At myLifeSite we hear regularly from thousands of readers who are researching continuing care retirement communities (CCRCs), also known as life plan communities. Those conversations help shape our content, highlighting the questions and concerns people commonly face. One of the most frequent topics is understanding the different types of CCRC contracts. Below is a clear, expanded explanation of the primary contract types and important details to consider when comparing communities and contract options.
Types of CCRC contracts
CCRCs typically offer one of five contract structures, with variations within each category:
Type A (lifecare) contract: A lifecare contract generally requires a higher entry fee or monthly service fee while residents live independently. In return, most residential services, amenities, and health-related services — including assisted living and skilled nursing — are provided with little or no additional monthly cost beyond standard inflation adjustments.
Put simply, a lifecare contract pre-pays for some future health-related services. The main advantage is predictability: residents and couples can budget knowing their long-term care costs are covered regardless of future health needs. The trade-off is paying more up front for services that may never be used.
When evaluating lifecare contracts, confirm exactly which services are included at no extra charge. For example, does the contract include assisted living as well as skilled nursing? Are services covered only in the community’s healthcare center or also if provided in the independent living residence? Many lifecare agreements still require residents to pay out-of-pocket for personal care delivered in their independent living unit.
The value of a lifecare contract is often greater for couples: if both spouses eventually need care, their monthly charges typically remain the same as before the transition.
>> Related: If I Move to a Lifecare Community Should I Keep My Long-Term Care Insurance?
Equalized rate lifecare: A variation called equalized pricing sets a single, predetermined monthly rate for healthcare when a resident transfers to assisted living or skilled nursing. That rate is usually tied to a specific residential unit’s price (for example, “the current rate for our smallest two-bedroom”). Residents moving from lower-priced independent units may pay more for care, while those from higher-priced units may pay less — effectively standardizing the care rate across residents.
Note that in a couple where both people require care, each person typically pays the equalized rate. This differs from traditional lifecare contracts, where couples often continue to pay the double-occupancy rate they paid in independent living.
Type B (modified): A modified contract offsets some future care costs but not on an unlimited basis. Examples include discounted care rates (e.g., 20–30% off market rates) or a set number of care days in the healthcare center at no extra cost. Some programs allow unused days to accumulate; others reset annually. For couples, it’s important to know whether allotted days or discounts apply per person or per unit. Some modified contracts combine discounts and allotted days.
Type C (fee-for-service): Fee-for-service contracts generally have lower entry fees or monthly fees while residents live independently. When assisted living or skilled nursing is needed, residents begin paying market rates for those services, causing monthly costs to increase accordingly.
Some fee-for-service models are fully à la carte, letting residents choose which services and amenities to pay for while in independent living; others apply mainly to the care portion. Compared with lifecare contracts, fee-for-service residents avoid paying up front for care they may not use but face unlimited exposure to potential long-term care costs.
Rental: Rental CCRCs require little or no entry fee, sometimes charging only a nominal community fee. Contracts are often month-to-month and typically carry higher monthly service fees than comparable entry-fee communities. Many rental contracts do not guarantee priority access to healthcare spaces, so available care units may be filled by non-residents or outside referrals. As with fee-for-service, healthcare is usually billed at full market rates.
Because independent living monthly fees are often higher in rental CCRCs and care is billed at market rates, a resident — especially a couple — could potentially pay more over their lifetime in a rental model than in an entry-fee community, depending on length of residency and level of care needed.
Equity/Co-op: In equity or co-op CCRCs, residents own their home or purchase shares in the cooperative and still pay a monthly service or membership fee for services and maintenance. Healthcare services in these models are usually provided at market rates.
Under a true equity model, ownership passes to heirs or the estate as with any home, though the monthly service fee often continues until the unit is resold to a qualifying buyer. Some equity models are hybrid: while residents receive a portion of resale appreciation, the operator retains control of the resale process and the unit’s future occupancy.
Caveats to comparing CCRC contract types
When comparing contract types, remember that the categories above assume other factors are similar. Geographic location, community age, and amenity quality can significantly affect price. For example, a lifecare contract in a rural area may cost far less than a fee-for-service contract in a high-cost city. If a single community offers multiple contract choices, the general characteristics described here usually hold true.
Also consider refundability of entry fees. A fee-for-service entry fee with a high refundable percentage (for example, 90% refundable) may be larger than a nonrefundable lifecare entry fee, which will affect upfront cost comparisons.
>> Related: Avoid This Mistake When Comparing Retirement Communities
Making an educated CCRC decision
Comparing CCRC contracts can be complex, especially if you’re not familiar with contract language and long-term care terminology. Do thorough research, ask detailed questions, and request written explanations of what each contract covers. Confirm specifics such as which services are included, how rates change upon transfer to healthcare, refund policies, and how couples are treated under the contract. Understanding these details will help you choose the contract and community that best match your health needs, financial goals, and peace of mind.
Updated on July 31st, 2024.