Part 1: Be a part of the growth of long-term care insurance
You have worked hard to establish your home care agency. Every day you recruit and train caregivers, provide quality care to your customers, and look for ways to grow your business. If you are like most agencies, clients pay for care either directly or with help from their family.
There is a growing new source of revenue for your agency and it covers over 7.2 million people who either use care now or will very soon. That payment method is long-term care insurance (LTCi). Understanding the LTCi market and its products could improve the growth of your agency by diversifying your revenue mix, accessing new payer sources, and providing a valuable service to prospective clients.
The LTCi market
Long-term care insurance, originally referred to as nursing home insurance, has been sold in the United States for over 30 years. Over that time, LTCi market has seen rapid growth, more than quadrupling since its inception. Buyers of LTCi policies are generally more affluent with higher than average incomes and assets.
From the perspective of insurers, more than $8 billion is being put aside to pay new LTCi claims in the next year alone. About $2.5 billion of that would be flagged for potential payment for home care. That works out to $34,000 reserved for home care per claimant.
PayRight has data on over 1,800 clients of LTC carriers from the past two years.
Given the size of the LTCi market, accessing and servicing this market can provide an opportunity for further growth.
Although there is plenty of opportunity, accessing this market can be a challenge for many agencies. PayRight has data on over 1,800 clients of LTC carriers from the past two years. Some of the issues an agency and their clients must deal with in using LTCI to pay for care include:
1. The average LTCi payer takes over 45 days to pay their claims
LTCi carriers take between 35 and 60 days to pay their claims. About 15% of these payments have an error, often due to incorrect billing or an error in calculating the benefits. In these cases, the agency either must balance bill the customer or rebill the agency.
2. Policies have many features that can affect payment
Nearly all policies include either coinsurance, elimination periods, daily max limits, or other coverage limits and cost-sharing. This can often make it very confusing for the client as to what coverage they will receive and will affect the reimbursement that you get directly from the carrier.
3. It can be difficult for clients to access and understand their benefits
There is a lack of standardization in benefit design and structure. This can make it hard for a consumer to understand the specifics of what they have purchased.
4. LTCi is not the core business of the carriers
LTCi insurers are indemnity insurance companies. They insure all kinds of things including life insurance, accident, umbrella, and other kinds of insurance in addition to LTCi. In addition, many carriers outsource the administration and payment of LTCi policies to a third party, since the structure is different than the rest of their insurance and requires a lot more processing effort.
As you can see, there are many challenges and opportunities you will face when accepting long-term care insurance. Continue to Part 2 to help you better prepare your agency for these challenges.
Despite the opportunity that LTCi coverage presents, you need to be prepared for the challenges.
Instead of thinking of the challenges of working with insurers as a problem, view them as an opportunity to distinguish yourself from your competitors. A few things that you should invest in if LTCi is in your future:
1. Make sure you understand each LTCi policy and its benefits
Most LTCi policies are individually based and not as highly regulated as other insurance consumers are used to, such as life, auto, and health. As a result, there is a wide amount of variance in policy benefits both among carriers and even within individual carriers. Make sure that your staff understands the specifics of each client’s policy benefits, as well as their usage of benefits to date. Many agencies count on the client or their family to deal with the carriers directly, but if there is an issue, it may result in delays in payment to your agency.
2. Know how to bill LTCi carriers
Unlike health insurance, which has standard billing forms, each LTCi carrier has variations in how they will accept bills and supporting documentation. You can help your clients significantly, if you know how to provide the appropriate documentation for each carrier.
3. Be prepared to help your customers
If your agency is prepared to help your customers navigate their policy, the benefits, and the reimbursement, this will put them more at ease working with your agency and may make the difference in you getting their business.
4. Have adequate cash flow
One challenge an agency may have is that it can take up to 75 days to receive payment from LTCi carriers, and you may end up paying $1,400-$2,000 in caregiver expenses prior to being reimbursed. Being able to manage your cash flow can improve the odds LTCi clients will select your agency for their service. The average duration of service for clients is 12-18 months, so the lifetime value of taking these clients is in your favor.