Long-term care (LTC) insurance is a crucial consideration for individuals planning for their future healthcare needs. This article addresses common questions about long-term care insurance in Indiana, with a focus on the Indiana Long Term Care Insurance Program, also known as the “Partnership Program”.
Why Purchase Long Term Care Insurance?
Life is unpredictable, and so are our future medical needs, financial situations, and levels of family support. While people are living longer and healthier lives, aging is inevitable, and accidents causing disability can happen at any age. A medical or mental condition can impact our ability to perform everyday activities. Just as we insure our cars and homes to mitigate financial risks, long-term care insurance helps offset the potential financial burden of needing extended care. An LTC policy empowers you to manage your long-term care needs and safeguard your financial resources. In Indiana, you can choose between traditional and Partnership long-term care policies.
Will Medicare Cover Long Term Care Costs?
Medicare’s coverage for long-term care services is limited and conditional. Medicare Part A offers a maximum of 100 days of coverage, fully covering the first 20 days and requiring a significant co-payment for the subsequent 80 days. Furthermore, Medicare’s coverage is primarily for skilled care aimed at improving a patient’s health, provided in a Medicare-approved facility, and typically requires a 3-day prior hospital stay. It does not cover the custodial care needs often associated with long-term care over extended periods.
What is the Indiana Long Term Care Insurance Partnership Program?
The Indiana Long Term Care Insurance Program, or “Partnership Program,” is a collaborative effort between insurance companies and state and federal governments. Its goal is to raise awareness and understanding of long-term care and assist Indiana residents (“Hoosiers”) in making informed decisions about their long-term care needs. The program aims to educate consumers about planning for potential future care needs and the role of insurance in that planning.
Does the State of Indiana Sell Partnership Program Policies?
No, the State of Indiana does not sell insurance policies under the Partnership Program. Insurance companies are the entities that sell these policies. The Partnership Program, operating within the Department of Insurance, collaborates with insurance companies and agents to promote long-term care awareness and oversees the program’s implementation. The Department of Insurance reviews and approves policies to ensure they meet all necessary regulatory requirements and consumer protection standards.
Partnership Policy vs. Traditional Long Term Care Policy: What’s the Difference?
Both traditional and Partnership long-term care policies offer benefits for long-term care services up to the policy’s specified limits. However, Partnership policies are distinguished by mandatory consumer benefits, some of which might be optional add-ons in traditional policies. Crucially, a Partnership policy provides extra financial protection if you ever need to apply for Medicaid. With a Partnership policy, you may not be required to “spend down” your assets to become eligible for Medicaid, and assets protected under a Partnership policy are also shielded from Medicaid estate recovery after your passing.
Understanding Asset Protection in Partnership Policies
Asset protection is a key consumer benefit included in Partnership policies, provided by the State of Indiana without additional charges. Consider this scenario: an individual with a long-term care insurance policy (either traditional or Partnership) exhausts their policy benefits but still requires ongoing care. They must then use personal or family funds to cover these costs.
If the individual cannot afford continued care, they might need to apply for Medicaid, a government assistance program. Medicaid eligibility typically requires individuals to have income at or below specific guidelines or to “spend down” their assets to meet those levels. A Partnership policy offers asset protection, meaning individuals can protect assets like cash, savings, checking accounts, IRAs, certificates of deposit, and real estate. It’s important to note that income sources like social security and interest income are not protected.
This asset protection feature is exclusive to Partnership policies and is not available with traditional long-term care insurance policies.
Are Partnership Policies More Expensive Than Traditional Policies?
No, the cost of a long-term care insurance policy is determined by four primary factors: 1) your age at the time of purchase, 2) the specific benefits you select, 3) your current health status, and 4) the insurance company you choose. If all these factors are equal, there is no difference in the price between a traditional and a Partnership policy. The asset protection benefit in a Partnership policy is provided by the State of Indiana at no extra cost; it is not a feature that insurance companies charge for.
How Can I Purchase an Indiana Partnership Long Term Care Policy?
Partnership policies are available through various insurance companies. Some companies offer both traditional and Partnership policy options. The State of Indiana itself does not sell Partnership policies. A list of insurance companies participating in the Partnership Program is usually available on the Indiana Department of Insurance website or the Partnership Program’s official webpage.
How Can I Identify if I Have a Partnership Policy?
