The "Partnership" is an innovative alliance between the State of California and a select number of private insurance companies. The California Department of Health Services designed the Partnership program to help you maintain your financial independence by creating a special type of long-term care insurance policy. It provides a way to obtain high quality, affordable, private insurance and receive guaranteed lifetime asset protection. The Partnership has three major goals:

• To help all consumers understand the risk and costs of long-term care;

• To offer private insurance protection that helps you avoid wiping out a lifetime of savings, or losing your financial independence paying for long-term care; and

• To offer private insurance policies that meet stringent state standards, and give you a lifetime of protection for your assets.

Partnership-approved long-term care insurance policies are sold by private insurance companies. These state approved policies must meet certain requirements established by the California Department of Health Services. These policies also have many features that are not required in other long-term care insurance policies. Some of the most important are:

• Each policy has standardized terms and a core set of benefits that make it

easier to compare policies from different companies;

• Automatic inflation protection is built into every policy to help your benefits keep up with some of the rising costs of care;

• The premium is waived from the first day you receive care in a nursing home or assisted living facility;

• Care for assisted living is a required benefit in each type of policy;

• Premium increases are limited by how much and how frequently increases can occur; and

• Asset protection is guaranteed in each type of policy.

Insurance companies participating in the Partnership must have their policies approved by both the Department of Insurance and the Partnership program. (You can call 1-800- 227-3445 for a list of participating companies.)

Partnership approved policies have a unique asset protection feature. This feature is only available when you buy a Partnership-approved policy. It ensures that every dollar paid out in benefits by one of these policies will protect an equal amount of your assets.

These policies pay for your care in the same way other long-term care policies would, until you've used up all of the benefits of the policy. Then if you still need long-term care you can keep more of your assets than if you had used up the benefits of an ordinary long-term care policy. Here's how it works:

Each dollar your Partnership policy pays in benefits can protect one dollar of your assets. You can keep each dollar of those protected assets for your own use, for your spouse, or to pass on to your loved ones.

For example: Suppose you had $42,000 in lifetime savings and bought a Partnership policy covering the same amount of long-term care services. ($42,000 in benefits is the approximate cost of one year of nursing home care or two years of part-time home care.) Later, you need long-term care services and you use up all the benefits of your policy.

If you still need long-term care after you run out of insurance benefits, you may have to apply for Medi- Cal to pay for your care. If you do apply for Medi-Cal, you can keep the entire $42,000 of your assets, not just the $2,000 limit that would apply otherwise.* Each dollar your policy paid (a total of $42,000) equals one dollar of asset protection ($42,000 of your lifetime savings in this case).

Because inflation protection is built into every Partnership policy the amount of assets you can protect increases each year you keep the policy. For instance, if you did buy $42,000 in benefits, those benefits will grow by 5 percent compounded each year you keep the policy. Both the daily benefit that pays for care, and the amount of your protected assets grow at the same rate. While other policies may include inflation protection, no other policy gives you this important asset protection.

Most people will recover or die before they use up all of the benefits of their policy, but a few will live longer than their benefits. If you buy a Partnership approved policy and later need care, you will use your insurance benefits to pay for care first. As you use those benefits you will receive a quarterly report from the insurance company. The report will tell you how much your policy has paid in total benefits, and the amount paid during that quarter.

Then, if you continue to need care after your benefits are used up, you may apply for Medi-Cal. If you qualify for Medi-Cal you will be allowed to keep the amount of your assets equal to the benefits paid by your policy. Without the asset protection of the Partnership program you would have to spend your savings until you had only $2,000 remaining.* This is called "spending down." The Partnership protection allows you to keep assets you would otherwise have to spend for your care.

If your total assets are more than the amount protected by the Partner- ship you will have to spend those unprotected assets before you will qualify for Medi-Cal. If your income is higher than what Medi-Cal allows at the time you apply, you may have to use some of it to pay for your care

The Partnership asset protection guarantee continues even after your death.

Medi-Cal can only collect from your estate when your assets are more than the amounts protected by the Partnership-approved policy you bought. Even then Medi-Cal can only collect the amounts paid by Medi-Cal for covered services. Asset protection applies to the value of any asset you own, including equity you may have in your house.

You can purchase coverage equal to all your assets, or only some of your assets. The amount you buy is up to you. Remember, if you buy less coverage than the assets you currently have, the inflation protection feature of the policy "I increase your asset protection each year. After you own the policy for thirteen years, and have filed no claims, the amount of asset protection you bought "I have doubled. You will have twice as much asset protection as you purchased originally.

