Medicare, Medicare Supplement, Medicare Advantage and Long-Term Care Insurance
This section is dedicated to products that are generally considered to be "senior" insurance products. The information in this section includes Medicare, Medicare Supplement, Medicare Advantage and Long-term Care Insurance. Individuals that have reached the age of 65 usually purchase coverage related to Medicare. However, the information is relevant to persons that are under the age of 65 and are on Medicare. Long-term Care Insurance is usually purchased by persons between the ages of 40 and 70. The individual pays the premiums to the insurance company for the coverage. The benefits are typically paid when the insured is elderly or disabled.
MEDICARE and MEDICARE SUPPLEMENT INSURANCE
Medicare is a federal government plan that provides health coverage to persons age 65 or over, those that are disabled that have been receiving Social Security benefits for 24 months, and those persons who are receiving kidney dialysis treatments are eligible for Part B of Medicare. The program was established in July 1966. Medicare is divided into two parts: PART A hospital coverage and PART B medical coverage.
- Part A is hospital coverage for which most citizens are automatically eligible upon turning 65. It is financed by taxes on employers and employees.
- Part B is doctor and out patient coverage which is optional to purchase. It is financed by individual monthly premiums, usually deducted from a person's social security check.
- Part A has a deductible that you must pay before Medicare will begin paying for health care services. The Part A deductible will be charged each time there is a hospitalization as long as 60 days separates hospitalizations. Once the deductible is paid, Medicare will pay a share of the covered health care expenses and you will be responsible for a share of the costs of the covered health care expenses. Part A also provides coverage for hospice care, limited skilled nursing care and home health care.
- Part B also has a deductible, but the Part B deductible is an annual deductible. Under Part B, Medicare will pay 80% of covered health care costs and you will be responsible for 20% of the covered health care costs that Medicare does not pay. Under the Affordable Care Act, Part B now covers some preventive services, including a yearly wellness exam, without a deductible or coinsurance.
- The Medicare deductibles and coinsurance amounts are adjusted on an annual basis.
THE MEDICARE MODERNIZATION ACT and THE MEDICARE IMPROVEMENTS FOR PATIENTS AND PROVIDERS ACT (MIPPA):
The Medicare Modernization Act was passed in December 2003. The law made several changes to the Medicare program. One of the biggest changes to Medicare is the introduction of a prescription benefit under Medicare identified as Part D. The Medicare Improvements for Patients and Providers Act (“MIPPA”) was passed in July 2008 and became effective June 1, 2010. This law is also known as Medicare Supplement Modernization. MIPPA helped to modernize the original ten Medicare supplement plans, which were originally designed and implemented in 1992. Effective June 1, 2010, plans E, H, and I are no longer offered for sale. New plans M and N are now offered for sale and may have a lower premium because they offer different cost sharing options. Certain plan benefits have been eliminated and others have been increased under MIPPA. For instance, a hospice benefit is offered in all the new plans effective June 1, 2010. Consumers with the old Medicare supplement plans do not have to purchase a new policy if their current policy is working well for them. For up-to-date information and answers to any of your questions about these federal laws, call 1-800-MEDICARE (800-633-4227) or visit www.medicare.gov.
MORE INFORMATION ABOUT MEDICARE:
For more information on the Medicare program, what is covered, and the changes that have recently been made to the program, please visit www.medicare.gov. The website has a lot of information including a "Frequently Asked Questions" section that covers many topics. You may also want to review the publication "Your Medicare Rights and Protections."
MEDICARE SUPPLEMENT POLICIES
A Medicare supplement policy is designed to help pay for the costs that are not paid by Medicare for covered health care costs (i.e. deductibles and coinsurance amounts). Medicare supplement policies are often referred to as “Medigap” policies. You should consider purchasing a Medicare supplement policy if you do not have employer or retiree health care coverage and can afford to pay a monthly Medicare supplement premium. Authorized Medicare Supplement Insurers In Michigan
MEDICARE SUPPLEMENT PLANS BASIC CORE BENEFITS:
Every Medicare supplement plan includes all of the following:
- Hospitalization: Part A coinsurance plus coverage for 365 additional days after Medicare benefits end
- Medical Expenses: Part B coinsurance (generally 20% of Medicare-approved expenses) for hospital outpatient department services
- Medicare Part A and B Blood Coverage: First three pints of blood per calendar year
- Medicare Part A Hospice Coinsurance
MEDICARE SUPPLEMENT STANDARDIZED PLANS:
- Plan A includes only the basic core benefits.
