Payroll Articles
Long-Term Care Insurance
Under the Health Insurance Portability and Accountability Act of 1996, Long-Term Care Insurance conracts are generally treated as accident and health insurance contracts. Therefore, amounts received under such contracts are excluded from income as amounts received for personal injuries and sickness and reimbursements for medical expenses. If the contract makes per diem payments (i.e., a certain amount of coverage is paid for each day of care); the excludible amount will be capped at $230 per day in 2004 (indexed for inflation), although excess amounts will be excluded to the extent of the actual cost of care. Employer-provided coverage under a lLong-Term Care Insurance contract is excluded from income to the same extent as employer-provided accident and health insurance coverage, but there are several restrictions.
- Long-term care coverage is not subject to the COBRA health care continuation requirements.
- Long-term care coverage is not a qualified benefit that can be offered as part of a Cafeteria Plan under IRC ยง125 and
- Long-Term Care Insurance that is provided as part of a Flexible Spending Arrangement is included in the Employee's income.
To qualify, a Long-Term Care Insurance contract must provide only for coverage of qualified long-term care services, such as necessary diagnostic, preventive, treating, mitigating, and rehabilitative services, plus aintenance or personal care services that are required by a chronically ill individual. The services must be provided under a plan of care prescribed by a licensed health care practitioner. A chronically ill individual is someone who is unable to perform at least 2 activities of daily living (e.g., eating, toileting, bathing, dressing, continence, transferring) or has a severe cognitive impairment requiring substantial supervision.