Life & Health Chapter 17 | Health Chapter 8: Health Insurance Plans for Seniors

Accelerated Death Benefit Rider

This rider pays out a portion of the life insurance policy’s death benefit upon the diagnosis of a terminal illness or other condition.

Activities of Daily Living (ADL)

These are the six activities that people perform every day, which have been defined as essential to living independently. These six activities are bathing, dressing, toileting, transferring, continence, and eating.

Adult Day Care

This is a type of care (typically custodial) that’s designed for individuals who require assistance with various activities of daily living while their primary caregivers are absent. This type of care is offered in care centers.

Assisted Living Facility

This is a residential community that provides some services but is more limited than a nursing home. This type of facility provides services such as housekeeping, meals, social activities, as well as intermittent nursing care.

Automatic Inflation Rider (AIR)

This rider causes the face amount of a long-term care insurance policy to increase annually, generally at 5% per year for a specified number of years. The cost of these increases is built into the initial premium.

Benefit Trigger

In a long-term care insurance policy, the benefits are activated by either a person’s loss of the ability to perform two or more of the activities of daily living or the existence of a cognitive impairment.

Buyer’s Guide: (See “Buyer’s Guide for Medigap Insurance” or Shopper’s Guide for Long-term Care Insurance.”)

Buyer’s Guide for Medigap Insurance

This guide gives applicants information about the different Medicare Supplement plans and is titled “Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare.” This publication was developed jointly by the Centers for Medicare and Medicaid Service (CMS) and the National Association of Insurance Commissioners (NAIC) and is updated each year. States generally require agents and insurers to provide copies to consumers by no later than the time of the filing of their application.

Center for Medicare and Medicaid Services (CMS)

This is the federal agency that administers and regulates the Medicare and Medicaid insurance programs.

Cognitive Impairment

This is a deficiency in a person’s memory, orientation to her environment, or ability to reason and make safe judgments. Long-term care insurance policies only cover the cognitive impairments that are the result of the organic diseases of aging.

Cold Lead Advertising

This is the illegal practice of using marketing that doesn’t disclose that a sales agent may call when a person responds to a marketing campaign.

Continuing Care

This type of care is designed to provide benefits to elderly individuals who live in a continuing care retirement community.

Continuing Care Communities

These communities provide a range of living arrangements for residents starting at independent living and progressing to nursing home care. These communities allow residents to access progressively more intensive levels of care without leaving the community that has become their home.

Core Benefits

These are the benefits that are defined in law and regulation that all Medicare Supplement plans must offer to meet the definition of a Medicare Supplement plan.

Custodial Care

This is the level of care that’s given to meet daily personal needs, such as dressing, bathing, getting out of bed, and eating; however, it’s not medical care. Although medical training is not required, this care must be administered under a physician’s order.

Donut Hole

This refers to a corridor deductible that’s built into Medicare Part D prescription drug plans between a person’s basic coverage and catastrophic coverage. These coverage zones are defined by the cost of a person’s prescription over the course of the year. In 2021, the basic coverage zone included the cost of medication up to $4,130 ($4,430 in 2022). In the same year, catastrophic coverage begins at $6,550 ($7,050 in 2022). Fortunately, the donut hole has been closing since the passage of the Affordable Care Act. Currently, it can best be described as the period during which a person pays a higher percentage of his outpatient prescription costs.

Duplication of Coverage

It’s illegal to sell a second Medigap policy to a person who already has one (other than a replacement).

Elimination Period

This is the period during which a person must wait before benefits begin. At the beginning of each long-term care insurance claim, a new elimination period acts as a deductible that’s expressed in time rather than money.

End-Stage Renal Disease (ESRD)

This refers to the point in the progressive deterioration of a person’s kidney when dialysis or a kidney transplant is necessary to sustain her life.

Formal Care

This is the paid care that’s delivered by professional caregivers. The care includes medical assistance from nurses or allied professions such as nutritionists and physical therapists; it also refers to help with personal activities and household tasks, such as what a person may receive from a personal care assistant.

Formulary

This is the list of medications that are covered by a specific prescription drug plan along with each medication’s designated category (generic, prescription, specialty, etc.).

Guarantee of Insurability Option (Rider)

This rider allows the policyholder to purchase additional coverage at designated future intervals. The allowable amount is based on an assumed inflation rate.

Guaranteed Issue

This refers to an applicant’s insurance policy that cannot be declined for coverage due to an insurability issue. Policies such as Medigap plans must accept all applicants during designated open enrollment periods.

Hands-on Assistance (Help)

This refers to physical assistance with one of the activities of daily living or related tasks.

High-Pressure Tactics

These are actions that use an explicit or implicit threat, excessive pressure, or a climate of fear to affect the sale of a policy.

