Long Term Care • LTCI Policy Design • Premiums • Benefit Triggers • Taxation • NAIC Model
Chapter 3 covers the design and taxation of long-term care insurance. Benefits are triggered when an insured is certified as chronically ill — unable to perform at least two ADLs for an expected 90+ days, or suffering severe cognitive impairment. The 30-day free look is required by HIPAA on all TQ policies. The feature with the greatest premium impact is the daily benefit amount; the elimination period also significantly affects cost (longer = lower premium). The calendar day method of counting the elimination period costs more than the service day method because benefits begin sooner.
Benefit payment models: reimbursement (expense-incurred) pays actual costs; indemnity and disability/cash models pay regardless of actual expenses. The most common policy type is comprehensive. Of inflation options, the GPO costs least but protects least; compound rate costs most. Contingent nonforfeiture is the only nonforfeiture option available at no extra premium. Tax-qualified policies allow premium deductions (age-based limits) and generally tax-free benefits — only TQ policies qualify; all LTC policies do not automatically qualify.