Group long-term health insurance provides coverage for institutional and home care services in which caregivers help you perform tasks related to daily living. A person may need long-term care upon developing a medical condition that results in disability, such as multiple sclerosis, rehabilitating after a stroke or experiencing cognitive impairments related to a diagnosis of Alzheimer's disease.
Benefits
Long-term care policies pay for care at nursing homes, assisted living facilities and adult day care centers, as well as for services that health aides or physical therapists render when they come to your home to assist you. The insurance provides benefits to help people pay for assistance with getting out of bed, getting dressed, bathing, cooking, going to the bathroom and other "activities of daily living," according America's Health Insurance Plans (AHIP), a trade group representing health insurers.
Significance
According to the U.S. Department of Health & Human Services, at least 40 percent of people age 65 years and older may need to enter a nursing home during their lifetime. Younger people who become disabled after an injury also may need a caregiver's assistance. With the cost of one year at a nursing home averaging more than $50,000 and payments to a part-time health aide averaging $12,000 a year, according to AHIP, long-term coverage may appear a wise investment. Many people, however, hold off from purchasing a policy due to cost, uncertainty about needing the care and confusion about plan benefits, says AARP, a membership organization for people age 50 years and older.
Daily Benefit
For some policies, insurance companies reimburse beneficiaries a fixed amount per day or month for services they receive. Policyholders choose the fixed amount when purchasing the plan. They also choose a specific length of time for receiving the benefits. Some plans pay the full daily or monthly benefit while other polices reimburse only for the actual cost of care up to the maximum benefit, AARP notes. Most policies also have an "elimination period," a length of time during which the beneficiary needs nursing home care or the services of a home health aide before the policy starts to pay benefits, according to the National Association of Insurance Commissioners, an association of state insurance regulators.
Pool of Money
Some policies use a "pool of money" approach in which insurers multiply the daily or monthly benefit by the number of years of coverage purchased. The beneficiary can spend from this pool at any rate for any combination of services the policy covers. For example, a policy that pays $150 per day for three years would yield a total benefit pool of $164,250, according to an AARP report. The total pool of money may last longer if the consumer uses home care, while staying in a private room at a nursing home may exhaust the beneficiary's funds more quickly.
Premiums
For group policies, employers or other organizations generally negotiate rates on behalf of individuals. As with group medical coverage, which pays for doctor visits and hospitalization, long-term care policyholders pay monthly premiums to an insurance company to share the financial risk of requiring caregiver services. The premium amount depends on the daily or monthly benefit a member chooses, the number of months for receiving the benefits, the elimination period time length and the beneficiary's age, AHIP notes.
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