How do I choose an appropriate elimination period?

LTC insurance plans typically include a time-based deductible, known as an “elimination period.” The elimination period is a period of time after one has met the benefit eligibility criteria, during which benefits are not paid. The most common elimination period for group LTC insurance is 90 days. However, in designing your LTC plan, you should consider how long you could afford to self-fund your need for care and balance that against the incremental cost of shortening the elimination period.

In evaluating a proposed elimination period, also consider whether the policy requires that you satisfy an additional elimination period for each separate episode of care. Most quality LTC products only require you to satisfy the elimination period once in your lifetime.

Elimination periods can be fulfilled in a variety of ways. Some plans only count days on which covered LTC services are paid for to fulfill the elimination period. Under such a plan, if care is received only every other day, it will take twice as long to fulfill the eliminiation period. Other plans will count one full week for each calendar week during which care is received on at least one day. In still other plans, the elimination period is fulfilled based on days of benefit eligibility, without regard to whether care is paid for. These nuances can significantly affect the ease or difficulty of fulfilling the elimination period.

Several carriers now offer an option of waiving the requirement to fulfill an elimination period if care is received at home. Such “zero day home care elimination period” plans are very appealing, but may increase costs substantially. When considering such an option, it is important to remember that (1) not all LTC needs begin with care being received at home and (2) other sources (e.g., Medicare) may very well cover the cost of care during some portion of the elimination period.

Note that regardless what elimination period you choose, a tax-qualified LTC policy will only pay benefits if your need for care lasts at least 90 days. Thus, for example, if you have hip replacement surgery from which you fully recover in 60 days, that 60-day need for LTC will not result in any benefit payment – regardless of the elimination period you choose – nor will it count towards fulfilling your elimination period. Such surgery could only help to fulfill your elimination period if you needed assistance with activities of daily living for at least 90 days.