Terms you need to know associated with Long Term Care Insurance

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AADLs. See advanced activities of daily living.

ACLF. See adult congregate living facility.

activities of daily living (ADLs). Basic self-care activities necessary for a person to survive and remain healthy, which generally include bathing, dressing, toileting, transferring (getting in and out of bed), eating, continence, and ambulating (moving around). The inability to perform some of these activities serves as a benefit trigger for many LTC insurance policies.

adjusted gross income (AGI). The portion of income remaining after a taxpayer reduces gross income by contributions to an IRA and other amounts.

ADLs. See activities of daily living.

adult congregate living facility (ACLF). A type of assisted living facility designed mostly for middle- to lower-income groups, with less spacious living quarters than continuing care retirement communities and meals served in a central dining room.

adult day care. Care provided to adults in a group setting during hours when primary caregivers are working.

adult day care centers. Safe environments in which people in need of assistance with ADLs can receive this help, associate with others in similar situations, and return home each day.

advanced activities of daily living (AADLs). Vocational, social, or recreational activities that reflect personal choice and add meaning and richness to a person’s life. The AADLs include working; attending church; going out to dinner, a theater, or a concert; playing cards; participating in physical recreational activities; and driving an automobile.

agent’s statement. A section of an insurance application that contains the sales representative’s comments about or impressions of the proposed insured.

AGI. See adjusted gross income.

alternate care. A plan of nonconventional long-term care and services developed cooperatively by a physician and an insurer to substitute for more expensive nursing home care. Alternate care may include special medical care and treatments, different sites of care, or even medically necessary modifications to an insured person’s home.

antiselection. The tendency of poor risks to apply for or renew insurance and thus to “select against” the anticipated results for the insurance product.

APS. See attending physician’s statement.

assisted living facility. A residential facility designed to meet LTC needs by providing accommodations, board, and access to medical services.

attending physician’s statement (APS). A written statement from a physician who has treated, or is currently treating, a proposed insured or an insured for one or more conditions. The statement provides the insurance company with information relevant to underwriting a risk or settling a claim.

bed reservation benefit. A long-term care policy benefit paid to reserve a bed in a nursing home or other LTC facility while the insured person is hospitalized for treatment.

benefit period. The number of days, months, or years during which a long-term care policy will pay a daily benefit amount.

caregiver training benefit. A benefit provided in a long-term care policy to cover the cost of training someone to help care for a covered person who is to receive care at home or at an alternate living facility.

CCRC. See continuing care retirement community.

chronically ill individual. Under the Health Insurance Portability and Accountability Act (HIPAA), an insured person whom a licensed health care practitioner certifies as someone who is unable to perform, without substantial assistance, at least two activities of daily living (ADLs), or has a similar level of disability, or requires substantial supervision to protect themselves from threats to health or safety due to severe cognitive impairment.

cognitive impairment. Mental incapacity that prevents a person from performing activities of daily living or from living safely.

cognitive reinstatement provision. A provision in a long-term care insurance policy that permits reinstatement of the policy if the reason for the lapse is that the policyholder has a cognitive impairment and that the reason for the missed premium payment was mental impairment.

cognitive status. The extent to which a person is aware of and capable of functioning in her environment.

compounded inflation rider. A type of inflation protection that calculates the benefit increase by adding the previous increases into the base used for calculation.

conditionally renewable. In LTC insurance, the term used to describe a policy in which an insured person can renew the policy up to the maximum age specified in the policy contract, but in which the insurer can refuse to renew coverage in certain circumstances.

Consumer Price Index (CPI). A national measurement of the rate of inflation compiled monthly by the U.S. Bureau of Labor Statistics.

continuing care retirement community (CCRC). A type of assisted living facility that provides both separate housing and living arrangements of the boardinghouse type. Residents contract with the community for long-term care services.

conversion feature. In a group long-term care plan, a policy provision that permits an insured group member who is leaving the group to change from group coverage to an individual plan offered by the same insurer.

copayment. A portion of an insured’s medical cost that must be paid by the insured as a condition of the insurer paying the remaining portion.

CPI. See Consumer Price Index.

custodial care. The most basic level of nursing care; care largely of a non-medical nature, in which a patient receives assistance with activities of daily living provided by nurses or other qualified persons at a nursing home or a similar facility.

daily benefit amount. The amount a long-term care insurer will pay for each day of an insured’s long-term care at a care facility or in the insured’s home.

declined class. The group of proposed insureds who represent such a great risk of needing near-term care that the risk can’t be insured at any premium rate, according to the insurer’s practices.

deductible. See deductible amount.

deductible amount. Also called a deductible. A flat amount of covered medical expenses that an insured must pay before the insurer will make any benefit payments.

deductible period. See waiting period.

dementia. A global impairment of cognitive function.

duration of benefits. The total benefit payable under an LTC insurance policy, defined in terms of a daily benefit amount and a maximum period of time during which that benefit amount is payable or a maximum dollar amount the policy will pay.

