Nebraska Department of Insurance
THE NEBRASKA HEALTH INSURANCE INFORMATION, COUNSELING, AND ASSISTANCE (NICA) PROGRAM
JUNE 2000 NICA NEWS
QUESTIONS AND ANSWERS
Q. What tax deductions can I take for long-term care insurance?A. Federal legislation enacted in 1996 established the tax treatment of long-term care insurance. Policies issued after January 1, 1997 which provide tax incentives are classified as "Tax-qualified Policies" (TQ) and those without any tax incentives are classified as "Non Tax-Qualified Policies" (NTQ). Premiums for "TQ" policies may be included as a medical expense if you itemize your deductions, and if your medical expenses exceed 7 1/2% of your adjusted gross income, the excess is deductible. There are maximum premium allowances based upon age. Policy benefit payments, when received, are free from federal income tax. Premiums for "NTQ" cannot be deducted as a medical expense and it is unclear if benefits received will or will not be taxable. Discuss your tax treatment of long-term care insurance with your accountant or tax person.
Q. What benefit length should I consider when choosing a long-term care policy?
A. Keep in mind the chances of needing long-term care for more than five years are relatively small. For most people, a policy covering three to five years will be more cost-effective. If, however, your primary concern is protection if you get Alzheimer's disease, which can last a long time, you may want to consider the more costly option of lifetime coverage.
Q. What are the advantages to choosing a long-term care policy with coverage for assisted living facilities?
A. Most policies today offer a full range of care services from home care to adult day care and assisted living facilities, to nursing home care. These are called "integrated or Pool of Funds" policies. Coverage for assisted living facilities (sometimes called alternative care facilities), are increasingly popular since they provide help with activities of daily living or supervision for the cognitively impaired while encouraging independence and privacy in a home-like setting. Choosing a policy with flexible benefits will give you better options should your health require more care than can be managed at home.
Q. My health insurance premium has gone up every year as I get older. Do all policies work that way?
A. Premiums on your health insurance go up for several reasons. Health care costs keep rising, and an insurance company's cost of doing business may increase. Age is often used to determine the premiums you pay. This can be important for people buying Medicare supplement or long-term-care insurance.
Q. What kinds of services does Medicare not cover?
A. Medicare helps with health care costs, but it does not pay for everything. You are responsible for deductibles and coinsurance. It generally does not cover outpatient prescription drugs, routine physical examinations, eye glasses, custodial care, dental care or dentures, routine foot care, orthopedic shoes, or hearing aids. In addition, neither Part A nor Part B provides for a private nurse or room (unless required medically), the first three pints of blood, or personal convenience items such as a TV or a phone in your room, or services covered by workers' compensation.
Q. My client moved to Nebraska. He had a Medicare HMO. No Medicare HMOs are available in our area. He is eligible to buy guarantee issue Medicare supplement plans A, B, C, and F. Is he also guaranteed the right to buy Medicare Select plans A, B, C, and F sold in our area?
A. Yes. Medicare Select plans are Medicare supplements and must be offered on a guarantee issue basis in this situation. Remember, the client must apply for the Medicare supplement plan A, B, C, or F within 63 days of when his previous coverage ended.