I’m Moving to a CCRC: Should I Keep my Long-Term Care Insurance?

This is a question I hear a lot from future and prospective residents of continuing care retirement communities. In answering this question it is important to first have a basic understanding of the different types of residency contracts offered among CCRCs.

CCRC Contract Types

About one-third of all continuing care retirement communities offer a fee-for-service contract, or in industry terms, a Type-C contract. Under this arrangement, when a resident moves from independent living to an assisted living or skilled nursing residence, the monthly fee will increase to reflect the market rate cost of care.

Another type of contract- usually referred to as a lifecare or Type-A contract- is offered by almost half of the industry. A lifecare contract requires a higher monthly fee for independent living than a fee-for-service contract (all other things equal), but the cost of assisted living or healthcare services does not get added to the monthly bill when a resident begins receiving care. In essence, a lifecare contract provides the same type of protection against the potentially exorbitant long-term care expenses as a long-term care insurance policy in the sense that the resident pays more while they are healthy in order to offset expenses later. Under a lifecare contract your coverage is essentially unlimited, but this protection is backed by the financial strength of the community rather than an insurance company.

A third type of residency contract, offered by about twenty-percent of providers, is a modified, or Type B contract, which is basically a blend of the two above described contracts. The cost of care is added to the monthly fee, but usually at a discounted rate. Alternatively, a resident may be entitled to a certain number of days in the healthcare center before they begin paying for services.

Compatibility of long-term care insurance with CCRCs

With a basic understanding of CCRC contract types you can quickly see that long-term care insurance is highly compatible with a fee-for-service contract, and even with a modified contract. In this case a resident would pay a lower monthly fee while living independently (again, all other things equal), and when they begin requiring care services at the CCRC they have long-term care insurance to help offset the increased cost.

But what about a provider that offers a lifecare contract? Isn’t it doubling up if a resident continues paying for long-term care insurance while also paying for a lifecare contract? On one hand the answer is yes. However, it may still be beneficial to keep the coverage. The reason why is because even though the monthly fee does not increase when care services are received, the resident may still be able to utilize the insurance policy and offset some portion of the fee. In essence, the net monthly cost to the resident could end up being less after beginning to receive care services than when the resident was living independently.

Do your research

Before making a final decision you should talk with a representative of the insurance company or your agent to find out exactly what is required in order to qualify for a claim. You should also talk with a member of the staff at the community, preferably someone on the finance team, to find out what the experience has been with other residents who have utilized their long-term care insurance and whether there are any limits on the percentage of the monthly fee that the community will submit to the insurance company for reimbursement.

In addition to the above explanations there are a couple of other reasons why it probably makes sense to maintain long-term care insurance coverage. First, if you ever decide to hire a caregiver to provide services to you in your independent living residence the cost for that will more than likely have to be paid out of your own pocket. Therefore, you could potentially use long-term care insurance to cover some or all of the cost. Also, if you ever decide to move out of the community for any reason and you do not move to another CCRC then you may wish you had kept your coverage.

If you choose to move to a community offering a lifecare (Type-A) contract, rather than dropping your coverage you might consider calling the insurance company to discuss options for scaling back your coverage, and thus your premium. The result could be a happy medium whereby you still have some coverage but you are reducing the effect of doubling up on payments.