Home Care

This is assistance with the activities of daily living and necessary household tasks. Home care may include both hands-on help and standby assistance. Both forms of support are defined as substantial assistance under the terms of a long-term care insurance policy.

Home Health Care

This level of care can include both skilled and unskilled care that’s provided in an individual’s home, typically on a part-time basis. It primarily refers to skilled services provided by healthcare professionals such as medication management, wound care, and physical therapy—particularly when described in contrast to unskilled “home care,” which is personal care in the home.

Hospice Care

This is comfort care for the dying, which may be delivered in a facility or the patient’s home. Individuals with terminal illnesses who decide to forgo treatment in order to address their terminal disease may instead opt for hospice care that makes their final months as comfortable as possible.

Hybrid (Asset-based) Long-Term Care Plans

These contracts use an annuity or whole life policy to guarantee long-term care benefits. If the policy owner doesn’t need long-term care, the policy owner can either use the annuity income for herself or the whole life insurance for beneficiaries.

Informal Care

This is the personal care a person may receive from informal (unpaid) caregivers, such as family members at home. As a rule, long-term care policies don’t pay for informal care. However, many policies do provide a training allowance to help family members deliver effective care.

Intermediate Care

This is one of the defined nursing care levels that’s used in long-term care insurance. At times, it’s referred to as “intermittent care” because intermediate care is often intermittent. It involves the delivery of limited daily, intermittent (or occasional) nursing and rehabilitative services. Practitioners deliver these services based on a physician’s orders, and the care must be provided by skilled medical personnel.

Intermittent Care: (See “Intermediate Care.”)

Lifetime Reserve Days

This is a hospital benefit that applies when the insured has used up all of the allotted days of hospital care in a standard benefit period under the terms of Original Medicare Part A. Lifetime reserve days are used once during a person’s lifetime. They’re NOT restored with the beginning of a new benefit period.

Long-Term Care

This refers to a broad range of medical, personal, and environmental services that are designed to assist individuals who have lost their ability to remain completely independent in the community.

Long-Term Care Insurance

This describes an insurance contract that pays for the cost of medical and personal services that are defined as long-term care for individuals who need assistance with the activities of daily living daily for an extended period.

Long-Term Care Partnership Program

This program is a federally supported, state-operated initiative. The program allows individuals who purchase qualified long-term care insurance policies to protect a portion of the assets they would otherwise need to spend on care before qualifying for Medicaid.

Long-Term Care Riders

These riders use a portion of the underlying policy’s face amount to pay a monthly benefit that helps cover the cost of long-term care services.

Medicare

This is the federally sponsored and administered program that provides hospital and medical expense insurance, primarily to those who are age 65 and older, any person who has received Social Security Disability Insurance benefits for 24 months, and any person with end-stage renal disease.

Medicare Advantage

This describes an “all in one” private insurance policy that’s subsided by the federal government and offers an alternative to Original Medicare. Most commonly, Medicare Advantage plans are either HMOs or PPOs. These plans may also provide coverage that Original Medicare does not, such as prescription drug (Part D) coverage.

Medicare Part A

This is the portion of the Original Medicare program that provides coverage of hospital and nursing home care services for eligible individuals. It also provides home health care and hospice services.

Medicare Part B

This is the portion of the Original Medicare program that provides coverage for the cost of physicians and other medical services for eligible individuals, including durable medical equipment.

Medicare Part C: (See “Medicare Advantage.”)

Medicare Part D

This is a program that offers a prescription drug benefit to help Medicare beneficiaries pay for the drugs they need. The drug benefit is separate and available to any person who’s entitled to Medicare Part A or enrolled in Medicare Part B. Consumers purchase this benefit through private prescription drug plans (PDPs) or Medicare Advantage (PPO) plans.

Medicare Select

This is a type of Medicare supplement (Medigap) plan which is sold in some states that can be any of the standardized Medigap plans (A-N), but which requires a policyholder to receive services from within a defined network of hospitals and, in some cases, doctors in order to be eligible for full benefits.

Medicare Supplement

This is a private health insurance policy for individuals who are covered by Original Medicare. The Medicare Supplement contract also referred to as Medigap insurance, fills various gaps in Medicare coverage. Medigap insurers are required to offer plans in one of 14 defined formats (A through N). Currently, there are 10 of these formats in use. Plan A is the most basic of the available plans.

Medigap: (See “Medicare Supplement.”)

NAIC

The NAIC is the National Association of Insurance Commissioners.

Non-Forfeiture (Benefit) Options

Some long-term care insurance policies include a non-forfeiture option. In fact, some states require this feature as part of any policy. These benefits will allow the insured to receive some value from his past premium payments if the policy ultimately lapses. Insurers define this benefit as either a reduced paid-up benefit value, a shortened benefit period, or an amount to be refunded.

