Cute couple smilingWith all the hoopla about LTC carriers going out of the market or raising rates, many people are more willing to consider short-term care (STC) policies. Hence, recovery care has come out of the shadows and sheds new light!

Short-term care (also known as Recovery care or “LTC Lite”) is not a new product but it has been gaining ground in the last three years as an alternative to traditional long-term care insurance. With its shorter underwriting cycle, high-issue rates, and low premiums it’s becoming increasingly popular especially for Medicare beneficiaries.

The standard STC policy provides coverage for one year or less. The benefits are usually reimbursement-type. Most are the “use it or lose it” type, although one popular insurance carrier uses the “pool of money” approach.

STC elimination periods are much more consumer-friendly. Most do not go longer than 60 days [as with LTC] and some offer a 0-day elimination period. And since these policies are not true LTCi – there is no 90-day doctor certification required before a person can receive benefits. This makes STC perfect for those who might have purchased a long-term care policy with a longer elimination period. Also, the policy can pay even if Medicare pays. In short, if a person chooses a 20-day elimination period, that is exactly what he or she will receive. The STC benefits would start on day 21.

Underwriting is a breeze. A person will not need to wait 4 to 6 weeks for a policy – more like 7 to 10 days or less. Most STC applications are just 10 or 11 health questions. If a person answers “No” to all the questions, then he or she is 95% through the underwriting process. Most insurance carriers do a prescription drug screen and a phone interview. Older ages [60+] would require a face-to-face interview with a cognitive screening. From time to time doctor records could be ordered, however that is pretty rare.

The health questions are similar to the questions found on an LTCi application and would be considered “knock-out” questions. Generally the insurance carrier wants to make sure that a person is not already ADL (Activities of Daily Living) deficient, cognitively impaired or affected by any life-threatening conditions. This is mainly considered a generalization. A “Yes” answer to any of the questions means the person will definitely not qualify.

Coverage can vary from policy to policy. They all cover care in a nursing home. While some policies only cover facility care, many offer benefits for care in the community as well. Some carriers may limit the amount of benefits they will pay for home care while others cover all types of care equally – just like a regular LTCi policy. One carrier offers a home care rider which provides for 90 home care visits. Coverages vary from company to company so be sure to contact your insurance broker in order to understand what the policy will pay.

The benefit triggers are the same as LTCi  if a person cannot perform 2 out of 6 activities of daily living (eating, dressing, toileting, transferring, bathing, continence) or has severe cognitive impairment.

A major difference between STC and LTCi is no 90-day doctor certification requirement. This means if a person only needs care for 6 or 7 weeks (i.e. recovering from a fractured hip), an STC policy will pay for the care. Whereas a traditional LTCi policy would not.

Generally people age 65+ buy these policies.  Fifteen years ago, the 65-year old was the perfect candidate for traditional LTCi. Now with higher rates, many people have found they are priced out of the market or they can no longer qualify due to health.

If a person is a Medicare beneficiary, according to the Medicare & You Guide, Medicare does not pay for most long-term care services. When they do pay, they will only pay for all charges up to 20 days. If a person continues to be eligible for the next 80 days he or she will pay $166.00 per day. After 100 days, Medicare stops paying altogether. That’s when a short-term care policy is critical.

For younger people, age 45-60, who may still have children at home, or are helping a few through college, a one year STC plan is a great way to guard against invading their retirement funds and to pay for a short-term serious illness or injury.

Those who cannot qualify for or afford traditional LTCi, the STC applications are only 10 to 11 questions. Most of the underwriting is taken off the application. One STC insurance carrier does not have a weight chart. The same company will also take insulin-dependent diabetics (regardless of the daily units used), as long as the person has not been on insulin for over ten years. Some other carriers do not ask if the person has been declined by another carrier. While no carrier wants to purposely insure ill people, there are plenty of times a person would be uninsurable for a traditional plan, but still qualify for STC.

Short-term care is not for everyone. However, it can be extremely important coverage for those people who do not have LTCi and have everything to lose.