Indiana began selling Partnership policies in May 1993. To determine if your policy is a Partnership policy, check the first page of the policy documents, the Outline of Coverage, and the application. These documents for a Partnership policy will contain specific language, often in bold print and enclosed in a box, explicitly stating that the policy qualifies under the Indiana Long Term Care Insurance Program for Medicaid asset protection. This boxed statement will look similar to:
| THIS POLICY {CERTIFICATE} QUALIFIES UNDER THE INDIANA LONG TERM CARE INSURANCE PROGRAM FOR MEDICAID ASSET PROTECTION. THIS POLICY {CERTIFICATE} MAY PROVIDE BENEFITS IN EXCESS OF THE ASSET PROTECTION PROVIDED IN THE INDIANA LONG TERM CARE PROGRAM. |
|---|
Conversely, if a policy is not a Partnership policy, it will have boxed language stating “this policy does not qualify ……” for the Indiana Partnership Program.
Can Asset Protection Be Added to a Non-Partnership Policy?
No, asset protection cannot be added to a traditional long-term care policy. A policy is classified as either traditional or Partnership at the time of issue. Partnership policies are designed with specific consumer benefits, including asset protection, which are not standard features of traditional policies. Asset protection is exclusively a feature of Partnership policies.
Is it Illegal if My Agent Didn’t Discuss Partnership Policies After 1993?
No, it is not illegal. However, agents need specific qualifications to sell Partnership policies. To sell Partnership policies, agents are required to complete 8 hours of general long-term care training plus an additional 7 hours of training specifically focused on Partnership policies. If your agent did not discuss Partnership policies, it might be because they had not completed this specialized training or they represented an insurance company that does not offer Partnership long-term care policies.
What Level of Asset Protection Does an Indiana Partnership Policy Provide?
Indiana Partnership policies offer two types of asset protection: Dollar for Dollar and Total Asset Protection. The type of protection depends on the initial coverage amount you purchased and the inflation protection features of your policy.
A Total Asset Protection policy can protect all of your assets if you meet Medicaid eligibility requirements after exhausting your policy benefits. To qualify for Total Asset Protection, the policy must meet specific criteria: 1) include 5% compound inflation protection, 2) have a total benefit amount at least equal to the state-set minimum for the year of purchase, 3) have exhausted all policy benefits, and 4) not have had its total benefit reduced below the state-set minimum for the year of reduction. If these conditions are met, all of your assets, regardless of value, are protected when applying for Medicaid.
A Dollar for Dollar Partnership policy provides asset protection equal to the amount the policy has paid out in benefits, up to the policy’s maximum benefit.
How Can I Determine the Coverage Amount Needed for Total Asset Protection?
The Indiana Long Term Care Partnership Program provides resources, often available under sections like “Consumer Information” on their website, which include charts detailing the minimum coverage amounts required for Total Asset Protection. These minimum amounts are typically increased annually, often by 5% each year, to account for inflation and rising care costs.
Is My Income Protected Under an Indiana Partnership Policy?
No, income is not protected under an Indiana Partnership policy. While Partnership policies offer asset protection if you need to apply for Medicaid due to insufficient funds for long-term care, this protection extends to assets but not to income. Income will still be considered when determining Medicaid eligibility and potential contribution to the cost of care.
Is My Long Term Care Policy Valid If I Move to Another State?
Yes, long-term care policies, whether traditional or Partnership, are generally portable. They will cover services received in other states, regardless of where the policy was purchased. If you purchased an Indiana Partnership long-term care policy and are applying for Medicaid in a different state, you may also have asset protection through Reciprocity agreements with that state. It’s important to note that asset protection under a Reciprocity Agreement is typically on a dollar-for-dollar basis, even if your original policy was for Total Asset Protection in Indiana.
Can I Deduct Long Term Care Insurance Premiums on My Taxes?
Yes, you may be able to deduct a portion of the premiums paid for a tax-qualified long-term care insurance policy on your federal income tax return. Furthermore, if you have an Indiana Partnership LTC policy, you can deduct the premiums paid on your Indiana state income tax return using Form IT-40, Schedule 1&2, under “other deductions,” Code 608. Tax deductibility is subject to certain limitations based on age and adjusted gross income, so consulting a tax advisor is recommended.
Does a Partnership Policy Automatically Qualify Me for Medicaid?
No. Purchasing a Partnership LTC policy does not automatically make you eligible for Medicaid. The primary reason to buy long-term care insurance is to plan for potential future healthcare needs due to chronic conditions or illnesses and to manage the significant costs associated with that care. A long-term care policy gives you greater control over your care decisions and helps to manage expenses. In the event you do need to rely on Medicaid to cover long-term care costs, a Partnership policy with asset protection provides a financial safety net, protecting your assets while still potentially accessing Medicaid benefits if your care needs exceed your policy coverage.
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