LTCI Terminology (Glossary)
ADLs (Activities of Daily Living) – ADLs are specific activities with which most senior care company caregivers provide assistance. Most companies that provide care define ADLs very broadly, describing them as any non-medical activity needed in the home. For example, a company may say they provide assistance with the ADLs that provides assistance with cooking, cleaning, bathing, dressing, meal preparation, continence care, transportation, exercise assistance, medication reminders, light housekeeping and companionship. Long-Term Care Insurance policies, however, frequently define ADLs more narrowly.
Adult Day Care – Provides social and other personal services including supervision and assistance with some ADLs in a community setting. Day care can be provided at anytime of the day but care is always less than 24 hours. Adult day care communities are often used in combination with home and family caregivers to give the primary caregiver a break.
Alternative Plan Of Care – On policies with an Alternative Plan of Care benefit, the carrier will pay for new or emerging services that are not specifically defined under the Long Term Care plan if they later become available and are a reasonable substitute under the individual’s plan of care.
Assisted Living Facility (AL) – Assisted Living Facilities are senior care communities that are licensed by the state to provide room, board, medication management and care. Assisted living facilities are usually large, hotel-like buildings with many rooms and many common areas (i.e. a dining room, game room, libraries, and other common activity areas). Many times AL facilities have a base rate per month and different levels or tiers of care on top of that. For example, Level One may be bathing three times per week and light housekeeping services once a week. Level Two may include all of the Level One care in addition to mobility assistance to the dining room. Level Three may include all of the Level One and Two services, in addition to assistance with continence care medication management.
Bed Reservation Benefit – Pays the cost of reserving your place in a facility should you need or want to leave for an extended period (e.g. for a hospital stay or extended visit with relatives).
Benefit Triggers – Qualifying events to become eligible to receive the benefits of your Long Term Care insurance policy. In a tax qualified policy, this will be the requirement to need assistance for at least 90 days with 2 of the 6 activities of daily living or having a severe cognitive impairment.
Co-Insurance – In Long Term Care the concept of co-insurance refers to the amount that the insured must pay out-of-pocket to make-up the difference between their actual costs and the amount the policy covers. The greater the amount the insured is willing and able to “co-insure,” the lower the policy benefits must be and therefore policy premiums.
Cognitive Impairment – A deterioration and loss of intellectual capability that affects a person’s memory, language, personality and ability to reason, communicate and understand. Severe cognitive impairment is a symptom of Alzheimer’s and other forms of dementia.
Continence – One of the six Activities of Daily Living defined in a Tax Qualified Long Term Care plan. It refers to the ability to control bladder and/or bowel movements.
Compound Inflation – A rider where your benefits increase by a rate that is compounded each year. For example, if your Maximum Daily Benefit (MDB) was $100 and you had a 5% compound inflation rider, the Maximum Daily Benefit would increase by 5% per year. In year two it would be $105, in year three $110.25, in year four $115.76, etc. The difference between a compound and simple inflation rider is not significant in earlier years, but becomes greater as time goes on. It is recommended that you talk to a Long Term Care Insurance specialist to determine which inflation rider would be best for your circumstances.
Comprehensive Policy – An LTCI policy that covers care in multiple settings, including various types of assisted living facilities and home care.
Daily Benefit – See Maximum Daily Benefit.
Elimination Period – Also known as a deductible or waiting period. This is the number of days after the insured qualifies for and begins receiving services before the policy begins to pay benefits. While some policies have no deductible periods and pay benefits from the first day, the most common waiting periods are 30 days, 60 days, or 90 days.
Facility Only Policy – Policy where benefits are only covered if the policyholder is receiving care in a licensed Long Term Care facility, e.g. a Nursing Home or Assisted Living Facility.
Free Look Period – A provision which allows a policyholder to cancel their policy for a full refund within 30 days of receiving it.
Future Purchase/Guaranteed Purchase Option – This means the policyholder’s premium doesn’t increase when they increase coverage under this option as compared to an automatic compound or simple inflation, where coverage would increase each year automatically without a concurrent increase in premium.