- Plan B includes the basic core benefits and the Medicare Part A deductible.
- Plan C includes the core benefits, the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, and medically necessary emergency care in a foreign country.
- Plan D includes the core benefits, the Medicare Part A deductible, skilled nursing facility care and medically necessary emergency care in a foreign country.
- Plan F includes the core benefits, the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, 100% of the Medicare Part B excess charges, and medically necessary emergency care in a foreign country.
*Plan F also offers a high deductible option. The deductible increases every year and premiums are typically lower than other Medicare supplement policies. However, you must meet the deductible before the policy will cover your health claims. In 2010, the deductible for this plan was $2,000.
- Plan G includes the core benefits, the Medicare Part A deductible, skilled nursing facility care, 100% of the Medicare Part B excess charges and medically necessary emergency care in a foreign country.
- Plan K includes the core benefits. Plan K only provides 50% of the cost sharing for Medicare Part A covered hospice expenses and the first three pints of blood. It also only pays 50% of the Part B coinsurance after you meet your annual deductible. Once you meet your annual out-of-pocket spending limit, Plan K will pay 100% of all Part A and B deductibles, copayments and coinsurance. In 2010, the out-of-pocket limit for Plan K was $4,620.
- Plan L includes the core benefits. Plan L only provides 75% of the cost sharing for Medicare Part A covered hospice expenses and the first three pints of blood. It also only pays 75% of the Part B coinsurance after you meet your annual deductible. Once you meet your annual out-of-pocket spending limit, Plan L will pay 100% of all Part A and B deductibles, copayments and coinsurance. In 2010, the out-of-pocket limit for Plan L was $2,310.
- Plan M includes the core benefits, 50% of the Medicare Part A deductible, skilled nursing facility care and medically necessary emergency care in a foreign country.
- Plan N includes the core benefits, Medicare Part A deductible, skilled nursing facility care, and medically necessary emergency care in a foreign country. ** Plan N pays 100% of the Part B coinsurance except up to $20 copayment for office visits and up to $50 for emergency department visits.
A Medicare select policy is a Medicare supplement policy (Plan A through N) that conditions the payment of benefits, in whole or in part, on the use of network providers. Network providers are providers of health care, or a group of providers of health care, which have entered into a written agreement with the insurance company to provide benefits under a Medicare select policy. A Medicare select policy cannot restrict payment for covered services provided by non-network providers if the services are for symptoms requiring emergency care or are immediately required for an unforeseen illness, injury, or a condition and it is not reasonable to obtain such services through a network provider. A Medicare select policy must provide payment for full coverage under the policy for covered services that are not available through network providers. A Medicare select insurer must make full and fair disclosure in writing of the provisions, restrictions, and limitations of the Medicare select policy to the applicant. This disclosure shall include at least all of the following:
(a) An outline of coverage sufficient for the applicant to compare the coverage and premiums of the Medicare select policy with other Medicare supplement policies offered by the insurer or offered by other insurers.
(b) A description, including address, phone number, and hours of operation, of the network providers, including primary care physicians, specialty physicians, hospitals, and other providers.
(c) A description of the restricted network provisions, including payments for coinsurance and deductibles if providers other than network providers are utilized.
(d) A description of coverage for emergency and urgently needed care and other out-of-service area coverage.
(e) A description of limitations on referrals to restricted network providers and to other providers.
(f) A description of the policyholder's rights to purchase any other Medicare supplement policy or certificate otherwise offered by the insurer.
(g) A description of the Medicare select insurer's quality assurance program and grievance procedure.
At your request, under a Medicare select policy, the health carrier must make available to you the opportunity to purchase a Medicare supplement policy offered by the company that has comparable or lesser benefits that does not contain a restricted network provision. The health carrier shall make the policy available and cannot require evidence of insurability after the Medicare supplement policy or certificate has been in force for 6 months.
