Senoir Solutions: Baffled by nursing home insurance

Q. I am shopping for some nursing home insurance and am baffled at all the new terminology. Just what is an Elimination Period anyway? Why is it so important?—Jason D.

A. To over simplify an Elimination Period is a deductible expressed in days as opposed to dollars. It is the length of time between being eligible for coverage by the terms of the policy and when the insurer will actually start paying. It can be expressed in dollars by multiplying the days within the Elimination Period by the Daily Benefit covered by the policy. For example, if the amount of Daily Benefit you have chosen is $200 and your Elimination Period is 90 days, the policy will not afford payment for the first 90 days you are qualified for coverage. To express it another way, that means you are willing to absorb the first 90 days of exposure at the rate of $200 per day for a total of $18,000.

It is important for several reasons. It allows the insured to absorb some of the risk, thus reducing the premium. The longer the period, the lower the premium. The Elimination Periods can be applied more than once. Thus, it can be a large financial consideration and should be weighed carefully.

Q. My agent informs me that Medicare will pick up the first 20 days in a nursing home. Given that, why would anyone choose a policy with an Elimination Period?

A. I believe your agent is referring to the Skill Nursing Care (SNC) component of Medicare. This is not nursing home coverage as we think of it in the terms of Long-Term Care. If you would examine the wording of SNC, you would see it is designed for those undergoing short-term rehabilitation. True, this could take place in a nursing home, but it should not be confused with the coverage being offered by a Long-Term Care (Nursing Home) insurance policy.

By definition, SNC would apply to less than 8 percent of those in nursing homes today. In addition, Medicare only provides for the first 20 days. From 21 to 100 days of confinement, Medicare imposes a co-pay of $109.50 as of 2004. After the 100 days, Medicare does not pay anything.

Q. My agent has made quite the deal about my policy being a “qualified” plan. At the risk of sounding stupid, what is a “qualified” plan?—Greg V.

A. Good question. For the sake of brevity, suffice it to say it is a type of plan wherein the benefits are protected against taxation. There is one stipulation within this type of plan that should be noted. A physician must certify that confinement to a nursing home facility is expected to last for a minimum of 90 days.

Peter Gulatto has been associated with the insurance industry for more the 30 years. He has held a Certified Insurance Counselors (CIC) designation since 1983. His responsibilities have included those of an insurance agent, risk manager, consultant and insurance educator. His interest now is focused on providing answers to the insurance challenges facing our senior population.

Submit your questions to Peter J. Gulatto c/OoThe Centurion Group Inc., P.O. Box 3333, Rockford, IL 61106-0333, or call at 815-229-0994.

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