Does Long-Term Care Insurance Cover Assisted Living? How to Find Out What Your Policy Actually Pays

Many long-term care policies help pay for assisted living, but not every policy does, and only the policy itself can tell you how much it pays, when it starts, and what has to happen first. Policies differ a great deal from one another.

I'm Parul Darji. I'm a registered nurse, and I own Aspen Leaf Assisted Living Residence, four small homes in Flagler, Stratton, and Limon on Colorado's Eastern Plains. I'm not an insurance agent, and I can't tell you what your policy pays. What I can do is tell you what families need to ask, because finding out is a phone call, not a project.

Does long-term care insurance cover assisted living?

Often it does, but not always, and the exceptions tend to be older policies.

Some policies written years ago may cover nursing home care only, because that was what long-term care meant when they were sold. Others pay for care at home but not in a residential setting, or the reverse. Newer policies are usually broader, and many cover care in a licensed assisted living residence.

So the first question isn't "how much does it pay." It's "is assisted living in a licensed residential setting a covered benefit at all?" Everything else follows from that answer.

What triggers the benefit?

A diagnosis alone usually doesn't. Most policies pay when someone needs help with everyday activities, or needs supervision because of a cognitive impairment.

The everyday activities are nearly always the same six: bathing, dressing, using the toilet, moving between a bed and a chair, continence, and eating. Most policies start paying when someone needs help with at least two of them.

If the policy is "tax-qualified" (the policy or its outline of coverage will say so), federal law sets the rules:

• Someone licensed has to certify it. That can be a doctor, a registered nurse, or a licensed social worker. In practice, many insurers send their own nurse or social worker to do the assessment.
• The need has to last. It must be expected to continue for at least 90 days, and it's recertified at least once a year.
• Help doesn't have to be hands-on. Under IRS guidance, help counts when someone physically helps with the activity, and also when someone has to stand by within arm's reach to keep the person from getting hurt, such as being ready to catch them if they slip getting out of the shower.
• Cognitive impairment is its own trigger. Someone with dementia who can still do all six activities may qualify because they need supervision to stay safe, without meeting the activity count at all. Families with a parent who is physically well but no longer safe alone often assume the policy is no use to them, and they can be wrong.

Older policies, bought before these rules took effect in 1997, can use different wording, which is one more reason to ask the insurer to describe the trigger in plain language.

What is an elimination period, in plain terms?

It's a deductible measured in days instead of dollars.

The policy names a number of days, and benefits start after that many days have passed once the trigger is met. Many policies let the buyer choose 30, 60 or 90 days. During that stretch, care is usually paid for out of pocket, so it's worth knowing the number before month one.

The detail that surprises families isn't the length. It's how the days are counted. Some policies count every calendar day once care begins. Others count only the days on which paid care was actually received. Under the second kind, a 30-day elimination period can take a good deal longer than 30 days to satisfy.

Ask which kind yours is. It's one sentence, and it changes how much your family needs to have available up front.

What questions should you ask your insurer?

Call the number on the policy and ask these, in this order. Have the policy number in front of you and write the answers down, because you'll be repeating them to a care home later.

• Is care in a licensed assisted living residence a covered benefit under this policy?
• What has to happen before benefits begin? Ask them to describe the trigger in plain language, not by clause number, and who does the assessment.
• How long is the elimination period, and how are those days counted?
• Is the benefit paid as reimbursement, or as a fixed daily or monthly amount? This changes what paperwork you'll be doing every month.
• Who gets paid, us or the care home? Some policies pay the family, and some pay the provider directly.
• What's the most it pays per day or per month, and is there a lifetime maximum?
• Does the benefit amount grow over time? A policy bought long ago without inflation protection may pay a much smaller share of today's costs than the family remembers.
• What does a care home have to be for its costs to be covered? Requirements on licensing and setting vary, and this is the question that decides whether a specific home works.
• How and when do we file a claim, and what do you need from us and from the home?

That last one saves weeks. Insurers usually want an assessment and a plan of care, and both take time to arrange.

What surprises families most?

These come up again and again:

• Waiting to call. The policy has a section on how and when to give notice of a claim. Call as soon as care is being considered, not after a parent has been living somewhere for two months. The assessment and the paperwork take time, and the elimination period can't start until the trigger is met.
• Reimbursement means paying first. Under a reimbursement policy, the family pays the home and then submits receipts for repayment. That's a cash-flow reality worth planning for, not just paperwork.
• The home has to fit the policy. Not every residential setting meets every policy's wording. Ask the insurer what it requires, and ask the home whether it meets it, before move-in, not after.
• The benefit pool can run out. Many policies pay up to a lifetime maximum rather than for an unlimited time. Knowing roughly how long it can last is part of the plan, because assisted living is often not a short chapter.
• No inflation protection. A daily benefit set decades ago and never adjusted may now cover much less of the cost than the family expects.
• Nobody can find the policy. It happens more often than you'd think. If a parent mentioned buying one and the papers have vanished, old bank statements or checkbooks often show who the premiums went to, and that company can look the policy up. If the company has since been bought or renamed, the Colorado Division of Insurance answers consumer questions about insurers.

What does the care home need to do?

It's less than families fear, though there is some work involved, and it's fair to ask about it on a tour.

A home is usually asked to confirm what care a resident receives and how often, provide records that support the claim, and send monthly statements in whatever form the insurer wants. Some insurers also want a care plan on file.

Only your insurer can say what your policy pays, and you should be wary of anyone who offers to tell you instead. What we can do is help you understand what the policy covers and handle the paperwork with you. All four of our homes accept Long-Term Care insurance, along with Medicaid, VA benefits, and private pay. That's our homes in Flagler and Stratton and our two Limon homes on 6th Street and Circle Lane.

What if the policy covers less than you hoped?

Then it's one piece of the plan rather than the whole of it. The two other routes families most often use are applying for Medicaid to pay for assisted living in Colorado, which covers the care itself through the HCBS waiver, and VA Aid and Attendance, which a surviving spouse may be eligible for as well as a veteran. For what the monthly cost covers in the first place, see what assisted living costs in Colorado. If you're still working out whether this kind of care is the right fit at all, start with what assisted living is.

When you're ready, get the brochure, or schedule a visit to see the homes and talk the policy through with us. Coming to look doesn't commit anyone to anything.

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Parul Darji, RN — Owner & Administrator, Aspen Leaf Assisted Living Residence. Serving families in Flagler, Stratton, and Limon, Colorado.