ECCF. See extended congregate care facility.

elimination period. See waiting period.

employer-sponsored LTC plan. Long-term care insurance arranged by an employer through a private insurer to cover the LTC expenses of employees, their relatives, and company retirees.

evidence of insurability. Proof that the covered person meets the insurer’s health and lifestyle requirements and is an insurable risk.

exclusion. A loss for which a policy does not pay a benefit.

extended congregate care facility (ECCF). A type of assisted living facility that offers more extensive custodial care than an adult congregate living facility, but less than that of a nursing home.

full portability option. A group LTC policy provision that allows a person to continue to be covered by the group LTC policy after leaving the group.

functional assessment. In long-term care insurance underwriting, the process of examining (1) the cognitive status of the proposed insured and (2) the extent to which the proposed insured is able to perform the activities of daily living.

grace period. A period of time within which a policyowner may pay overdue premiums and avoid a policy lapse. The grace period for LTC insurance is typically 31 days.

group LTC plan. A plan of LTC insurance covering several individuals.

guaranteed purchase option. A policy provision that allows an insured person to add to the original daily benefit amount at intervals specified in the policy without having to provide evidence of insurability.

guaranteed renewable. In LTC insurance, the term used to describe a policy that the insurer is required to renew each year—as long as premiums are paid—for the lifetime of the insured.

hands-on assistance. Actual physical assistance provided to a person who is in the course of performing activities of daily living.

Health Insurance Portability and Accountability Act (HIPAA). Federal insurance legislation passed in 1996 that provided tax benefits to individuals and employers who purchased long-term care coverage and defined the nature of the kind of long-term care insurance that would be eligible for the tax benefits.

HIPAA. See Health Insurance Portability and Accountability Act.

home health care. Care a patient receives at home, whether medical care or custodial care.

hospice. A facility that specializes in the treatment of terminally ill people, typically providing 24-hour care, including the services of doctors and nurses to care for a patient and provide pain relief.

IADLs. See instrumental activities of daily living.

IMSA. See Insurance Marketing Standards Association.

indemnity benefit method. A method of LTC benefit payment whereby a policy pays a specified benefit regardless of the actual expenses for long-term care of the insured person.

individual LTC policy. An LTC insurance policy that is issued to cover the long-term care expenses of a single person, rather than the long-term care expenses of a group.

inflation. A general rise in prices of goods and services.

inflation protection rider. A policy provision that either automatically increases the benefit amount each year by a specified percentage or allows the insured to opt for a higher daily benefit at specified intervals during the lifetime of a policy without having to show evidence of insurability.

instrumental activities of daily living (IADLs). Activities that require higher levels of functional ability than basic ADLs and provide an indication of whether a person is able to function independently at home. The IADLs include the ability to use a telephone, use transportation services, shop for groceries, prepare meals, perform housework tasks, and take medicine as directed by a prescribing physician.

Insurance Marketing Standards Association (IMSA). An insurance industry organization that provides education and training programs in the area of market conduct for industry members and certifies people who have completed its program of education.

intermediate nursing care. Nursing care provided on less than a 24-hour basis, usually rehabilitative in nature.

lapse. The termination of an insurance policy because a renewal premium is not paid during the period specified in the policy.

lifetime benefit period. A policy feature that provides for payment of a daily benefit amount for the remainder of the insured person’s life, provided the insured person is receiving custodial care.

long-term care (LTC) insurance. Insurance that provides medical and other services to insureds who need care in their own homes or in an institution providing such care.

Long-Term Care Insurance Model Act. The model act adopted by the National Association of Insurance Commissioners in 1993, and modified periodically, that sets into legal language for state adoption the regulation recommendations contained in the Long-Term Care Insurance Model Regulation.

Long-Term Care Insurance Model Regulation. The model regulation developed by the National Association of Insurance Commissioners in 1993, and modified periodically, that contains a set of recommendations for state regulation of long-term care insurance.

LTC insurance. See long-term care insurance.

market conduct. The general term that insurers and regulators use to designate the area of insurer activity involving advertising, sales, and distribution of insurance products.

Medicaid. A joint federal and state medical insurance program administered by the states to provide payment for health care services, including long-term care, for people with low incomes.

Medicare. A United States government health insurance plan for persons age 65 and older and people with certain disabilities.

Medicare Part A. The part of Medicare that provides basic hospital insurance.

Medicare Part B. The part of Medicare that provides benefits for physicians’ professional services.

Medicare supplement policy. Also known as a Medigap policy. A private insurance policy that provides benefits for certain expenses not covered under Medicare, such as Medicare deductible amounts and copayments. This coverage is available only to individuals who are covered by Medicare and can be purchased by individuals or by employers to cover retired employees.

Medigap policy. See Medicare supplement policy.

misstatement of age provision. A policy provision which states that if an insured’s application misstates his or her age, benefits are adjusted to the level that the premiums would have bought based on the insured’s correct age.

model act. A document developed by the National Association of Insurance Commissioners to put model regulation requirements in the form of a written law that a state’s legislature may pass in its entirety or in part.

model regulation. A set of recommendations developed by the National Association of Insurance Commissioners advising states to adopt certain requirements that insurers must meet with respect to an insurance product.