This question comes up frequently, and I’ve been getting it more often lately. Although I’ve written about this topic before, here is a concise, up-to-date overview of how long-term care insurance (LTCI) works if you live in a continuing care retirement community (CCRC), also known as a life plan community.
The short answer…
Generally, if you move to a CCRC you can use your long-term care insurance. Most LTCI policies trigger benefits when the insured cannot perform a specified number of activities of daily living (ADLs) — typically two or three — without assistance, as defined in the policy. That eligibility standard does not change because you live in a CCRC.
If you become unable to perform the required ADLs while living in a CCRC, you or your designated legal proxy would file a claim with your LTCI carrier. There are, however, important caveats that depend on the type of LTCI you hold and the type of CCRC residency contract you signed. Understanding those distinctions will help you know what to expect.
Types of long-term care insurance policies
LTCI policies generally fall into two categories: reimbursement policies and cash indemnity policies. Reimbursement policies are the most common today, though some insurers still offer cash indemnity plans.
Reimbursement LTCI policies
A reimbursement policy pays up to your daily or monthly benefit limit for actual care costs. For example, if your monthly care costs are $7,000 and your policy pays $5,000 per month, the insurer reimburses $5,000. If your bill is $4,000 that month, the insurer reimburses $4,000 and the remaining portion of your benefit pool typically stays available for future use.
With reimbursement coverage, you or the care provider must submit receipts and bills to the insurer so they can determine the appropriate reimbursement amount.
Cash indemnity LTCI policies
A cash indemnity policy pays a fixed monthly benefit regardless of actual care costs. If your policy pays $5,000 per month, you receive that amount once you meet the policy’s ADL or cognitive impairment criteria, even if your actual care costs are lower.
Cash indemnity plans do not require bills to be submitted. The insurer pays the policyholder (or another designated recipient) directly, and those funds can be used for any purpose.
Type of CCRC contract
CCRC residency contracts vary and have important implications for how LTCI benefits are applied.
Many CCRCs offer a lifecare (Type A) contract. With lifecare, your monthly fee generally remains the same whether you live independently or require assisted living or nursing care within the community. Conceptually, a Type A contract resembles a long-term care policy with broad or unlimited benefits, although contracts may still include inflation adjustments and certain ancillary charges, so read the terms carefully.
Other communities use a fee-for-service (Type C) contract. Under this arrangement you typically pay a lower fee while independent but are charged market rates for any care you need later, which can be quite expensive depending on the level and duration of care.
Some CCRCs offer hybrid contracts that blend features of lifecare and fee-for-service, often providing discounted care rates rather than full coverage.
Limitations on claim amounts
If you live in a lifecare CCRC and carry a reimbursement LTCI policy, claims can be affected because you may not generate separate monthly care bills when you change levels of care. Some insurers have denied claims or limited reimbursements on this basis, while other CCRCs use internal formulas to allocate a portion of the monthly fee that represents the value of the care provided and submit that amount to the insurer for reimbursement. In such cases, your LTCI payment may be limited to the portion the insurer accepts from the facility.
That said, outcomes vary. Some CCRCs coordinate with insurers and submit an agreed-upon billing amount, while other residents have encountered denials. It’s important to know how your chosen community handles billing and how your insurer interprets policy terms.
No limitations on cash indemnity plans at CCRCs
Cash indemnity policies are generally not limited by the billing practices of a lifecare CCRC because they don’t require submission of invoices. Once you meet the policy’s ADL or cognitive impairment criteria, the insurer pays the stated cash benefit directly to you, without regard to the community’s internal billing.
Read the fine print
Always read your LTCI policy’s terms and the CCRC contract carefully. Consult an LTCI specialist or attorney if you have questions about how benefits will be applied within a specific community. Understanding both the insurance policy language and the residency contract details will help you avoid surprises and make informed decisions about funding future assisted living or skilled nursing care.