Paying for long-term care services is a burden for many of your residents/patients. And while options for payment are few, another option could be available to them through the Assurance Benefit.
This benefit converts the death benefit of an in-force life insurance policy into a long-term care benefit plan. The Assurance Benefit is specifically designed to address immediate needs to pay for long-term care services.
Life insurance is an unqualified asset for Medicaid eligibility. To qualify an applicant will often times need to lapse or surrender the policy. Converting the policy to an Assurance Benefit that pays directly every month towards the costs of long-term care is a Medicaid qualified spend down of the policy and it preserves a portion of the death benefit over the entire period. After years of premium payments, many policy owners will allow a policy to lapse or surrender it for any remaining cash value. This is a big mistake.
A life insurance policy is legally recognized as an asset of the policy owner and it counts against them when qualifying for Medicaid. If a policy has anything more than a minimal amount of cash value (usually in the range of $2,000) it must be liquidated and that money spent towards cost of care before the owner will qualify for Medicaid.
All Medicaid applications specifically ask if the applicant owns life insurance and full policy details. Medicaid recovery units have become much more forceful about looking for life insurance policy death benefits (declared and undeclared) that have paid out to families after the death of a Medicaid recipient. The Assurance Benefit is a qualified spend down of the asset. A partial death benefit is preserved over this spend down period and a final expense payment is also preserved. Once the ABP benefit has been spent down, the enrollee would be able to apply for Medicaid.
The Assurance Benefit Plan (ABP) is not a long-term care policy. The participant enrolls in the program by converting their life insurance policy through an ownership transfer. The client will be transferring all ownership and beneficiary rights to the life insurance policy to the Benefits Administrator. The benefit is administered by a third party administer on behalf of the insured and family with the payments being made every month directly to the licensed provider of long-term care services. SNF, AL, Home Health and Hospice all qualify.
From the moment the ABP is put into effect, the Benefits Administrator will begin making monthly payments to the appropriate health care provider as well as all future premium payments on the life insurance policy. Benefits can stop and start or be adjusted to match changing needs. The Assurance Benefit can be used in combination with a long-term care insurance policy, an annuity, a VA Aide & Attendance recipient, or any other financial vehicle.
The client can customize the monthly payment arrangement to best meet their needs. Generally, clients will try to average out the monthly payments to fully exhaust the benefit over their life expectancy. Should the client pass away with additional monies still due, the remaining benefit is paid directly to the client's beneficiaries.
The total ABP payment amount is based on the face amount of the life insurance policy, annual premium payments and most importantly, health status of the client.The total payment amounts generally range from a low of 20% of the face amount to a high of 50% of the face amount of the life insurance policy, however, each case is individually underwritten.
- There must be a need for long term-care services (within 3 months).
- You must own an in-force life insurance policy.
To application steps include:
- Application and Policy Review
- Value Based Conversion of Policy
- Benefit and Payment Administration
The following information is required:
- Completed Life Care Funding application
- Copy of the life insurance policy
- Current policy illustration
- Signed HIPPA authorization
- Life Insurance Information Release Form
- Last 2 years Medical Records
- Proof of Power of Attorney (If Applicable)
To review, the key benefits of the program include:
- Simple application and review process
- No age or policy size minimum
- No premium payments
- All types of in-force life insurance qualify
- Fixed payments made directly to care provider/facility
- Preserves partial death benefit
Information for this article was provided by the Life Care Funding Group (LCFG). They specialize in converting the death benefit of an in-force life insurance policy into a long term care benefit. For more information, contact 1-888-670-7773.
The Assurance Benefit is something you may want to become more educated about and share with families, caregivers and community members.