THE OUTLINE OF COVERAGE:
The outline of coverage is a document that is required to be given to the applicant at the time of application. An outline of coverage consists of four parts:
- A cover page giving company contact information
- Premium information
- Disclosure pages including:
- Information regarding your right to return policy
- That the policy may not fully cover all of your medical costs
- Neither the company nor its agents are connected with Medicare
- Charts displaying the features of each benefit plan offered by the insurer
YOUR RIGHT TO RETURN THE MEDICARE SUPPLEMENT POLICY:
The policy is your contract. You must read the policy itself to understand all of the rights and duties of both you and your health carrier. If you find that you are not satisfied with your policy, you may return it to the health carrier. If you send the policy back within 30 days after you receive it, the health carrier will treat it as if it had never been issued and return all of your premium payments.
REPLACING YOUR EXISTING MEDICARE SUPPLEMENT POLICY WITH ONE FROM A DIFFERENT COMPANY:
Do not cancel your present policy until you have received your new policy and are sure that you want to keep it. Any agent selling a Medicare supplement policy that will replace another Medicare supplement policy with a different health carrier must provide you with a notice regarding replacement of Medicare supplement coverage. The notice will look similar to this:
- According to (your application) (information you have furnished), you intend to drop or otherwise terminate existing Medicare supplement coverage and replace it with a policy or certificate to be issued by (company name) insurance company. Your new policy or certificate provides 30 days within which you may decide without cost whether you desire to keep the policy or certificate. You should review this new coverage carefully comparing it with all disability and other health coverage you now have and terminate your present coverage only if, after due consideration, you find that purchase of this Medicare supplement coverage is a wise decision. I have reviewed your current medical or health coverage. The replacement of coverage involved in this transaction does not duplicate coverage, to the best of my knowledge. The replacement policy is being purchased for the following reasons (check 1):
______ Additional benefits
______ No change in benefits, but lower premiums
______ Fewer benefits and lower premiums
______ My plan has outpatient prescription drug coverage and I am enrolling in part D (500.3827(5))
______ Disenrollment from a medicare advantage plan. Please explain reason for disenrollment [optional only for direct mailers] (500.3827(5))
______ Other. (Please specify)
1. Health conditions which you may presently have (pre-existing conditions) may not be immediately or fully covered under the new policy. This could result in denial or delay of a claim for benefits under the new policy, whereas a similar claim might have been payable under your present policy.
2. Your insurer will waive any time periods applicable to pre-existing conditions, waiting periods, elimination periods, or probationary periods in the new policy or certificate for similar benefits to the extent such time was spent or depleted under the original coverage.
3. If, after thinking about it carefully, you still wish to drop your present coverage and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical and health history. Failure to include all material medical information on an application may provide a basis for the insurer to deny any future claims and to refund your premium as though your policy or certificate had never been in force. After the application has been completed, and before you sign it, review it carefully to be certain that all information has been properly recorded.
HOW A MEDICARE SUPPLEMENT POLICY WORKS:
A Medicare supplement policy cannot pay for losses resulting from sickness on a different basis than losses resulting from accidents. A Medicare supplement policy must provide benefits that are designed to cover cost sharing amounts under Medicare and will be changed automatically to coincide with any changes in the applicable Medicare deductible amount and copayment percentage factors. Premiums may be modified to correspond with such changes. A Medicare supplement policy shall be guaranteed renewable. Termination shall be for nonpayment of premium or material misrepresentation only. Termination of a Medicare supplement policy shall not reduce or limit the payment of benefits for any continuous loss that began while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be predicated upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or payment of the maximum benefits. A Medicare supplement policy cannot cancel the coverage of a spouse solely because of the occurrence of an event that caused the cancellation of coverage of the insured, other than the nonpayment of premium.
