healthy applicant (i.e. passing more rigorous underwriting criteria), being married, or living with

someone. Finally, long-term care insurance is generally offered on an issue-age basis, meaning the

younger you are when you buy the policy, the lower the insurance premium.

14) Is there a maximum allowed annual premium increase for my long-term care insurance?

A: Yes. COMAR 31.14.01.04(A)(5) provides that except under certain exceptional circumstances, a

long-term care insurer cannot raise your premium by more than 15% in a 12-month

period. Furthermore, COMAR 31.14.02.06(B)(2)(d) states that, except under limited circumstances,

your renewal premium rate cannot be greater than new business premium rates, except for

differences attributable to benefits.

15) Do I have any options other than accepting the premium rate increase?

A: Yes. If you would not like to accept the full premium rate increase, COMAR 31.14.01.36 requires

every long-term care insurance policy and certificate to include a provision allowing the policyholder

to reduce coverage and lower the policy premium in at least one of the following ways:

 Reducing the maximum benefit; or

 Reducing the daily, weekly, or monthly benefit amount.

Additionally, a long-term care insurer may voluntarily offer you other ways to reduce the impact of a

premium rate increase by including options in the policy to lower the inflation protection rate, or by

providing an option to reduce the inflation protection from compound to simple inflation. Before you

make any decision involving reduction of benefits, you should understand the long term impact of

doing so.

16) What does the MIA do when it receives a request from an insurance company to change

its long-term care insurance premium rates?

The process to file a premium rate change request is as follows:

1. All insurance carriers doing business in Maryland’s individual and group long-term care

insurance market must submit premium rate change requests to the MIA through the System

for Electronic Rate and Form Filing (SERFF).

2. After an MIA analyst confirms that all required documents have been submitted, the filing is

assigned to an initial reviewer. For a detailed description of the initial review process, see

the MIA’s power point entitled, “Long-Term Care Insurance Rate Review Process-Maryland”

(October 27, 2016), available

online: http://insurance.maryland.gov/Consumer/Documents/agencyhearings/Long-Term-

Care-Insurance-Rate-Review-Process-SarahLi.pdf.

3. After completing an initial review, the initial reviewer provides a rate review summary form to

all other MIA actuarial staff for peer review.

4. A public hearing is conducted for every rate increase filing received by the MIA. The hearing

serves as a means for MIA staff, the long-term care insurer that has requested the premium

rate change, and consumers to discuss the rate filing, and for the long-term care insurer to

respond to questions from the MIA staff regarding the rate increase request.

5. After considering the information provided in the hearing, and any additional public

comments, the Insurance Commissioner makes a final decision to approve or disapprove the

premium rate increase request.