Different types of long term care insurance: tax-qualified and non tax-qualified LTC.

Long term care insurance types. In 1996 Health Insurance Portability and Accountability Act (HIPAA) establishes two kinds of long term insurance:

1.  non-tax qualified LTC (it was also known as traditional LTC);

2.  tax-qualified LTC.

Let’s view both of them in details.

The first type of long term care insurance is not charged taxes upon. It is usually activated by a “trigger” which is a so called “medical necessity trigger”. It means that the patient should address his physician or a doctor referred by a firm for him to state that the patient needs medical care, only after this the policy will pay. A patient is required to be unable to perform at leas one activity of daily living which include dressing, bathing, eating, toileting, etc. In this case the  company has no choice but to help the patient immediately. The main disadvantage of this type of LTC is that a patient will surely receive a tax bill after he gets medical care benefits, and there is always a risk that the sum in a tax bill can be rather large. It should be mentioned that there are only few firms which offer non-tax qualified LTC as it costs very expensive to insurance companies. As a result, tax-qualified long term care insurance is more common.

If to speak about tax-qualified LTC it differs from non-qualified one. According to it the policy will pay only in case the patient needs medical care for 90 days minimum and is not able to perform at leas two daily living activities. Also medical benefits can be provided in case a patient has severe cognitive dysfunction and needs medical care for more than 90 days. Otherwise, a doctor has to give a plan of care. According to tax-qualified health care insurance all medical benefits got by the insured patient are non-taxable.

Apart from the fact that one LTC is taxable and another is not, non-qualified LTC is more friendly to costumers as there is no restrictions of HIPA rules. So, one LTC offers you tax deductibility, another – high level of medical service, and it’s up to you what to choose for it is impossible to have high medical service without paying taxes.

There is an individual program of LTC for federal government workers. About 20 million American federal workers are able to get federal long term care health insurance plan. The latter has a range of benefits over common plans of LTC medical insurance offered by  firms. Addition conditions that let a patient get a cover are: mental disorders, informal care, international coverage, rate stability and others.