I hope many of you have by now become aware of the launch of the Merlin Law Group’s disability, life, health, and long-term care insurance website: PayMyInsuranceClaims.com.  I am going to start blogging on disability, life, health, and long-term care insurance issues on this Property Insurance Coverage Blog until we get a blog set up on the PayMyInsuranceClaims.com website.

Many folks I speak with are unaware of the existence of long-term care insurance. I have found that the folks who are aware of the existence of long-term care insurance know precious little about same. So, today’s blog offers any and all such folks a legislative / legal overview and a practical considerations overview of long-term care insurance.

Regarding the legislative / legal history of long-term care insurance, here is a nice, slightly abridged article from a legal treatise:

According to the Long-Term Care Insurance Model Act, long-term care insurance is ‘any insurance policy or rider … designed to provide coverage for not less than twelve (12) consecutive months for each covered person … for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, provided in a setting other than an acute care unit of a hospital.’

Long-term care (LTC) insurance was initially offered in the late 1970s. Since its inception, the growth of the LTC insurance market has been boosted by congressional action. Congress mandated the development of a Task Force to conduct a comprehensive examination of how to promote the development of private LTC insurance, generate consumer confidence, provide direction to states on the appropriateness and sufficiency of consumer protections related to LTC insurance, and ensure reasonable market value.

Concurrently with the activity of the Task Force, the National Association of Insurance Commissioners (NAIC) developed a Long-Term Care Insurance Model Act (Model Act). The congressional Task Force recommended that states be encouraged to adopt the NAIC Model Act. However, the Task Force stopped short of recommending federal regulation of LTC insurance in the same manner in which Medigap insurance is regulated. Most states now regulate LTC insurance policies and much of this regulation is based on the Model Act or some form of it.

Generally, LTC insurance policies pay a daily indemnity rate for care in nonhospital settings – usually for custodial, intermediate, or skilled care in nursing homes – or for supportive or home health care services. Some policies also cover respite and adult day care. Premiums for LTC policies are typically fixed, based on the insured person’s age at purchase.

The Health Care Portability and Accountability Act (Act) of 1996 establishes uniform federal guidelines for ‘qualified long-term care insurance’ and provides limited tax deductions for premiums paid for such insurance. The Act, effective January 1, 1997, draws heavily on the National Association of Insurance Commissioners (NAIC) Long-Term Care Insurance Model Act (Model Act) and Model Regulation. Among the features that constitute a ‘qualified long-term care insurance contract’ eligible for the tax deductions are requirements that the contract offer long-term care insurance coverage only, and that the contract must be renewable. The Act includes prohibitions, a ‘qualified long-term care insurance contract’ must not: pay expenses ordinarily reimbursable under Medicare, including co-payments and deductibles; allow for surrender for cash or assignability as collateral (there is an exception for refund of premiums at cancellation or death of the insured); or pay dividends (any dividends and refunds must be applied to payment of future premiums or increased value).

Under the Act, long-term care insurance benefits provided by employers to employees are treated as non-taxable fringe benefits, and any premiums paid by the individual insured are tax deductible to certain limits dependent on the age of the insured taxpayer. The 2013 figures [were]:

Insured’s Age

Annual Deductions Allowed

40 or younger










The Act also defines certain ‘consumer protections’ with reference to the Model Act and Regulation.  The consumer protection provisions include requirements that a policy:  guarantee that the policy holder, and a designated third party, will be notified prior to termination due to non-payment of premiums; clearly detail any pre-existing conditions that limit the individual’s right to coverage; offer the option of inflation protection; and contain a non-forfeiture provision in the case of default by the insured, under which the insured would receive some form of substitute compensation (such as, reduced paid-up insurance, extended term insurance, etc.). Further, if the policy replaces another policy, it may not impose new periods of ineligibility for pre-existing conditions if such conditions would have been covered on the prior policy.

The Act also regulates the behavior of the insurance carriers in the marketing of long-term care policies.  Every insurer offering qualified policies must keep records of every sales agent’s commissions, lapse rates and number of policies sold.  Agents with unusually high lapse and replacement rates must be reported to the Commissioner of Insurance.  Overall lapse and replacement rates for each company must also be reported.  All insurers must additionally send copies of any advertising used to solicit customers to the Commissioner of Insurance for review. 

Finally, it is time to provide an overview of practical considerations for the long-term care insurance consumer; but, understanding that reader fatigue may have by now set in, I do so via reference to the American Association for Long-Term Care Insurance website.