1 Understanding Continuing Care Retirement Communities and Long Term Care Insurance Betty Doll, MBA, CLTC Doll & Associates Long Term Care Insurance Services Broker, Trainer, Consultant

2 CCRC’s CCRC is generic term for facilities that provide housing and health care both while able to live independently and when needing assistance with ADL’s or when needing full scale skilled nursing services Lots of variations and contract arrangements Typically are categorized by “risk”

3 CCRC’s Generally a campus type environment Includes –independent living— –homes, cottages, condos –assisted living; and –skilled nursing facility Amenities vary: meal plans, wellness programs, cultural activities Many are very high-end

4 CCRC’s Result of some of the same demographic changes that created long term care insurance Increased life expectancy Fewer family members available to help provide care “Aging in Place”

5 The CCRC Market Upper middle class to affluent clientele Those who cannot afford LTCi probably cannot afford a CCRC Entrance fees Monthly maintenance fees

6 Type A: Full Risk “Full risk” refers to facility assuming full risk for the additional costs of living accommodations and personal assistance associated with need for higher levels of care Charges an entrance fee—part of fee is for future health care If resident needs to move to ALF or SNF, there is usually no additional entrance fee No increase in monthly fees when moving to a higher level of care but fees can increase based on inflation Sometimes referred to as a “life care” contract

7 Type B: Partial Risk Facility assumes a portion of the risk for future health care needs of the resident It may be a guaranteed discount on fees for the ALF or SNF care It may be a certain number of days will be provided in ALF or SNF at the same monthly rate as is paid for independent living—rates would increase after that time

8 Type C: Fee for Service Fee for service means that the full risk of increased cost for higher levels of care is the responsibility of the resident If ALF or SNF is needed, the resident will pay a higher monthly fee for those services The facility passes all costs associated with the higher level care to the resident

9 Equity Model Residents pay an initial fee deemed to be an acquisition cost for their dwelling unit They also pay monthly fees When they move to higher level of care, the CCRC “resells” their unit and the resident receives all or a portion of the initial investment back. Many different forms of contracts

10 Entrance Requirements All types will review the finances of applicants to determine ability to afford the entrance fee and the ongoing monthly charges Simply moving into a CCRC does NOT mean that the person is eligible for benefits from their LTC policy—must meet the benefit triggers Many CCRC’s require that the person be first eligible to live in independent living Most have a minimum age requirement Many have a significant waiting list

11 Amenities Vary dramatically from community to community May include various meal plans Communities may have club house, fitness center, a post office, a grocery store, golf course

12 Accreditation CCRC’s are accredited by CARF—the Commission on Accreditation of Rehabilitation Facilities. The examining body for CARF is the Continuing Care Accreditation Commission. For more info and look at the section on CARF-CCACwww.carf.org

13 Costs Entrance fees can range from almost nothing up to over $1 million dollars Costs will differ based on amenities, competition, and reputation Entrance and monthly fees vary within a CCRC for level of residence, refund options, and single or double occupancy Review contracts carefully for fees and add- ons Some have additional entrance fees for a new level of care

14 Financial Qualifications Per a CPA: –A couple needs at minimum $60K annual income and $750,000 net worth Per the administrator of a Type C (fee for service) facility: –A base net worth of twice the entrance fee and a monthly income stream of twice the monthly fees. Is a major financial decision and commitment

15 Entrance Requirements May need to get on waiting list: younger clients need to be advised to apply now Facility will evaluate if applicant has sufficient funds and acceptable health to meet their requirements Physician typically must affirm that the applicant is in good health, ambulatory, and able to live without assistance

16 Monthly Fees Remain “level” for Type A (full risk) but likely will increase based on economic conditions—also may increase based on additional meals provided and supplies needed in higher levels of care For fee-for-service facilities, monthly fees rise to market rates for that level of care Personal expenses are not included

17 What’s the Attraction? Knowing that they will not have to look for care facilities as health care needs change Knowing they will not be a burden to their children Confidence that caregivers will be available (may be of special interest to those with no family) Security of knowing that plans for the future have been taken care of Social structure Type A: Fixed costs

18 The Role of LTCi LTCi does NOT cover fees while in Independent Living for any type of CCRC LTCi is especially beneficial to those in Type B, C, or Equity arrangements because it will cover the additional costs associated with higher levels of care

19 LTCi and Type A (Full Risk) When entering the Type A (Full Risk) facility, one is essentially “pre-paying” for future care Cost of increased levels of care is factored into entrance fees and monthly costs – fees do NOT increase when moving to higher level of care

20 LTCi and Type A (Full Risk) Type A Facilities do not typically encourage residents to have LTCi But typically do not encourage them to drop LTCi if they already have it Conduct their own actuarial assessments—does the applicant have ability to pay these “level” monthly fees for remainder of life LTCi may be “redundant”

21 LTCi and Type A (Full Risk) If applicant has LTCi, a cash plan will be easiest to collect from If reimbursement—client receives monthly bill from CCRC and submits to carrier for reimbursement—sometimes tricky since essentially same bill as when in independent living (possibly plus meals and supplies) If able to get reimbursement, provides additional cash flow which can be used in any way needed

22 LTCI and Fee for Service CCRC The decision is essentially the same for those planning to enter a fee for service CCRC as it is for anyone else—evaluate the risks and consequences if care is needed LTCi would pay for care within the ALF or SNF at the CCRC when the policy’s benefit triggers are met Fees at the Fee for Service CCRC increase with the increase in care received—LTCi then offsets those additional fees Communities generally encourage residents to have LTCi

23 Positioning LTCi for those considering a CCRC Provides coverage while on waiting list for entrance May need care prior to going to CCRC Keeps options open—may decide to go elsewhere If enter Type a (Full Risk) can re-evaluate the value of keeping the policy in force

24 Summary Every CCRC is different –Full Risk, Partial Risk, Fee for Service, Equity –Encourage clients to fully understand what they are considering and pros and cons of each Know the type of facility your client is considering— you will approach the LTCi discussion differently LTCi is less important in Type A (Full Risk) since client has pre-paid health care available CCRC’s involve a significant financial commitment but also offer confidence and security that care will be available in the future