There are two kinds of Partnership- approved policies. One is a facility only policy that covers care in a nursing home or a residential care facility, often called an assisted living facility. The other is comprehensive policy that also covers care in a nursing home or residential care facility, but includes a full range of benefits for home and community services. Home and community services include home health care, personal care, homemaker services, adult day care, hospice, and respite care. Both kinds of policies have built in inflation protection. The daily benefit and the lifetime benefit maximum automatically increase by 5 percent compounded each year.

When you buy one of these policies you choose the daily benefit that will be paid for benefits covered by the policy. You also choose the number of years you want the policy to pay benefits once you need care. Every participating insurance company offers a one and two year policy with a 30-day waiting period. These companies can also sell policies that pay longer than two years and include other benefits.

The benefits in each policy are interchangeable. The lifetime policy maximum is available to pay for any benefit covered by the policy. All Partnership-approved policies calculate home and community benefits as a monthly pool of funds that can be used to pay for any of the services covered by the policy. This gives you the flexibility to arrange services at the times and in the amounts needed. You are not limited to a set amount of care each day, regardless of how many or how few services you need.

You can select the amount of coverage closest to the amount of assets you want to protect. Participating insurance companies offer benefit amounts ranging from coverage for one year up to coverage for the rest of your life. You can protect as little as $30,000 in assets up to $300,000 or more. The asset protection feature means you only need to buy the amount of insurance that is equal to the assets you want to protect.

Note: A Partnership option is offered by the California Public Employees Retirement System (CALPERS). Call 1-800-338-2244 or visit their website at http:\\www.calpers.ca.gov to find out more about long-term care benefits offered to their members.

How Much Do Partnership Policies Cost?

The cost of a policy will depend on your age, your health, the amount of daily benefit you select, and the features you choose. The more years you want the policy to pay if you need care also adds to the premium cost. Lifetime coverage is the most expensive, and few people can afford to buy it. Most people buy a policy that will pay for two or three years. In addition, the older you are when you buy a policy, the higher the premium will be. (See pages 31 for more informa- tion on things to consider when buying long-term care insurance.)

There are two ways to qualify for benefits. One is if you are unable to perform at least two of the six basic activities of daily living (ADLs), and are expected to need care for at least 90 days. Those six ADLs include bathing, dressing, toileting, transferring, continence, and eating. The other way to qualify is if you have a severe cognitive impairment like Alzheimer's disease. In either case you must need human assistance or supervision.

Note: Partnership policies use the same benefit eligibility standards required by federal law to be considered a tax qualified policy. Premiums paid for policies labeled as tax qualified may be deductible as a medical expense if you itemize your federal (and state) income tax returns. Consult your tax advisor for informa- tion on how the tax changes affect you. (See page 29 for more information on tax qualified policies.)

When you need care, an independent care management agency will assess your physical, mental and social needs. The care manager will develop a Plan of Care that describes the services you need. The cost of these services will not be deducted from your benefits. Some policies will even pay the care manager to arrange for the delivery and coordination of your services, and monitor the quality of your care at your request.

You have the right to appeal any denial of benefits, the Plan of Care or the amount of any claims paid. The care management agency must give you an explanation of your right to appeal, and the procedures you must follow.

There are no special eligibility rules, except that you must be a resident of California at the time you buy a policy. The insurance benefits of your policy can be used anywhere, even if you move to another state. The benefits paid for your care will count towards your asset protection, even when you live in another state. However, you must live in California to claim the asset protection. If you returned to California and still needed care, your assets would be protected when you applied for Medi-Cal.

If you already have a policy from one of the companies participating in the Partnership you may he able to replace your current policy with a Partnership policy. If you do have a policy from one of these participating companies, you may want to consider replacing your old policy with a Partnership policy. You will be charged a higher premium based on your current age, but you will also get some premium credit towards the premium for the new policy. This may make it possible to upgrade an older policy purchased before many of the new improvements in newer policies. While companies can require you to pass new health screening, it cannot be stricter than it is for other people applying for new policies.

Partnership policies are sold by private insurance companies participating in the Partnership program, and specially trained insurance agents. You should ask your agent, or any agent selling long-term care insurance, if they have taken the required training and can sell you a Partnership policy. You can get a list of the companies that are currently selling these policies by calling 1-800-227-3445.