Guaranteed Renewable – Guaranteed Renewable means that the insurance company cannot cancel a policy or change any of the benefits, unless a policyholder fails to pay the premiums. Insurance companies are only allowed to increase premiums for a “class” of policies, but not for an individual personally for any reason including a change in health or age.
Hands-On Assistance – The physical assistance of another person without which you would be unable to perform one of the Activities of Daily Living (ADLs). Some insurance carriers define the inability to perform an ADL without hands-on assistance as a trigger for policy benefits. This is a more stringent measure than merely requiring “stand-by” assistance.
Home Care – Assistance with various activities of daily living provided in the home.
Home Health Aide – Hands-on custodial care provided in the home. Home health aides may be licensed but do not provide medical care. Typically they will help with activities of daily living such as bathing, dressing and transferring. Since Home Health Care agencies are usually certified by Medicare, they are more expensive than those that choose not to get certified.
Hospice Care – Hospice Care is designed to give supportive and palliative care to people in the final phase of a terminal illness. It can be provided at home or in a hospice facility, and encompasses physical, emotional and spiritual support for the patient and their family.
Inflation Protection or Inflation Rider – A rider you can add on to your Long Term Care Insurance (LTCI) plan that adjusts the benefits over time to account for inflation. Inflation protection riders can adjust benefits annually based on a simple or compound fixed rate (e.g. 3.2 or 5%) or based on the consumer price index (CPI). Alternatively some plans have a Future Purchase Option where you have the option to increase benefits in the future.
Informal Care – Care provided by family and friends of a loved one. While, unlicensed and generally unpaid, informal care makes up the majority of in-home care and has been termed the “back-bone” of our national Long Term Care system. In residential settings formal, paid care is often used to supplement the informal care provided by family caregivers.
Instrumental Activities Of Daily Living (iADL) – Skills necessary to live independently but not necessary for fundamental functioning. IADLs for instance would include shopping, preparing meals, taking medications, paying bills etc. Inability to complete Instrumental Activities of Daily Living is not a trigger to start receiving benefits under a Long Term Care insurance policy. However, many policies will cover these services for someone who is eligible for benefits due to inability to perform a specified number of the Activities of Daily Living.
International Benefits – Benefits for covered services received outside the United States. Some policies have international benefits included others do not. If this benefit is important to you, let your Long Term Care insurance specialist know so they can find a plan that includes this coverage.
Lapse – Termination of a policy due to the policyholder’s failure to pay the premium.
Lapse Protection – Policyholder’s can pay past-due premiums and reinstate their policies up to 5 months after they have lapsed if the failure to pay was the result of cognitive or functional impairment.
Lifetime Maximum Benefit – The maximum amount an insurance carrier will pay over the life of a policy. For a policy with a maximum Daily Benefit and set benefit period it is equal to the current Maximum Daily Benefit times the Benefit Period in days.
Maximum Daily Benefit – The maximum amount the LTCI policy will pay for covered services in any single day.
Medicaid (MediCal) – Medicaid (Medical in California) is a joint federal and state program that provides health care services for people with low incomes and limited assets. Each state sets its own limit on the amount of income/assets a person can have and still qualify for Medicaid. MediCaid will cover qualified Long Term Care expenses (often limited to a Medicaid qualified nursing facility) for people that are legally impoverished.
Medicare – A federal program to provide hospital and medical insurance to people age 65 and older and to certain ill or disabled persons. Benefits for Long Term Care are very limited.
NonForfeiture Benefits – This is an optional rider on Long Term Care insurance policies that allows the policyholder to retain some limited policy benefit (usually equal to the amount of premiums paid-in) if you lapse your policy.
Partnership-Certified Policy – A Long-Term Care insurance policy approved by your state for participation in the partnership program. This program allows you to receive benefits from Medicaid for Long Term Care services without spending-down all of your assets if you have previously purchased and depleted the benefits in a partnership-certified policy. This program is not currently available in every state.
