Indiana Program Helps With Obtaining LTC Policies

Aug. 06--Hoosiers can take advantage of the Indiana Long-Term Care Partnership Program, a collaboration between the long-term care insurance industry and the federal and state government designed to encourage awareness of long-term care insurance, said Rebecca Vaughan, long-term care program director with the Indiana Department of Insurance.

"A Partnership policy provides a policyholder with a significant level of financial protection for long-term care services, enables the individual to maintain control over health care choices and helps preserve Medicaid dollars," she said.

Partnership long-term care policies, sold by insurance companies and now available in 44 states, require more consumer protections than traditional insurance policies, she said -- adding that Indiana and the other three original Partnership states have different Partnership policy requirements.

"Indiana Partnership policies require certain minimum levels of benefits, have additional consumer protections and provide asset protection," she said. "If a person purchases an Indiana Partnership policy, uses all their insurance benefits and as a last resort must apply to Medicaid for continued care, he or she has protection from Medicaid asset spend down."

Vaughan said if you buy an Indiana Partnership policy and use up all the insurance benefits, you may need to apply for Medicaid, a federal/state-funded medical assistance program for low-income individuals.

"Medicaid eligibility only allows a beneficiary to keep $1,500 in assets and would require a spend down of assets above this amount," she said. "However, a Partnership policy allows an exemption from the spend down equal to either the amount paid out in insurance benefits or a total asset exemption."

If a person has "nonexempt" assets -- things like cash, annuities, cash, IRAs, certificates of deposit, mutual funds, stocks and bonds -- that exceed the allowable limits of $1,500 for an individual and $2,250 for a couple, those assets must be disposed of or "spent down" in order to qualify for Medicaid.

A person can keep certain "exempt" assets -- things like a home, home furnishings, vehicle and personal effects -- and still qualify for Medicaid.

So the protection from the spend down basically allows people who buy a long-term care Partnership policy to preserve some of their assets and still qualify for Medicaid.

Vaughan said Indiana requires a Partnership policy to have either 5 percent compound inflation or a Consumer Price Index inflation factor, thus protecting the policyholder from the rising cost of long-term care.

"No specific amount of coverage is required unless you are purchasing a total asset policy," she said. "These benefit requirements provide a policy that contains a good level of insurance coverage and also allow policy benefits to keep up with inflation on long-term care services."

Indiana Partnership policies have two kinds of asset protection. One is "dollar-for-dollar asset" protection, which allows an individual to keep an amount equal to the amount paid out in insurance benefits. The other is "total asset" protection, which allows an individual to keep all assets from the Medicaid spend down regardless of the amount paid out by the insurance policy.

Vaughan said each year, the minimum amount of initial policy benefit required for total asset protection increases by 5 percent. For 2012, an initial policy amount must be $277,190 to earn total asset protection.

Vaughan said it costs insurance companies no more to offer a Partnership policy than a traditional policy with the same benefits.

"There is no cost for asset protection, and no risk to the insurance company for this feature," she said. "Asset protection is an economic incentive provided by the state in return for purchasing a long-term care policy that has a good level of benefits in an effort to be good stewards of Medicaid dollars. For that, the state will allow you to keep assets if you find it necessary to apply to Medicaid."

Buying a Partnership policy can also reduce your taxes.

Indiana residents who pay premiums for an Indiana Partnership long-term care insurance policy can deduct those premiums from their taxable income on state tax returns, and if they itemize on their federal return, they can list long-term care insurance premiums as a medical expense.

If those premiums along with other medical expenses exceed 7.5 percent of your adjusted gross income, you can take that total as a deduction.

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