Long-Term Care Insurance Coverage for Private Care Homes: Claims, Denials, and Appeals

A long-term care insurance policy is supposed to provide security when a family needs it most. Yet some families discover - only after choosing a smaller, more individualized private care home - that the insurer refuses to pay because the residence does not fit an outdated policy label.

This is hugely detrimental because we are experiencing a stark deficiency in available long-term care options in Hampton Roads and elsewhere.  As demand for long-term care rises and families seek alternatives to large, assisted living facilities, private care homes are filling a critical need. Citizens must be enabled to enlist the growing, and often better, options afforded by private care homes in their communities.

What is a Private Care Home?

Also known as community-based or adult group homes, these residences help with bathing, dressing, meals, medication management, mobility, and supervision - often in a more personal setting. When an insurer denies coverage based on how the home is classified rather than the care it provides, policyholders may have strong grounds to challenge the decision.  Recently, I’ve successfully appealed such denials and secured past and future payments for the insured client and, in some cases, the client’s estate if the claim was not approved during the client’s lifetime.

How Long-Term Care Insurance May Treat Private Care Homes Differently

Long-term care insurance is defined as assistance paying for personal and health-related care provided at home, in assisted living, in a nursing facility, or through community-based care when a person cannot perform activities of daily living because of a prolonged medical condition, disability, or cognitive impairment such as Alzheimer’s disease and dementia.

Private care homes operate differently from corporate assisted living facilities.  Many long-term care insurance policies were drafted around traditional categories such as “nursing facility” and “assisted living facility.”  If a small, private home is licensed only through local business licensing, or if it is considered a non-medical adult group home or residential home, an insurance company may argue that the setting does not meet the policy’s definitions.

If your long-term care insurance policy includes home health or community care benefits, the Virginia State Corporation Commission’s Bureau of Insurance has taken steps to protect access to qualifying care provided by family members, friends, and independent caregivers - even when those caregivers are not medically licensed. These protections help policyholders obtain the financial support they responsibly planned and paid for.  Virginia law provides that such benefits cannot be restricted to services only provided by registered nurses, physicians, Medicare-certified agencies, and long-term care facilities.  While these rules do not override every policy definition, they are persuasive when an insurance company takes an overly narrow view of covered care.

What to do if Coverage is Denied

Insurers often deny claims involving private care homes because they lack information establishing the proper licensure of the home and whether the home meets certain commonly required criteria such as 24-hour supervision by awake staff, meal service, medication assistance, retention of care records, emergency procedures, the presence of a registered nurse or physician oversight, and ability to assist with activities of daily living.  Many policies require a plan of care or individual service plan.

Insured individuals should obtain a complete copy of their long-term care insurance policies and read the entire policy, including riders, definitions, exclusions, benefit triggers, and alternative plan-of-care provisions.  If you are exploring a private care home, obtain documentation of the offerings of the home and determine if it is properly licensed.  This does not necessarily mean that it is licensed as an assisted living facility.  In most cases it means that the home is actually exempt from licensing by the Virginia Department of Health and Virginia Department of Social Services because the home houses ten or fewer residents, or no more than three residents with a serious cognitive impairment. 

In some cases, when a policy requires certain services that the care home does not provide, such as an attending nurse or physician, the resident can outsource and arrange such services at an extra cost that is manageable to the insured resident.  Thus, satisfying the policy so that the cost of residency in the home is covered by the policy.

Requesting coverage or appealing a denial is most effective when the insured can provide the following in clear documentation:  (1) a written explanation of the insured’s benefit trigger, such as inability to perform activities of daily living or severe cognitive impairment; (2) a plan of care signed by a physician or nurse; (3) records showing the number of residents in the home and a description of services provided therein; (4) any business licenses and policies showing the home operates lawfully; and (5) a copy of staff schedules, meal plans, and emergency operations procedures.

If a private care home is the right fit for you or your loved one and long-term care insurance benefits are available, you should not give up if your claim is denied.  Contact an attorney before considering different, less individualized, residential placement.  The benefits of private care homes are not outweighed by the cost, in most cases they are more affordable than large, assisted living facilities and the benefits of long-term care insurance coverage should be readily available under the law and public policy.  As private care homes become an increasingly important part of the long-term care landscape, families should be able to choose the care setting that best meets their needs and receive their insurance benefits without outdated policy labels standing in the way.

Kendall Drew Rasberry is a Pender & Coward attorney focusing her practice on estate planning, probate, powers of attorney, estate and trust administration, business entities, and issues affecting individuals with special needs.