Long-term insurance — a form of coverage generally intended to help pay for care services that may be needed later in life — has already been both embraced and disgraced in its relatively short history. First introduced in some forms and formats in the late 1970s, it didn’t really take hold with consumers until a couple decades later. To a great number of people then, it seemed like a dream: a way to assure they could get the long-term care they needed without going bankrupt or depleting other family members’ finances.

For many, the dream proved impossible.

In March, 2007, the New York Times ran a story titled “Aged, Frail and Denied Care by Their Insurers” that shined the light on some of the rudest awakenings.

It reported that thousands of elderly long-term care insurance policyholders experienced delays in payments along with unfathomable and wrong-headed bureaucracy. A great number of consumers were shocked to learn that, despite the peace of mind they thought they had purchased in a policy, they had no coverage at all; in the year 2005, for example, nearly one in every four long-term care claims was denied.

The reasons were sketchy at best. One company, Bankers Life and Casualty, sent an 85-year-old woman with dementia the wrong paperwork to fill out, then denied her claim because the paperwork was improper. Another insurer, Penn Treaty American, insisted that a 92-year-old man’s condition had improved so much that he no longer needed nursing care — despite his diagnosed forgetfulness and anxiety and doctor’s orders to the contrary.

And many unwitting consumers were surprised to learn that their policies were limited to helping pay for nursing home care only, as opposed to other preferred care such as assisted living or adult daycare.

At the bottom of the bad business practices: Insurers began to realize their calculations had been off — both about how long policyholders would live and how increasingly expensive it would be to treat conditions common among seniors such as Alzheimer’s and diabetes.

In 2008, the year after the Times story ran, John E. Dickens, director of healthcare for the Government Accounting Office, testified before Congress, mostly championing the benefits of long-term care insurance but also acknowledging consumer concerns about rocketing premium costs and an avalanche of denied claims.

The increase in public and political awareness spawned investigations into insurers’ marketing and claims practices and led to reforms, with many of the worst actors going out of business or opting not to offer long-term care insurance.

A Closer Look at the Fine Print

Consumers today considering buying long-term care insurance policies are urged to proceed cautiously — as navigating the confusing terms in the policies can be overwhelming. Another caveat: No two policies are the same, so each one must be closely read, including the fine print on coverage and exclusions.

When the policy takes effect

In general, long-term care coverage takes effect when a policyholder either:

• Needs supervision because of a cognitive impairment such as Alzheimer’s or some other dementia, or
• Needs help with at least two out of six of the Activities of Daily Living, often called ADLs — which include eating, dressing, bathing, grooming, going to and from the toilet, and moving from one place to another. Some policies require that full hands-on help must be needed.

Types of care covered

While policies differ, the care commonly covered may include:

• Home health care — Skilled care at home provided by a nurse, home health aide, nutritionist or therapist; some policies require that the individual or agency providing the care must be licensed
• Home care — Assistance with ADLs and help with chores and housework
• Medical equipment, such as walkers and wheelchairs
• Home modifications — such as walk-in showers or wheelchair ramps
• Future services — Types of services developed after a policy has been purchased or not explicitly covered by an insurance policy, though generally the policyholder and a doctor and the insurance company must all agree to it, and
• Care coordination — Help in determining care needs, finding services, and arranging for care (though this coverage is quite rare).

Policy amounts and limits

Most long-term care policies have a limit on the total amount that will be paid; some may pay one rate for all types of services required, and some pay differing amounts for differing services — for example, $50/day for home care or $100/day for nursing care.

Prudent policy shoppers will compare the amount of benefits with the average cost of care where they live, as a policyholder would be on the hook for the difference. There is help with this: Genworth, which provides various types of insurance, also publishes an annual Cost of Care Study listing costs of home healthcare, adult day healthcare, assisted living, and nursing home care in each state. For example, figures for 2018 reveal that the annual cost of 44 hours of care per week from a home health aide ranged from $38,896 in Mississippi to $68,640 in Hawaii. For some people, this bit of comparison-shopping may even prompt a move.

Elimination periods

Before the insurer will pay for any care, policyholders must meet the elimination period — the number of days that must pass before benefits will be paid; policyholders must usually pay out of pocket for care before then. For example, policies will usually count either a number of days of service or calendar days before covering the cost of care.

Dealing With Denials

As warned, long-term care insurance claims may be delayed or denied for any number of reasons. The important thing for a consumer to do is to read the insurer’s denial letter very carefully; often, all that may be required is additional documentation from a doctor or other care provider to reverse the decision.

If a claim is denied because the care provider was not approved, for example, it may be possible to negotiate for coverage — especially if the policy provides of an “alternative plan of care” or there is a documented reason for using a particular provider’s services.

If a claim is denied because the insurer claims a benefit is not covered, an explanation from a health care provider of precisely why it is needed may change that determination.

Additional Guidance

For more on the nitty-gritty of long-term care insurance, including a glossary of common policy terms, see the guide Navigating Long-Term Care Insurance, published by Home Instead, an in-home care agency.