OPEN ENROLLMENT PERIOD:
The best time to purchase a Medicare supplement policy is during the open enrollment period. The open enrollment period begins on the first day of the month in which you are both: age 65 or older and enrolled in Medicare Part B. The open enrollment period lasts six months during which you can purchase any Medicare supplement plan that any company offers. With one exception, each Medicare supplement policy currently available from a health carrier must be made available to all applicants during the applicant's open enrollment period. The exception: Blue Cross and Blue Shield of Michigan is not required to issue Medicare Supplement policies to individuals who are eligible for group coverage from an employer or former employer that is secondary to Medicare. Group coverage secondary to Medicare includes Health Reimbursement Accounts and other premium reimbursement arrangements and group plans where the employer or former employer pays all or a portion of the cost of the coverage but does not include coverage made available to an individual but the employer or former employer does not contribute anything toward the cost of that coverage.
GUARANTEE ISSUE RIGHTS:
You have 63 days to apply for new coverage with guarantee issue rights for standardized Medicare supplement plans A, B, C, F, High Deductible Plan F, K or L if you have had any of the circumstances listed below:
- You are enrolled under an employer plan that provides health benefits that supplement the benefits under Medicare and the plan terminates or the plan ceases to provide all those supplemental health benefits to the individual.
- You are enrolled with a Medicare Advantage plan or a PACE program and any of the following circumstances apply:
(i)The certification of the organization or plan has been terminated.
(ii)The organization has terminated or otherwise discontinued providing the plan in the area in which you live.
(iii)You are no longer eligible to elect the plan because of a change in your place of residence
(iv)You can show that the organization offering the plan substantially violated a material provision of the organization's contract including the failure to provide on a timely basis medically necessary care for which benefits are available under the plan or the failure to provide covered care in accordance with applicable quality standards, or the organization, or agent or other entity acting on the organization's behalf, materially misrepresented the plan's provisions in marketing the plan to the individual.
- You are insured under a Medicare supplement policy and the coverage ends because of any of the following:
(i) The insolvency of the health carrier
(ii) The health carrier substantially violated a material provision of the policy.
(iii) The health carrier, or an agent or other entity acting on the health carrier's behalf, materially misrepresented the policy's provisions in marketing the policy to the individual.
- You were covered under a Medicare supplement policy and you cancel the coverage and subsequently enroll, for the first time, with any Medicare Advantage plan and the subsequent enrollment is terminated by you during any period within the first 12 months.
- When you first became eligible for benefits under part A of Medicare at age 65, you enrolled in a Medicare Advantage plan and you disenrolled from that plan not later than 12 months after the effective date of enrollment.
UNDER THE AGE OF 65 AND ON MEDICARE:
If you are under the age of 65 your choices of Medicare supplement policies is generally limited to a Medicare supplement Plan A or Plan C. There are a limited number of health carriers that must offer Plans A and C to persons under the age of 65. Companies that are required to offer Plans A and C to persons under the age of 65 are allowed to charge those individuals more for the coverage. The only health carrier that may not charge more because the person is under the age of 65 is Blue Cross Blue Shield of Michigan.
BECOMING ELIGIBLE FOR MEDICAID WHILE YOU HAVE MEDICARE:
Benefits and premiums under the policy will be suspended at your request for a period not to exceed 24 months. You must notify the health carrier within 90 days after you become entitled for the assistance. The health carrier must return to you the portion of the premium attributable to the period of Medicaid eligibility, subject to adjustment for paid claims.
If you lose entitlement to medical assistance under Medicaid, the policy shall be automatically reinstituted effective as of the date of termination of the assistance. In addition:
(a) The reinstitution shall not provide for any waiting period with respect to treatment of pre-existing conditions.
(b) Reinstituted coverage shall be substantially equivalent to coverage in effect before the date of the suspension.
(c) Classification of premiums for reinstituted coverage shall be on terms at least as favorable to the policyholder or certificate holder as the premium classification terms that would have applied to the policyholder or certificate holder had the coverage not been suspended.
