Long Term Care (LTC): Compensation and Reimbursement Plans


There are two different styles of long term care plans which determine how the client will be paid. These are compensation plans and reimbursement plans. Choosing between these two plans is certainly not the easiest thing in the world. Here are the differences between the two diets to help you make that decision easier.

Compensation schemes

A compensation plan allows the customer to receive a check each month for the maximum monthly benefit as soon as they qualify for a claim. C. Brant Steck, Risk Management Consultant at First Element Insurance Planners and Vice President of BUI, explains it with an example: if the maximum monthly benefit is $5,000 per month and the benefit period is 36 months, this client will receive a check each month, for 36 months, d an amount of $5,000.

With this plan, there are no bills, receipts, or caregiver approvals. It can be a way of providing family members with some sort of compensation for informal care, but there really is a lot of flexibility. One downside is that indemnity plans typically cost significantly more than reimbursement plans, so the customer must decide whether “the benefits are worth the extra cost,” adds Steck.

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Repayment plans

A reimbursement plan is a plan that reimburses the policyholder for eligible expenses, up to a monthly maximum. However, the policy owner must submit the receipts to the insurance company. Going back to the same example of $5,000 per month, if the client presents receipts for $3,000, the insurance company will reimburse him $3,000. Steck explains that the remaining $2,000 that is not returned to the customer remains in his cash reserve for future use.

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