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These plans are designed to encourage individuals to purchase long-term care insurance (LTCI) to finance their long-term care needs, while giving them a way to protect some assets should they ever need to apply for Medicaid in addition to using LTCI benefits.
As of May 2008, partnership policies are currently for sale in 14 states (Colorado, Oregon, Idaho, South Dakota, Nebraska, Minnesota, Indiana, Ohio, Pennsylvania, New York, Rhode Island, Connecticut, Virginia, and Florida) and 11 other states have approved state plan amendments to put partnership programs into place.
The Benefits
Long-term care insurance can help cover the expense of care; however, it is possible that an individual may need additional long-term care funding beyond the coverage in his or her insurance policy. Medicaid, a state-administered welfare program that can help pay for long-term care for people with very low assets and/or income, may be an option. A person may have to significantly deplete his or her assets, however, before becoming eligible to receive Medicaid benefits.
Partnership policies provide a way to plan for the high cost of long-term care, while addressing the potential problem of outspending the benefits of a long-term care policy. With qualified partnership policies, policyholders may be able to protect some or all of their assets from the Medicaid "spend-down" requirements. The program allows individuals to retain assets equivalent to their insurance benefit. In other words, if a policyholder uses $100,000 worth of long-term care insurance benefits and then applies for Medicaid benefits, the first $100,000 of their assets would be ignored in determining Medicaid eligibility. The amount of asset protection is directly tied to the benefits paid out by the insurance policy.
Insurance companies price qualified partnership policies identically to non-partnership policies, so product cost should not be an obstacle when you and your clients are deciding whether a partnership policy makes sense for them.
How Does a Policy Qualify?
In order for your client's policy to qualify for the partnership program, it must be federally tax-qualified. There are state residency requirements for issuing partnership policies in participating states.
Partnership policies also have inflation protection requirements that vary by state and by the age of the policyholder at time of issue. In non-partnership policies, inflation protection generally is offered as an optional rider, but partnership policies must include inflation protection at the levels specified by the participating state.
Agents must familiarize themselves with the specific regulations in the state or states where they will be selling partnership policies. For example, some states have, or are considering, reciprocity agreements with other states that have partnership programs. Under such agreements, a person could still have the asset-protection afforded by the partnership program if he or she purchases a qualified partnership policy in one state and then moves to another participating state.
Producer Training
In order to sell partnership policies, producers must adhere to state-established training requirements. These requirements vary by state, so it is imperative that all agents are knowledgeable of their state's requirements for initial and ongoing training. Some professional organizations are offering partnership courses, but agents should be aware that these courses do not meet the requirements in some states and that training requirements continue to evolve. Consult your state's Department of Insurance for specific requirements and approved curriculums. Agents and insurers must maintain proof of training in all states and submit it to the commissioner for review upon request.
Potential Issues and Concerns
Purchasers of partnership policies should be aware that Medicaid eligibility is not automatic. To qualify for Medicaid, individuals must meet the state's income and functional eligibility criteria, which may change over time. Because both assets and income are taken into account when determining Medicaid eligibility, some who purchase partnership policies may never qualify for Medicaid -- because their incomes are simply too high.
In addition, the requirements for receiving benefits from an LTCI policy can vary from the criteria for receiving Medicaid benefits, and the setting in which care is provided also can vary. For example, a policyholder could have coverage for home care under his or her LTCI policy, but might be able to receive Medicaid-funded services only in a nursing home.
Agents also should review with their clients the conditions under which a policy could no longer qualify for the partnership program. Clients should be aware that if they choose to revise their policy, it might no longer qualify. Also, clients who move to a state that does not recognize their qualified partnership policy would not receive the asset-protection afforded by the partnership program in their original state. Furthermore, laws could change or the partnership program could be modified or discontinued. These circumstances, however, would not affect the coverage included in the client's LTCI policy -- only the asset-protection benefits. Long-term care insurance still offers valuable protection against the rising cost of long-term care, with or without the benefits of the partnership programs.
Excellent Consumer Opportunity
LTCI partnership programs are an excellent opportunity for producers to sell more policies by offering consumers the added benefit of asset protection. As more states implement such programs and more companies offer qualifying products in those states, more consumers will see the purchase of partnership policies as a smart way to plan for their potential long-term care needs.
Cameron B. Waite is executive vice president of Strategic Operations for Penn Treaty, a leading long-term care insurance provider. Mr. Waite joined Penn Treaty in 1996, and is currently responsible for the company's investor and regulatory relations, among other functions. He is actively involved with issues of long-term care, lecturing, and lobbying for national reform and consistency in long-term care insurance reserving standards. He also is a director and officer of the National Alliance of Life Companies.
