Long-term care insurance partnership policies, which are available in most states, offer your clients a strategic advantage to plan for their long-term care costs while also exempting additional assets from Medicaid in the event they exhaust their long-term care insurance (LTCI) policy benefits and seek financial assistance.
Read More: Why Your Clients Should Pre-Plan for Long-Term Care
What Is LTCI State Partnership?
The Deficit Reduction Act of 2005 enabled individual states to create long-term care partnership programs. Essentially, these programs are alliances formed between the state and private insurance companies to encourage people who might otherwise rely on Medicaid for their long-term care needs to purchase partnership-qualified LTCI policies. The key benefit of LTCI partnership plans is they allow policyholders who deplete their policy benefits to retain additional assets (typically equal to the amount of LTCI benefits used) beyond Medicaid’s resource allowance and still qualify for financial assistance, as long as they meet all other eligibility requirements.
LTCI Inflation Protection Required
The DRA requires that LTCI partnership policies include inflation protection if sold to an individual age 76 or under. The specific requirements vary depending on the age of the insured at the time of purchase. Here is a summary of the inflation protection requirements:
Below Age 61: Compound annual inflation protection is required, but states can determine the percentage rates. (About half of states currently allow for percentages between 1-5%, while the remaining have a minimum of 3%.)
Ages 61-76: Some level of inflation protection is required.
Over Age 76: Inflation protection is optional.
LTCI Partnership Policy Case Study
Sharon (age 55) is researching her options for long-term care insurance policies:
| Option 1 | Option 2 | |
|---|---|---|
| Monthly Benefit | $5,000 | $5,000 |
| Benefit Maximum | $180,000 | $180,000 |
| Inflation Protection | No | Yes, 1% |
| Partnership Qualified | No | Yes |
| Monthly Benefit at Age 80 | $5,000 | $6,412 |
| Benefit Maximum at Age 80 | $180,000 | $230,838 |
| Monthly Premium | $148 | $212 |
Sharon isn’t sure if she should spend the extra money to ensure that she has partnership protection. However, she has assets worth $225,000 that she would like to pass along to her daughter. In the end, she decides to purchase the 1% inflation option to qualify for partnership protection. That way, she’ll be able to safeguard additional assets if she requires additional care after exhausting her LTCI benefits and seeks financial assistance through Medicaid.
At age 80, Sharon is diagnosed with dementia and requires care. After 3 years, she has used up all of her LTCI benefits, and she applies for Medicaid. Thanks to partnership protection, the amount that has been paid out in policy benefits—$230,838—is protected from Medicaid.
Sharon passes away at age 85. Because she purchased an LTCI partnership policy, Sharon was able to leave an inheritance to her daughter.
To learn more or find out if your state participates in the long-term care insurance partnership program, schedule a call with us.
