What Is a Type A Life Care Contract and Why Does It Matter?
This is the second post in our Confidence to Plan Ahead series.
What Is a Type A Life Care Contract and Why Does It Matter?
One of the most important differences among Life Plan Communities is not the size of the apartment, the dining program, or the amenities. It is the contract.
A Type A Life Care contract is designed to provide greater predictability around future care costs. It generally combines independent living, services and amenities with access to specified health related services under one long term agreement. Residents typically pay an entrance fee and a monthly service fee, with the contract defining how costs are handled if additional care is needed in the future. Type A agreements are considered the most comprehensive of the traditional Life Plan Community contract types.
At Westminster Village, understanding the Life Care contract is an important part of planning ahead. The value is not simply where you will live today, but understanding what your agreement provides if your needs change in the years ahead.
What does “Type A” mean?
Life Plan Communities, also known as Continuing Care Retirement Communities or CCRCs, may offer different types of residency contracts.
A Type A contract, sometimes called an extensive or Life Care contract, generally provides the broadest level of future care benefits of the traditional contract models. The resident pays an entrance fee and ongoing monthly service fee, and the agreement specifies the health related services available if care needs increase.
The details are important. Not every Type A contract is identical, so prospective residents should review exactly which services are included, how fees may change, and under what circumstances additional charges may apply.
What is the primary benefit of a Type A Life Care contract?
Predictability.
None of us knows exactly what our health needs will be five, ten, or twenty years from now. A Type A contract is structured to reduce some of the financial uncertainty associated with that unknown.
Rather than waiting until additional care is needed and then paying entirely according to the market cost of that care, a Type A contract establishes in advance how specified future services will be provided and paid for. Type A contracts generally involve higher upfront costs in exchange for greater protection from substantial increases associated specifically with moving to higher levels of care, subject to the terms of the individual contract.
That distinction becomes particularly important when comparing Life Care with other senior living arrangements.
How is a Type A contract different from fee for service senior living?
With a fee for service arrangement, you generally pay for additional care when you need it. If your needs increase, your costs may increase significantly because you begin paying the prevailing rate for that level of service.
With a Type A Life Care contract, more of that future risk is addressed through the contract established when you enter the community.
Neither approach is automatically right for everyone. The important question is how much financial predictability you want and how you prefer to plan for possible future care expenses. Type A contracts tend to appeal particularly to people who place a higher value on reducing uncertainty around future care costs.
Does a Type A contract mean my monthly fee will never increase?
No, and this is an important distinction.
Monthly service fees at Life Plan Communities can increase over time as the costs of operating the community change. A Type A contract is not a promise that your monthly fee will remain unchanged for life.
Instead, its value is generally related to how the contract treats the cost of specified additional care. Type A contracts are structured so that moving to a higher level of covered care does not result in the same type of substantial increase that may occur under a fee for service arrangement. The exact provisions depend on the individual contract.
When comparing communities, ask to see the actual residency agreement and understand both how annual service fee increases are determined and what happens financially if your care needs change.
Why does health matter when entering a Life Care community?
This is another reason planning ahead matters.
Because a Type A provider is making a long term commitment under the terms of the Life Care contract, communities may have health and financial requirements that prospective residents must meet before entering under that agreement.
Those requirements vary by community.
Waiting for a significant health change before considering a Life Plan Community can therefore affect the choices available to you. Beginning the process while you are living independently gives you time to understand admission requirements and determine whether a particular contract and community are right for you.
What should I ask before signing a Type A Life Care contract?
Do not focus only on the entrance fee or monthly fee. Ask what those payments provide over time.
Important questions include:
- What services and levels of care are covered by the contract?
- How will my monthly fee change if I need additional care?
- What costs are not included?
- How have monthly service fees changed in recent years?
- What happens if my spouse and I eventually need different levels of care?
- What health and financial requirements must I meet before entering?
- Is any portion of the entrance fee refundable?
- What happens if I leave the community?
- What financial protections or assistance are available if my circumstances change?
A Type A contract is a significant financial and long term commitment, so prospective residents should understand the actual agreement rather than relying solely on the name of the contract. AARP similarly recommends carefully examining what entrance and monthly fees include and having a qualified professional review a CCRC agreement before signing.
Understanding Life Care at Westminster Village
Westminster Village is a nonprofit Life Plan Community in Scottsdale offering a Type A Life Care contract.
For someone considering Westminster Village, the conversation should go beyond choosing a floor plan. It should include understanding how the Life Care contract works, what services it provides, how costs are structured, what happens if needs change, and how those provisions fit into your overall financial and retirement plans.
Our team can walk prospective residents and their families through the Life Care contract, answer questions about fees and requirements, and explain what the agreement means in practical terms.
Because a Life Care decision is about more than where you live today. It is also about how you choose to prepare for tomorrow.
Planning while you have choices gives you the opportunity to understand those decisions before you need to rely on them.
Click here to read our first post titled ‘Not Ready to Move? It Might be the Right Time to Start Looking.’