Long-Term Care Insurance State Partnership Plans

About two thirds of the states have long-term care insurance partnership programs put in place for their residents. These partnership programs were designed to encourage the purchase of Long-Term Care insurance by state residents so that the states can reduce its liability for paying for long-term care costs in the future. These partnership plans are vital if the current State Medicaid (or MedI-Cal in California) are to remain solvent.

The advantage the partnership policies have to consumers is that the state acts as a safety net for them in case their care exceeds the benefits of their Long-Term care policy, and they are guaranteed that long-term care costs will not be allowed to completely wipe out all of their assets.

The basic premise of the partnership program is that it allows the purchaser of a Long-Term Care insurance policy to shelter an amount of funds equal to the amount the policy pays out in benefits and still qualify for state assistance through Medicaid, as long as he or she has exhausted all of the benefits and still needs care. This ensures that Long-Term Care insurance partnership policyholders will never have to be impoverished to receive state assistance, even if their need for care outlasts the benefits of their Long-Term Care insurance policy.

This is a clear benefit to consumers, because they no longer have to buy policies that contain lifetime benefits to ensure that long-term care costs won’t wipe out their life savings. They can choose a lower benefit period instead, perhaps three to five years, which is very adequate coverage for the vast majority of consumers.

What identifies a policy as being partnership-qualified? There are several qualifications that were outlined in the federal Deficit Reduction Act of 2005, including the need to be federally tax-qualified and to contain the consumer protection provisions of the NAIC LTC Model Act and Model Regulation. The vast majority of policies sold today already have those provisions.However, there is one requirement that contributes more than almost any other to qualifying a Long-Term Care insurance policy for the partnership program. It must have the age-appropriate inflation protection benefit.

These requirements are as follows:

• Those age 60 or younger must have “compound annual inflation protection.”
• Those at least 61 but younger than 76 must have “some level of inflation protection.”
• Those age 76 or older must be offered an inflation protection option, but they are not required to purchase that option.

Why is inflation protection given such prominence in partnership-qualified policies? The answer is that if partnership-qualified policies don't have inflation protection, the purpose of a partnership program may be defeated.

This is because the whole purpose of the partnership program is to help relieve the financial burden of long-term care costs from the state Medicaid or Medi-Cal systems. If a consumer buys a Long-Term Care insurance policy but does not allow it to keep pace with the rising costs of care, the insufficient benefits will be more likely to force the policyholder to turn to Medicaid or Medi-Cal anyway. With very few assets left, the state will have to pick up the rest of the bill for this individual and the original intent of the program is defeated.

Long-Term Care specialists require special state certification to be able to sell the partnership plans. The long-term care specialist works for you, the client, and shows no bias towards one carrier or another. Schedule a consultation to determine which carrier, and what benefits would best satisfy your individual needs.