Are you going to be an ant or a grasshopper?
A Time for Play and a Time for Work
Regardless of your age or generation you’ve likely heard Aesop’s fables, even if you didn’t realize that’s what you were hearing. Stories like “The Tortoise and the Hare” and “The Boy Who Cried Wolf” are told to children as fun stories that also have important lessons on persistence and the importance of telling the truth. Another fable, the story of “The Ant and the Grasshopper,” tells of the importance of hard work and preparation. The grasshopper, singing and dancing the summer away, cannot fathom the reason the ants are hard at work stockpiling food for the winter. When the winter comes and the ants are reaping the rewards of their hard work while the grasshopper starves, suddenly everything makes sense. I think we can all agree on the importance of hard work and preparation, and planning for long-term care is no exception.
I have previously written on the importance of planning for long-term care, and you can read about that here. You may have read that post and thought that you’ve planned adequately because you purchased insurance years ago, and that will take care of the problem. While there’s some truth to that, and by purchasing a policy you’ve done more planning than the majority of people out there, if your goal is to be the ant and not the grasshopper, we need to take that level of planning one step further.
Be the Ant
It’s pretty common for clients who own long-term care insurance policies to have purchased them twenty to thirty years ago, and if you haven’t reviewed your policy since that time, it’s time for a refresher. Before jumping into your own policy’s terms, here are a few definitions to review for phrases that are common to see in any long-term care insurance policy:
Benefit period:
The number of days or weeks that an insurance policy will pay out benefits.
Elimination period:
The number of days that the insured must meet the criteria to trigger the policy before the insurance policy will begin to pay out benefits. The two types that you typically see with long-term care insurance contracts are calendar-day and service-day elimination periods. A calendar-day definition will credit every day towards the elimination period qualification regardless if professional care is being received each day. Service-day periods only credit days that care is provided. Calendar-day periods are preferable to service-day periods because it’s quite likely in the beginning of an extended care event that you will not need professional care every single day.
Indemnity vs. Reimbursement:
Once you’ve satisfied the elimination period, an indemnity policy provides a specific amount of money that will be paid to the insured regardless of how much the care received actually costs. A reimbursement policy will provide a monthly benefit equal to the cost of care after you’ve paid for it, up to the maximum benefit amount of the policy.
Inflation protection:
Most policies today are sold with an inflation protection rider, which allows the benefit amount to grow annually at a specified rate (typically 3 or 5 percent compound). While an inflation protection rider can be an expensive option to add on to a policy, it’s usually recommended in order to ensure that a policy can keep up with the rising costs of healthcare over time.
It’s important to remember that insurance policies are legal contracts between the insured (you) and the insurance company. With these basic definitions in mind, it’s time to start stockpiling food for the winter by dusting off those old contracts and reading the fine print. Some policies will pay for home healthcare and facility care; others may only pay for facility care. Some policies require a professional to provide the care; others may allow you to pay a family member to provide care for you. When it comes to insurance the devil is in the details, and understanding these details will help you feel empowered and prepared when winter finally comes.
You should also recognize that ants don’t work alone. Similarly, it’s important that you bring a trusted family member, friend, or Power of Attorney into your colony when doing your homework. It’s entirely possible that you will need assistance applying for your long-term care claim, and having someone who has done their homework on your insurance policy alongside you can help the process of applying for your claim move much more smoothly.
So, after some time digging through your policy, you’re starting to build a pretty strong foundation for your family and you’re feeling more and more like an ant as opposed to that flaky, unprepared grasshopper you used to be. You found out that:
- You have a policy that will cover facility care after an elimination period of ninety days.
- Your policy’s benefit amount has more than doubled since you bought it twenty-five years ago due to that inflation protection you fortunately decided to buy.
- It’s a reimbursement policy, and you will be refunded up to the amount you’re spending for care.
You’re feeling confident about the upcoming winter. But wait…how will we know when that winter is actually here and it’s time to use the policy?
In order to qualify for a long-term care insurance claim, a medical professional must certify that you either need help with at least two activities of daily living (eating, bathing, dressing, toileting, transferring, and continence) or that you have a severe cognitive impairment. Once you have met either of the qualifying medical triggers as well as the elimination period, then the insurance benefit will start to pay out.
Winter has Arrived
Your anthill has successfully stockpiled resources for the harsh winter, and finally snow starts to fall around you. You and your loved ones have noticed over the last year or so that you cannot get around like you used to, and your doctor agrees that you need formal assistance with multiple activities of daily living. Reaching out to your insurance company with your trusted ant family, you find out that applying for claims is pretty complicated even with advance preparation. Next thing you know, a large packet of paperwork shows up at your mailbox. Rest assured though, you ants are prepared for everything to come.
While the names of the forms will vary a bit from one insurance company to another, there are typically five documents needed to apply for a claim, and it’s highly recommended that you complete and submit them all together at once:
- Policyholder Statement: completed by you or your Power of Attorney, providing basic information about the insured as well the reason for the claim
- Attending Physician Statement: completed by the doctor certifying that you need the care, usually your primary care physician, describing the tests and reasons that you need the care
- Nursing Assessment and Plan of Care: completed by a nurse, detailing the types of care that you will need
- Provider Statement: completed by any facilities or home-healthcare companies that are already providing care, showing that they are capable of providing the care detailed in the Plan of Care. The Provider Statement also can be used to show the care they have already provided to you, which is key to ensuring those days of care you have paid for are counted towards your elimination period.
- Authorization to Release Information: signed by you or your Power of Attorney, allowing the insurance company to collect information on your healthcare history in order to process and eventually approve the claim
The claims process can often be completed in a few weeks’ time, depending how quickly you and the other ants in your colony can coordinate all of the moving parts and pieces. For a grasshopper who doesn’t understand the provisions of their policy, I’d expect it to take a fair bit longer. Completing paperwork only partially or improperly can lead to significant delays in the approval process or even claims being denied, requiring you to reapply.
As Aesop’s old fable reminds us, there’s a time for play and there’s a time for work. Years ago when you purchased that long-term care insurance policy, you made a decision to start preparing for the winter ahead. Even if you’ve recently spent some years as a grasshopper enjoying summer, it’s not too late to return to your ant ways and ensure that you and your family are armed with knowledge and prepared for what is to come. A bit more work in the short term will pay dividends when winter inevitably comes.
Jacob Yocco, CFP®
