Long-Term Care, Nursing Home and Specified Disease Policies
You have already studied what long-term care insurance pays for. Wisconsin adds requirements for the policy and for you when you sell it. The Commissioner has found that these products are sold to “a population which is particularly susceptible to pressure sales tactics” (s. Ins 3.455 (1), Wis. Adm. Code), so the rules in s. Ins 3.46 are detailed.
Long-Term Care, Nursing Home and Home Health Care Policies
Section Ins 3.46 treats three products as long-term care policies: comprehensive policies covering care in both institutional and community settings, nursing home only policies and home health care only policies (s. Ins 3.46 (3) (m)). Only a policy that substantially covers both settings may use the words “long-term care,” in the policy or in an advertisement (s. Ins 3.46 (6), (7)). The face of each policy carries a caption saying what it covers; a nursing home policy states, “THIS POLICY DOES NOT COVER HOME HEALTH CARE.”
What every policy must provide (s. Ins 3.46 (4), (5))
- Coverage regardless of whether care is medically necessary, with no requirement of a prior hospital stay or prior institutional care.
- Coverage of irreversible dementia. A policy may exclude mental and nervous disorders, but never Alzheimer’s disease.
- A highest daily benefit of at least $60, if the policy uses fixed daily limits.
- An elimination period of no more than 365 days, and a lifetime maximum of at least 365 days of coverage.
- Reinstatement if a lapsed insured proves cognitive impairment or loss of functional capacity and asks within 5 months.
- Guaranteed renewable for life or noncancellable, for an individual policy.
- A 30-day right to return (s. 632.73 (2m)), and the right to cancel midterm for a prorated refund (s. 632.825, Wis. Stat.).
- No denial based on a preexisting condition after the policy has been in force 6 months (s. 632.76 (2) (b)).
When benefits begin (s. Ins 3.46 (17), (18))
The policy pays when the insured cannot perform activities of daily living or has a cognitive impairment. The activities include at least bathing, continence, dressing, eating, toileting and transferring, and the trigger may not be stricter than a deficiency in 3 of them, or cognitive impairment alone. A policy meant to be tax-qualified may also require a practitioner’s certification that the inability to perform at least 2 activities is expected to last 90 days, and must say it is intended to be tax-qualified.
Selling Long-Term Care: Your Obligations
At first contact. When you solicit, deliver the Commissioner’s guide to long-term care and an outline of coverage (s. Ins 3.46 (9) (a)). You must also offer two things at that contact (s. Ins 3.46 (11), (12)):
- Inflation protection at least as favorable as 5% annual compounding, compounding with the consumer price index, or payment of 80% of actual charges. The applicant marks acceptance or rejection on the signed application.
- If the policy has an elimination period over 180 days, the same coverage with 180 days or less.
At application. The insurer discloses that premiums may rise and lists every rate increase on the form or similar forms over the past 10 years, and the applicant signs an acknowledgment (s. Ins 3.46 (9) (b), (g)). Later increases require at least 60 days’ notice (s. Ins 3.46 (9) (i)). The application warns, in bold beside the signature line, that incorrect answers allow the insurer to deny benefits or rescind (s. Ins 3.46 (10) (g)). For an applicant 75 or older, the insurer must obtain medical evidence before issuing (s. Ins 3.46 (10) (a)).
Suitability. Each insurer develops suitability standards and trains its agents, and you must use them (s. Ins 3.46 (16)). They weigh the applicant’s ability to pay, their goals for long-term care, and the value of any existing coverage. You present the Long-Term Care Insurance Personal Worksheet and the form “Things You Should Know Before You Buy Long-Term Care Insurance.” If the applicant falls short of the standards or declines to answer, the insurer may reject the application or send a letter asking them to confirm they want to proceed.
Replacement. You list every health policy you have sold the applicant that is still in force or was sold in the past 5 years, and you make reasonable efforts to determine whether the replacement is appropriate (s. Ins 3.46 (14)). The applicant receives a replacement notice, and the replacing insurer notifies the existing insurer within 5 working days. The new policy must credit waiting and preexisting periods already satisfied.