BUYING A MEDICARE SUPPLEMENT POLICY:
Some Medicare supplement policies are purchased through licensed agents of health carriers. Other Medicare supplement policies are purchased through a direct response method where you fill out an application and send it directly to the health carrier. You do not work with an agent with direct response sales. Authorized Medicare Supplement Insurers In Michigan
FILLING OUT A MEDICARE SUPPLEMENT POLICY APPLICATION:
When you fill out the application for a policy, be sure to answer truthfully and completely any questions about your medical and health history. The health carrier may cancel your policy and refuse to pay any claims if you leave out or falsify important medical information. Review the application carefully before you sign it. Be certain that all information has been properly recorded. Application forms or a supplementary application or other form to be signed by the applicant and agent for Medicare supplement policies must include the following statements and questions:
- [STATEMENTS] (500.3827(1))
(1) You do not need more than 1 Medicare supplement policy.
(2) If you are 65 or older, you may be eligible for benefits under Medicaid and may not need a Medicare supplement policy.
(3) If, after purchasing this policy, you become eligible for Medicaid, the benefits and premiums under your Medicare supplement policy will be suspended during your entitlement to benefits under Medicaid for 24 months. You must request this suspension within 90 days of becoming eligible for Medicaid. If you are no longer entitled to Medicaid, your suspended Medicare supplement policy, or, if that is no longer available, a substantially equivalent policy will be reinstituted if requested within 90 days of losing Medicaid eligibility. If the Medicare supplement provided coverage for outpatient prescription drugs and you enrolled in Medicare part D while your policy was suspended, the reinstituted policy will not have outpatient prescription drug coverage, but will otherwise be substantially equivalent to your coverage before the date of the suspension.
(4) 500.3827 statement #5
(5) Counseling services may be available in your state to provide advice concerning your purchase of Medicare supplement insurance and concerning Medicaid.
- [QUESTIONS] (500.3827 (1))
These questions should be answered to the best of your knowledge.
(1) Question 1 A, B and C
(2) Question 2 A and B
(3) Question 3 A, B and C
(4) Question 4 A, B and C
(5) Question 5 A and B
MEDICARE SUPPLEMENT PLAN RATES:
There are three basic ways that Medicare Supplement plan carriers rate their policies.
- Attained age: This means your premium is based on your current age and your premium will increase each year as you get older.
- Issue age: This means the cost of the policy is based upon how old you are when you first purchase the policy. The premium will not increase each year because of your age, but could increase if the carrier files a request for a rate increase.
- Community rating: Under community rating, all insureds in the same classification pay the same amount of premium. Your premium isn’t based on your age and may increase due to inflation or other factors if the carrier files a request for a rate increase.
A claim filed under a Medicare supplement policy cannot be denied as a pre-existing condition if the condition was last treated more than 6 months prior to the effective date of the Medicare supplement policy. The policy cannot define a pre-existing condition more restrictively than to mean a condition for which medical advice was given or treatment was recommended by or received from a physician within 6 months prior to the effective date of coverage. A Medicare supplement policy cannot use riders or endorsements to exclude, limit, or reduce coverage or benefits for specifically named or described pre-existing diseases or physical conditions. If a Medicare supplement policy replaces another Medicare supplement policy, the replacing health carrier must waive any time periods applicable to pre-existing conditions, waiting periods, elimination periods, and probationary periods in the new Medicare supplement policy for similar benefits to the extent such time was spent under the original coverage.
MEDICARE ADVANTAGE (MA) PLANS:
Medicare Advantage plans are offered by private companies approved by Medicare. The Department of Insurance and Financial Services (DIFS) does not have authority over Medicare Advantage plans but DIFS does license most of the health carriers that issue Medicare Advantage plans in Michigan. However, Medicare Advantage plans are solely under the authority of the Center for Medicare and Medicaid Services, a federal agency. This means that DIFS does not review or approve the contract language or the rates for Medicare Advantage plans.
These plans are sometimes called “Part C” or “MA Plans”. Medicare Advantage plans actually replace original Medicare coverage and will provide all of Part A and Part B coverage and must cover all of the services that original Medicare covers except for hospice care. They are not Medicare supplement policies even though they cover many of the same benefits as Medicare supplement policies. For this reason, individuals do not need a Medicare Advantage plan and Medicare supplement plan at the same time. You may only enroll, switch or drop a Medicare Advantage plan during certain times of the year. Once enrolled in a Medicare Advantage plan, you must stay enrolled for the calendar year starting the date your coverage begins. There are limited circumstances during which you may be able to change your coverage. For more information, call 1-800-MEDICARE (800-633-4227) or visit www.medicare.gov on the web.