Personal Care – Non-medical care and assistance needed to help a person perform activities of daily living and/or supervision and assistance for someone suffering from a severe cognitive impairment. Most health insurance plans do not cover custodial or personal care but are limited to acute or rehabilitative skilled-care. Long Term Care insurance plans were therefore designed to cover these services.
Plan Of Care – A documented, individualized plan of Long Term Care services prepared by a Licensed Health Care Practitioner (LHCP). Typically a Plan of Care would include the types and frequency of care needed and whether the care was to be provided by family care-givers or through formal paid care providers. If formal care is required the care plan should include a list of potential providers including whatever community services are available in the area.
Pre-Existing Conditions – Medical conditions that existed, were diagnosed, or were under treatment before the policy was issued. If the application is approved by underwriting, most Long Term Care insurance policies will cover pre-existing conditions as long as they were revealed at the time of application.
Respite Care – Respite care refers to temporary or short-term care provided to the patient so that the primary informal care-giver can take a break or rest. Respite care can be provided at home or in a facility and allows the primary care-giver a temporary relief from care-giving.
Simple Inflation – A rider where the benefit increase by a fixed amount per year. For example if your Maximum Daily Benefit (MDB) was $100 and you had a 5% simple inflation rider, the Maximum Daily Benefit would increase by $5.00 per year. Therefore in year two it would by $105, in year three $110, in year four $115 etc. The difference between a compound and simple inflation rider is not significant in earlier years, but becomes greater as time goes on. It is recommended that you talk to a Long Term Care specialist to determine which inflation rider would be best for your individual circumstances.
Skilled Nursing Facility/Nursing Home – The highest intensity level of Long Term Care. A skilled nursing facility is defined as a health facility or a distinct part of a hospital that provides 24 hour a day nursing care on an inpatient basis. Skilled nursing facilities will have a registered nurse or LPN on duty at all times and a licensed physician on call at all times.
Stand-By Assistance – The presence of another person within arm’s reach required to prevent injury during the performance of an ADL. For example, if you need somebody standing by to catch you in case you fall getting in and out of the bath. This is a lesser requirement for triggering of policy benefits than the requirement for hands-on assistance.
Step-Down – A policy feature which allows a policyholder to reduce coverage in exchange for a lower premium. For instance, a policyholder can reduce the Daily Benefit, or the total number of years the policy will pay or increase the elimination period. A policyholder has the right to step down policy benefits anytime after the first year and should always be considered before lapsing coverage.
Substantial Supervision – Continual monitoring of a cognitively impaired person.
Tax Qualified – In 1996, Congress passed the Health Insurance Portability and Accountability Act (HIPAA). Under this bill there are federal tax advantages for LTC policies that are designated “tax-qualified” (TQ). For instance, on a tax-qualified policy you may be able to deduct part of the policy premium from your taxes as a medical expense if you qualify for a medical expense deduction. Likewise, insurance benefits from a Tax Qualified policy, in general, are not taxable as income. To be defined as “tax-qualified” the Long Term Care policy must meet the provisions of the federal guidelines defined in HIPAA. Policies purchased on or after January 1, 1997 may or may not be tax-qualified. All Long Term Care insurance policies purchased before January 1, 1997 are “grandfathered in” and are considered qualified for tax-favored status.
Toileting – One of the six defined Activities of Daily Living in a federally tax-qualified Long Term Care insurance policy. Refers to the ability to get on and off the toilet and perform hygiene related tasks.
Transferring – One of the six defined Activities of Daily living in a federally tax-qualified Long Term Care insurance policy. Refers to the ability to move in or out of a bed, chair or wheelchair.
Underwriting – The process whereby the insurance carrier reviews an individual’s health status prior to issuance of a policy in order to determine if they are eligible for coverage. Underwriting for Long Term Care generally involves one or more of the following: completion by applicant of medical questionnaire, review of applicants medical records, a telephone interview by a nurse or health aid including a cognitive test, an in-home physical and cognitive assessment by a nurse or health aide.
Waiver Of Premium – A common provision in Long Term Care insurance policies that waives the requirement to pay premiums while the insured is receiving benefits.