Non-Participating Provider

This is a provider that bills individual Medicare recipients rather than accepting assignment (direct payment) from Medicare. These medical service providers refuse to be limited to the established Medicare rates for service. In return for taking on the task (risk) involved with billing individuals, non-participating providers may charge up to 15% more than the fee schedule for participating providers.

Nursing Home

This is a location that’s primarily designed to provide skilled nursing care around the clock.

Original Medicare

This consists of the fee-for-service hospital and medical insurance programs that are administered by the federal government. It includes Medicare Part A (hospital insurance) and Medicare Part B (medical insurance).

Part A: (See “Medicare Part A.”)

Part B: (See “Medicare Part B.”)

Part C: (See “Medicare Part C.”)

Part D: (See “Medicare Part D.”)

Participating Providers

This is a medical professional or organization that’s authorized to bill Medicare for services, and that accepts payment (accepts assignment) directly from Medicare and, in doing so, also accepts its schedule fees-for-services.

Physical Assistance: (See “Hands-on Assistance.”)

Plan A

This is the most basic of the available Medicare Supplement plans that are offered through private insurers. Plan A contains only the Core Benefits.

Pool of Money

This is a concept that describes how long-term care insurance policies define their benefit limits. Although policies describe their benefits in terms of a specific period, that period is based on an assumed daily expenditure. If the daily cost of care is less than the specified daily amount, the number of days for which benefits can be received increases.

Post-Claims Underwriting

This underwriting process occurs when an insurer approves all applicants and only underwrites the risk when the insured files a claim. This practice can result in the insurance carrier’s denial of the claim based on the information it should have evaluated before the coverage went into effect and policy premiums were paid.

Prescription Drug Plan (PDP): (See “Medicare Part D.”)

Primary Insurer

This term applies when more than one group insurance contract or social insurance program covers the same insurable loss. In this situation, the primary insurer has primary responsibility for covering the loss. The primary insurer pays the benefits as defined in the applicable contract as if no other insurance coverage can be applied.

Private Fee for Service (PFFS) or Medicare Advantage Plan

This is a form of Medicare Advantage policy that allows an individual to use any participating Medicare provider. The insurance plan, rather than Medicare, determines reimbursements.

Respite Care

This is a type of health or medical care that’s designed to provide a short rest period for a caregiver. It’s characterized by its temporary status.

Return of Premium Rider

This rider refunds paid premiums when the insured dies without using the policy benefits or, in some cases, when a policy lapses.

Secondary Insurer

This term applies when more than one group insurance contract or social insurance program covers the same insurable loss. The secondary insurer only has responsibility for covering the loss to the degree that the primary insurer does not. In other words, the secondary insurer only covers the costs that are not covered by the primary insurer.

Shopper’s Guide: (See “Buyer’s Guide for Medigap Insurance” or Shopper’s Guide for Long-Term Care Insurance.”)

Shopper’s Guide for Long-Term Care Insurance (LTCI)

The NAIC publishes “A Shopper’s Guide to Long-Term Care Insurance” that explains what LTCI is, what it does, and various LTCI contract features. The guide also offers consumers tools to determine whether the costs and benefits make it a suitable choice. Most states require insurers and their agents to provide this publication to consumers during the solicitation process.

Skilled Nursing Care

This is daily nursing care that’s ordered by a doctor and is medically necessary. It can only be performed by, or under the supervision of, skilled medical professionals and is available 24 hours a day.

Skilled Nursing Facility

This is a residential facility that provides skilled nursing care.

Stand-By Assistance

This is available assistance that can be readily given in the event a person needs help to safely complete one or more of the activities of daily living. Caretakers provide stand-by assistance by being physically present and within one arm’s length of their clients during the activity in question in case help is needed.

Substantial Assistance

This is a level of service which indicates that the individual receiving the aid can no longer safely carry out the task in question independently. Substantial assistance can either be hands-on assistance or stand-by assistance.

Tax-Qualified Long-Term Care Insurance Contract

This is an individual policy or group plan that satisfies specific criteria as defined by the Health Insurance Portability and Accountability Act (HIPAA). According to HIPAA, qualified LTCI plans have the following characteristics:

They do not duplicate Medicare.
Their benefits are triggered by the inability to perform at least two ADLs or cognitive impairment based on a diagnosis that the impairment will last 90 days or more.
They are guaranteed renewable with a 30-day free look.
The insured has a written plan of care.
The policy has no cash value.
Twisting

This represents the use of deception or misrepresentation to induce an individual to replace an existing policy with another contract.

Waiver of Premium

This is typically a standard clause in long-term care insurance contracts. This provision suspends premium payments while an insured receives benefits.