Medicare Advantage plans may require the use of network providers and may pay different copayments, coinsurance and deductibles than original Medicare. They may also offer extras, including vision, hearing or dental coverage. Many include Medicare Prescription Drug coverage.
Medicare Advantage plans include:
- Health Maintenance Organization Plans (HMO)
- Private Fee-for-Service plans (PFFS)
- Preferred Provider Organization Plans (PPO)
- Special Needs Plans (SNP)
MEDICARE PRESCRIPTION DRUG COVERAGE (PART D):
Prescription drug coverage is available to everyone with Medicare and is offered by Medicare Prescription Drug plans or Medicare Advantage Plans. The Department of Insurance and Financial Services (DIFS) does not have authority over Medicare Prescription Drug plans, but DIFS does license most of the health carriers that issue Medicare Prescription Drug plans in Michigan. However, Medicare Prescription Drug plans are solely under the authority of the Center for Medicare and Medicaid Services, a federal agency. This means that DIFS does not review or approve the contract language, the list of covered prescription drugs or the rates for Medicare Prescription Drug plans.
Health carriers will offer a variety of options, with different covered prescriptions, and different costs. Medicare Prescription Drug plans are voluntary. If you want prescription drug coverage under Medicare, you must choose a plan offering the coverage that best meets your needs and then enroll. You may only join, switch or drop Medicare Prescription Drug coverage during certain times and once enrolled, you generally must stay enrolled for the calendar year starting the date your coverage begins.
If you have retiree health coverage or are covered under an employee group health plan, please watch for any information that is sent by the employer. You may not have to make any changes. If you do not understand the information you receive from your current or former employer, please contact the company's human resources department or use the contact number provided on any written communication you receive.
Medicare Prescription Drug plans will charge a monthly premium that varies by plan. This premium is in addition to the Medicare Part B premium. Medicare Advantage Plans that include prescription drug coverage may include an amount for the prescription drug coverage in their monthly premium.
** As of January 1, 2011, the amount you pay for Medicare Prescription Drug coverage may be higher based on your income.**
Medicare Prescription Drug plans may have yearly deductibles that must be met before the plan begins to pay its share of your covered drugs. *In 2011, no drug plan may have a deductible of more than $310. They may also have copayments and coinsurance that must be paid after the deductible has been met. Medicare Prescription Drug plans also have a coverage gap commonly known as the “donut hole.” This means after you and your Medicare Prescription drug plan have spent a certain amount of money, you then have to pay all of the out-of-pocket costs for your prescriptions up to a yearly limit. Starting in 2011, if you reach the coverage gap or “donut hole” in one year, you will get a 50% discount on covered, brand name prescription drugs. The Affordable Care Act will reduce the coverage gap in Medicare Prescription Drug plans over the next ten years. There are additional savings each year in the coverage gap through 2020 when the coverage gap will be eliminated.
MEDICARE PRESCRIPTION DRUG PLAN INFORMATION:
- Guide to Medicare Prescription Drug Coverage
- Things to Think About When You Compare Medicare Drug Coverage
- Closing the Coverage Gap - Medicare Prescription Drugs Are Becoming More Affordable
- 1-800-MEDICARE (800-633-4227) for Medicare and Medicare Prescription Drug coverage information
MEDICARE INFORMATION AND ASSISTANCE:
- Medicare & You Handbook
- MyMedicare.gov - free personalized information about your Medicare benefits and services
- Michigan Medicare/Medicaid Assistance Program (MMAP) - A free counseling service for Medicare and Medicaid beneficiaries and their caregivers. MMAP can assist in making health benefit decisions. Visit www.mmapinc.org or call: 800-803-7174 - MMAP - for free senior health insurance counseling.
LONG-TERM CARE INSURANCE
"Long-Term Care insurance" is an insurance policy designed to provide coverage for at least 12 consecutive months for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, personal, or custodial care services provided in a setting other than an acute care unit of a hospital, such as a nursing home.
