The CAO will identify and confirm life insurance owned by each member of the applicant/recipient group or by a legally responsible relative (LRR) living with the group.
NOTE: If an applicant/recipient group member or LRR is not the owner or cannot convert the policy, the CAO will not count the policy.
The CAO will look at possible life insurance coverage for an individual who is:
Employed.
A member of a lodge or fraternal order.
A member of a union.
A veteran.
For life insurance, the face value (the amount printed on the policy) and the cash surrender value (the value of the policy if it is cancelled before the individual dies) are not considered resources when deciding on eligibility for GA-related MA.
The CAO will count the face value of any term insurance or other life insurance that has a cash value.
The CAO will figure the countable value of life insurance as follows:
If the total face value of all policies is $1,500 or less for each insured individual, do not count the policies for that individual, no matter who owns the policies or their cash value.
If the total face value for an insured individual is more than $1,500, figure out the cash surrender value. If the total cash surrender value is more than $1,000 for each insured individual, count the amount over $1,000 as a resource for the individual who owns the policy.
If a policy insures more than one individual, use an equal amount of the cash surrender value for each insured individual, unless the policy or information from the insurance company says not to.
If a member of the applicant/recipient group or an LRR owns a policy with a face value over $1,500, the cash surrender value over $1,000 is counted as a resource, even if the individual who is insured does not live with the household.
Example: Mr. and Mrs. Jerone apply for MA. Mr. Jerone owns a life insurance policy insuring his mother, who does not live with the Jerones. Mr. Jerone can cash in the policy, which has a face value of $5,000. The cash surrender value over $1,000 is counted as a resource for Mr. and Mrs. Jerone.
A funeral insurance policy that cannot be cancelled or changed will be treated as an irrevocable burial reserve, rather than an insurance policy.
An individual who is ineligible because of an insurance policy can become eligible if he or she lowers the cash value of the policy. The CAO will tell the individual to contact an insurance agent to work out a plan. Here are some suggestions:
Convert the policy to a type with no cash value.
Cash in the policy and use the money received to set up either a revocable burial reserve of up to $1,500 or an irrevocable burial reserve.
NOTE: Life insurance may be considered a legally unavailable burial reserve if the individual does not have legal access to the life insurance policy and ownership is changed to a financial institution or funeral director. (See Section 340.721, Irrevocable Burial Reserves.)
Cash in the policy and use the money to pay household expenses and purchase another policy with no cash value or a small cash value.
Borrow on the cash value to lower the amount to below the resource limit.
NOTE: If the amount borrowed is spent on medical expenses in the month it was received, it must not be counted as a resource. However, any money remaining on the first day of the following month must be counted as a resource. The CAO must deduct the amount borrowed from the cash surrender value to figure out how much will be counted.
If the insurance policy is term insurance, or if the total face value for each insured individual is not more than $1,500, there is no need to confirm the cash surrender value. The CAO will record the information, including the name of the company, the policy number, the face value of the policy, and the name of the individual insured. These policies do not count as resources.
If an insurance policy has a total face value of more than $1,500 for each insured individual, the CAO will find out whether it has cash surrender value by:
Reviewing the actual insurance policy.
Contacting the insurance agent or company.
All the identifying information must be recorded for each policy.
The cash surrender value of life insurance can be confirmed by:
The cash value charts on the policy itself.
By a written statement from the insurance company.
NOTE: Cash value charts cannot be used if the individual has collected dividends, gotten advanced loans, or if he or she has not paid the premium.
If neither of the above is available, the CAO will send a Request for Insurance Data (PA 83-Z) to the insurance company. The CAO must always send a PA 83-Z if the cash value for the policies, combined with the other countable resources, is close to the resource limit.
Reminder: An individual becomes ineligible for MA on the date that his or her resources go above the MA resource limit. The CAO will send an advance notice and include information that eligibility will continue if the individual gives proof within ten days that resources have been reduced to within the limit.
Demutualization” or “going public” is when a mutual life insurance company owned by policyholders converts into a life insurance company owned by shareholders. Only the policyholders’ ownership rights in the company change. The contract between company and policyholders does not change. Eligible policyholders may receive cash, additional insurance or shares of stock in exchange for changes in ownership rights in the company.
When reviewing an individual’s resource and income eligibility, the CAO must determine if a policyholder’s insurance company has demutualized. The CAO will ask whether an applicant/recipient received stocks, additional insurance or lump sum payments in exchange for changes to ownership rights in the company at demutualization. The applicant/recipient must give proof of the cash value of any resources from the demutualization of a life insurance company.
For applicants holding insurance policies that went public:
Determine the face and cash value of the policy to verify the countable resource value. See Section 340.42.
Count any stock received as a result of demutualization as an available resource. The number of shares multiplied by the dollar amount per share equals the resource amount. For individuals asking for MA LTC coverage, determine the value of the stock on the date of requested coverage for MA LTC. When calculating a resource assessment, determine the stock value as of the date of admittance to the LTC facility or the date the individual is assessed functionally eligible for HCBS.
Example: 3 shares at $50 per share = $150 amount of countable resource
If the stock was traded in for cash at the time of demutualization, treat the amount of cash received as a lump sum and apply lump sum policy as in Chapter 357.
For recipients holding insurance policies that went public:
Verify the date the recipient received notice of number of stock shares received.
If the recipient received notice of stock shares received and reported the change within 10 days, determine the value of the stocks as of the date the recipient was notified of ownership of the stock (number of stocks x $ per share.) Combine the value of the stocks with other countable resources.
If the total resources are above the appropriate MA LTC limit, send an advance notice to end MA LTC eligibility.
If the total resources are less than or equal to the appropriate MA LTC limit, note the information in the case record.
If the stock was traded in for cash at time of demutualization, treat the cash received as a lump sum and apply lump sum policy according to Chapter 357.
Updated February 14, 2012, Replacing February 8, 2002