My Oct. 12 column described how premiums under the new Federal Long-Term Care Insurance Program generally compare with those under its predecessor plan and with those for individual policies on the retail insurance market. I also mentioned that, in general, I think the benefits offered by the new federal plan are superior to its predecessor’s and at least comparable, with certain exceptions, to most individual policies from major insurance carriers.

In this column, I will describe how the new federal benefits, underwritten by John Hancock Life, differ most significantly from one individual retail policy, one that most closely matches the federal plan in benefits and premium. Because there are many long-term care insurance companies and policies out there, it is impossible to generalize the comparison. My comparison will be with John Hancock Life’s Custom Care II Enhanced product as it is offered in Washington, D.C. The D.C. policy also happens to be one that I consider to be among the best currently available on the retail market.

I identified 35 differences between the two policies in three basic categories: differences where the new federal plan is clearly or very likely to be superior, differences where the retail policy is clearly or very likely to be superior, and differences where the better policy depends on your specific circumstances or future needs.

Where I find the new federal plan is superior: better benefits for overseas care; coverage for acts of war; reduced underwriting requirements for certain applicants; relaxed requirements for satisfying the elimination period, often referred to as the policy deductible; and better benefits for informal care providers, for respite care, for care-planning visits and hospice care, and for drugs, supplies and durable medical equipment.

Where I find the retail policy is clearly or very likely to be superior: the option to share benefits between spouses; return of premium for death before age 65; a guarantee that your policy’s terms will never change without your consent; preferred rates for applicants in very good health and more flexibility in offering coverage to applicants in poor health; state regulation of future rate increases; more lenient standards for benefits eligibility; a wider range of benefit levels and options; more lenient requirements for satisfying the home-care elimination period; additional benefits for accidental injury before age 65, caregiver training, provider care quality checks, bed reservation and care advisory benefits.

Where I find differences that may or may not be significant, depending on your needs: eligibility for participation in state Medicaid Partnership programs; availability of a monthly benefit limit; inflation protection options; availability of various riders and discounts; qualifications for informal care-giverbenefits; availability of various payment frequencies and duration; and exclusions for long-term care benefits you may receive from other insurance policies or programs.

While it is not practical to explore the details of all of these differences, this summary can serve as a checklist for conducting your own evaluation of plans available to you. Unfortunately, too many long-term care insurance decisions are made based on incomplete or inaccurate information.

One of the most common mistakes consumers make is giving equal weight to factors that are, in fact, unequal. For example, if Policy A has a more liberal benefit trigger than Policy B – an important difference, since receiving any benefits, at all, is at stake – but Policy B has a more generous respite care benefit, it would be a mistake to consider these two advantages to be offsetting. The additional respite care benefit is dependent on triggering benefits in the first place, and the value of the additional respite care benefit is likely to be relatively small compared with the overall policy limit, or even a single month of benefits.

Having a clear understanding of the differences between policies, and prioritizing those differences in their relevance to your particular needs, is key to making informed decisions.

Written by Mike Miles
For the Federal Times
Publication November 9, 2009