Guaranteed renewable means that you have the right to continue the long-term care insurance as long as you pay the premiums on time. The insurance company does not have the right to make any change in any provision of the policy or rider while the insurance is in force unless mandated by law. The insurer cannot cancel the policy if your premiums are paid on time and there have been no material misrepresentations. Rates may be revised by the insurer on a class basis.
YOUR RIGHT TO RETURN THE POLICY:
Your new policy provides 30 days within which you may decide, without cost, whether you desire to keep the policy.
EXCLUSIONS OR LIMITATIONS:
The following is a list of circumstances where an insurance company can exclude or limit coverage:
- Pre-existing condition: a condition for which medical advice or treatment was recommended by, or received from, a provider of health care services within the 6 months immediately before the effective date of the policy.
- Michigan law provides that your replacement policy or certificate cannot contain new pre-existing conditions or probationary periods. The insurer will waive any time periods applicable to pre-existing conditions or probationary periods in the new policy for similar benefits to the extent such time was spent under the original policy.
- Mental or nervous disorders: however, this shall not be defined to include more than neurosis, psychoneurosis, psychopathy, psychosis, or mental or emotional disease or disorder and shall not permit exclusion or limitation of benefits on the basis of Alzheimer's disease or related disorders.
- Alcoholism or drug addiction
- Illness, treatment, or medical condition arising out of any of the following:
- War or act of war, whether declared or undeclared,
- Participation in a felony, riot, or insurrection,
- Service in the armed forces or units auxiliary to the armed forces, or
- Suicide, whether or not the individual was sane or insane at the time of the suicide, attempted suicide, or intentionally self-inflicted injury
A LONG-TERM CARE INSURER CANNOT LIMIT OR EXCLUDE COVERAGE BY:
- Type of illness
- Type of provider
- Territorial limitations
- Medical condition
- Accident other than a motor vehicle accident
INFLATION PROTECTION RIDER:
The inflation protection rider is an optional additional benefit to your policy that provides for benefit levels to increase to account for reasonably anticipated increases in the costs of long-term care services covered by the policy. Insurers must offer, at the time of purchase, the option to purchase a policy with an inflation protection feature with at least one of the following:
- Increases benefit levels compounded annually at a rate not less than 5%
- Guarantees the insured the right to periodically increase benefit levels without providing evidence of insurability or health status so long as the option for the previous period has not been declined
- Covers a specified percentage of actual or reasonable charges and does not include a maximum amount or limit
HOME HEALTH CARE SERVICES OR ASSISTED LIVING SERVICES:
A long-term care insurance policy that provides coverage for home care services or assisted living services shall define and provide a detailed explanation in plain English of what home care services or assisted living services are covered. A long-term care insurance policy that provides coverage for assisted living facility stays shall define in plain English what assisted living facilities are covered.
THE SUMMARY OF COVERAGE:
The summary of coverage provides a description of the important features of the policy. You should compare this summary of coverage to summaries of coverage for other policies available to you. The summary of coverage will include, among other things, the following:
- A description of the benefits provided by the policy
- A graph showing a comparison of benefit levels over at least a 20-year period of a policy that has an inflation protection rider and the benefit levels of a policy that does not have an inflation protection rider
- Any expected premium increases or additional premiums to pay for automatic or optional benefit increases
REPLACING YOUR EXISTING LONG-TERM CARE POLICY WITH ONE FROM A DIFFERENT INSURANCE COMPANY:
When an agent determines that a sale will involve replacement, the agent must furnish a notice regarding replacement of accident and sickness or long-term care coverage. One copy of the notice will be kept by you and an additional copy signed by you will be kept by the insurance company.
WHO SELLS LONG-TERM CARE INSURANCE?
