I am going to risk creating a bunch of unfriendly comments this week by venturing in the discussion of which benefit solution is better – reimbursement or indemnity.
I deserve to be heard on this because our peers have been doing an outstanding job marketing the value of cash indemnity product offers while demonizing reimbursement policies. I do not believe that they are being fully transparent.
I am NOT saying that indemnity plans are a bad thing. What I am saying is that the way in which they are being presented is not fully transparent.
Too many times, all that is heard is “you can get a full monthly benefit paid in cash every month” or some variation. While that may be true and I do recognize the value in the strategy, there is more under the covers than simply receiving cash. I’m saying that certain details have been minimized or swept to the side.
Here are a couple of points that are that (in reality) can turn into a sticky situation.
The first point that I want to make is that regardless of payment model (reimbursement or indemnity), someone will always be playing bookkeeper. Someone has to manage the insured’s finances by paying their bills, depositing their checks, and coordinating affairs with their care providers. There is no ducking it. AND, the process is strikingly similar regardless of which claims methodology is used.
It is not a myth that you that will become a bookkeeper … it is a fact! Regardless of whether you have a policy in place or not, with every long term care situation – someone has to assume management of the financial affairs. There will always be that responsibility. AND, that someone is typically not the insured who is receiving care.
There had better be a plan in place indicating/designating who will be managing the affairs and paying the bills because bookkeeping WILL occur in every extended care instance. It is unavoidable.
Another thing that is downplayed is receipts. You cannot minimize the importance of retaining them. While indemnity products may not require receipts to be submitted to pay claims, they do suggest that you hold on to them for tax purposes. Afterall, you never know when you least favorite uncle (Uncle Sam) will want to visit and review your filing. Retaining your receipts is essential and the prudent thing to do and it provides an audit trail.
Speaking of tax time – the reimbursement model is simple it is simply a check box. An indemnity product introduces a little more work with tax form 8853, per diem limitations, receipts to validate claims if needed, and the possibility that the informal care giver has become a household employee along with all the obligations that comes with that. A reimbursement policy at tax time requires less paperwork at tax time.
Some people will brush these concerns aside and say that I am trying to scare people because (you fill in the reason). In actuality, what I am saying is that we should be talking openly and honestly about the risks as well as the rewards that a benefit payment method offers. Nothing more, nothing less – just honesty without the spin.
Remember, long after we retire, someone will be calling with a claim for a policyholder. The last thing that any of us want is for the family of a policyholder to be disappointed because they were not adequately informed.
Fridays with Fisher 
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