Compensation. Renewal compensation must be level for at least 5 renewal years, and replacing a policy generally earns no more than renewal compensation (s. Ins 3.46 (13)).
Prohibited practices. Twisting, high-pressure tactics, cold lead advertising and misrepresenting a material fact are all prohibited (s. Ins 3.46 (23) (b)).
Training. Before selling, you need at least 8 hours of initial training, 2 of them on Wisconsin Medicaid and long-term care, followed by a 4-hour course every 24 months (s. Ins 3.46 (26)).
After the Sale
Protection against unintentional lapse. At application, the applicant names at least one other person to receive any lapse notice, or signs a waiver, and the insurer repeats the offer at least every 2 years (s. Ins 3.46 (15)). The policy cannot lapse for nonpayment unless the insured and the designee get notice at least 30 days before the lapse, sent no sooner than 30 days after the premium was due. This protects a policyholder whose memory is failing.
Nonforfeiture. The insurer must offer a shortened benefit period nonforfeiture benefit. If the buyer declines it, the policy still includes a contingent benefit on lapse after a substantial rate increase (s. Ins 3.46 (19)).
Contestability. The insurer’s right to rescind narrows over time (s. Ins 3.46 (20)):
- In the first 6 months, the misrepresentation must be material.
- From 6 months to 2 years, it must be material and relate to the condition being claimed.
- After 2 years, the insurer must show knowing, intentional fraud about the insured’s health.
Benefits already paid cannot be recovered after a rescission.
The Wisconsin Long-Term Care Partnership
A qualifying partnership policy is a tax-qualified policy, with required inflation protection, that carries a disclosure that it is intended to qualify for the partnership program (s. Ins 3.465 (3)). Its value to the buyer is in Medicaid. When the insured later applies for Medicaid, the state excludes an amount equal to the benefits the partnership policy paid, both in counting the person’s resources and in recovering from their estate (s. 49.45 (31) (a), Wis. Stat.).
Cancer and Other Specified Disease Policies
A specified disease policy pays only for a disease or diseases named in the policy (s. Ins 3.27 (4) (b) 8.). Cancer, heart attack and stroke policies are examples. A policy with restrictive exclusions or limits like these must carry the stamp “THIS IS A LIMITED POLICY—READ IT CAREFULLY” (s. Ins 3.13 (2) (h)).
Advertising. An advertisement may not imply coverage beyond the named diseases, or call one disease by several names to seem broader, and must state plainly that the coverage is limited, for example “THIS IS A CANCER ONLY POLICY” (s. Ins 3.27 (9) (c), (zb)).
The shopper’s guide. The Commissioner found consumers “are not aware of the limitations of cancer insurance” (s. Ins 3.47 (1)). So when you invite anyone to apply for a cancer policy, you give them A Shopper’s Guide to Cancer Insurance (s. Ins 3.47 (5)), unless the buyer receives the Medicare guide under s. Ins 3.39 instead (s. Ins 3.47 (3)). The guide warns that cancer insurance “is not a substitute for comprehensive coverage,” that duplicate coverage is expensive, and that a major medical policy should come first.
Sales to Medicare beneficiaries. An individual specified disease policy sold to a Medicare-eligible person must be designated “SPECIFIED OR RARE DISEASE LIMITED POLICY,” state that it is not a substitute for broader coverage, and come with a disclosure statement on or with the application explaining how it overlaps with Medicare (s. Ins 3.39 (9)).
Lesson summary
- Only a policy covering both nursing home and community care may be called “long-term care”; nursing home only and home health only policies meet the same standards but may not use the term.
- Policies must cover Alzheimer’s disease, cannot require a prior hospital stay, and must pay when the insured cannot perform 3 activities of daily living or is cognitively impaired.
- At solicitation, deliver the long-term care guide and outline of coverage, and offer inflation protection such as 5% compound.
- Use the insurer’s suitability standards and the personal worksheet; the insured names a person to receive lapse notices.
- Contestability narrows at 6 months and again at 2 years, after which only fraud allows rescission.
- Partnership policies protect assets equal to the benefits paid when the insured later needs Medicaid.
- Cancer and other specified disease policies are limited policies; give cancer prospects A Shopper’s Guide to Cancer Insurance.