Agents that are licensed to sell health insurance products in Michigan can sell long-term care policies. For a listing of insurance companies that are authorized to sell long-term care insurance in Michigan see Long-Term Care Writers In Michigan
Long-term care insurance is a relatively new type of insurance. Early on, there was not a lot of experience with paying claims when developing rates. When the initial rates were being developed companies made erroneous assumptions made about how much the company would actually pay for claims. Fewer people dropped their policies than the insurance companies had predicted. Companies may not have used strict underwriting practices, which allowed people to purchase the insurance that really should have been denied coverage or should have been charged a higher premium for their existing health conditions. Companies have now realized fewer people have dropped, or lapsed their policies. Policyholders are living longer and those individuals that are in facilities are staying in those facilities for longer periods of time due to better technology and health care. For all of these reasons, companies are increasing premiums as a means to maintain their reserves and be able to continue paying present and future policyholder claims.
LONG-TERM CARE INSURANCE RATE FILINGS:
Rate filings for individual long-term care policies or certificates issued prior to June 1, 2007, will be subject to the standards set forth in MCL 500.3927. Section 3927 of the Insurance Code establishes a minimum fixed loss ratio of 60% as the method to determine whether a rate filing is reasonable. The statute states the benefits will be considered reasonable in relation to the premiums provided the expected lifetime loss ratio is at least 60%. A loss ratio, simplistically speaking, is total paid claims divided by earned premium. For example, if an insurance company pays out $60.00 in claims and collects $100.00 in premium, then its loss ratio is 60%.
Rate filings for individual and group long-term care certificates that were issued on or after June 1, 2007, must be submitted to DIFS for review at least 30 days before the insurer notifies policyholders. Within 30 days after submission of the rate filing, DIFS is required to determine whether the filing is complete. The filing must include an actuarial certification that, under moderately adverse conditions, if the premium increase is implemented no further rate increases are anticipated. The filing must also include:
- New premium rate schedule
- New disclosure of rate increase history
- New actuarial certification
- Rate comparison statement
DIFS requires any rate increase filing, regardless of the date the certificate was issued, to provide the following information:
- Number of Michigan policyholders being affected by the rate increase
- The average premium before and after the rate increase for both nationwide and Michigan policyholders
- Experience exhibits showing actual to projected lifetime loss ratios
LONG-TERM CARE INSURANCE APPLICATION:
All applications for long-term care insurance policies must contain straightforward questions designed to assess the applicant's health condition. If an application contains a question that asks whether the applicant has had medication prescribed by a physician, it must also ask the applicant to list the medication that has been prescribed. If any medications listed in an application were known by the insurer or should have been known at the time of application to be directly related to a medical condition for which coverage would otherwise be denied, then the policy shall not be rescinded for that condition. The application must contain the following language:
“Caution: If your answers on this application are incorrect or untrue, [company] has the right to deny benefits or rescind your policy."
Application forms are designed to find out if you have any other long-term care insurance policy in force or whether a long-term care policy is intended to replace any other accident and sickness or long-term care policy presently in force.
PRIOR HOSPITAL STAY REQUIREMENT:
The insurance company cannot require a prior hospital stay before benefits are payable.
TAX QUALIFIED LONG-TERM CARE INSURANCE POLICIES:
When you purchase a long-term care policy, you may be asked to choose between a tax qualified long-term care policy and a non-tax qualified policy. If you purchase a qualified policy and you itemize your deductions, the premiums you pay for your long-term care policy may be deductible.
Long-term care insurance premiums can be added to your deductible medical expenses. You may then be able to deduct the amount that is more than 7.5% of your adjusted gross income on your federal income tax return. The amount of premium that can be deducted depends on your age. Refer to your tax advisor for more information.
If you purchased a Michigan approved long-term care policy before 1997, Federal law allows these policies to be "grandfathered" and considered as tax qualified policies.
LONG-TERM CARE INSURANCE INFORMATION:
- Long-Term Care Policies in Michigan - required provisions for long-term care policies sold in Michigan
- Long-Term Care Insurance Fact Sheet
- Long-Term Care Insurance: What You Should Know
- A Shopper’s Guide to Long-Term Care Insurance
- Michigan Medicare/Medicaid Assistance Program (MMAP) - A free counseling service that can assist in making health benefit decisions regarding Medicare, Medicaid and long-term care. Visit www.mmapinc.org or call: 800-803-7174 - MMAP - for free senior health insurance counseling.
- MMAP Publications: