Contract Types: What Are Your Full-Service Retirement Community Options
A Full-Service Retirement Community is the only type of retirement community that contractually provides for all future care contingencies. When you choose to live in a Full-Service Retirement Community, also referred to as a continuing care retirement community (CCRC), you’re planning for and investing in your future.
Most communities require incoming residents to in as an independent living resident. And, although independent living residents often pay higher fees with some contract types than they would in an independent living only community, it’s important to remember that they may also be paying for future costs of healthcare services they may require.
To help alleviate the concerns that incoming residents may have concerning the higher costs for independent living, many contract types also offer partially or fully refundable entrance fees. Part of the entrance fee and/or monthly fee may qualify as a deduction as a prepaid healthcare expense.
The main reason individuals move into Full-Service Retirement Communities is to have access to the community’s full continuum of care, including:
Many communities also offer memory care and additional healthcare services. Knowing that all future care needs are covered provides individuals with a sense of security knowing they will not have to move to receive the care they need.
Full-Service Retirement Community Contract Types
Payment plans can vary dramatically from one community to the next. Knowing this, let’s look at the various contract types. While contracts vary, there are typically three main types:
- Type A: extensive or life-care contracts
- Type B: modified contracts
- Type C: fee-for-service contracts
Most contracts, including the three types above, can be broken down into the following components:
- The entrance fee is often compared to a membership charge. You become a member, which gives you access to the full continuum of care the community offers.
- The monthly fee is paid to cover the cost of the services you have access to the moment you move in. That includes the community’s amenities, services and conveniences.
- Additional costs and fees such as administrative fees, health assessment fees and community fees that may be required when signing or reserving a home.
In most full-service communities, residents are required to pay an entrance fee that may or may not be refundable along with their usual monthly fee. Some contracts allow portions of the entrance fee to be refunded, but the amount refunded often decreases for each month of residency. For example, the refundable portion of the entrance fee could decrease by two percent each month until a specified length of residency has occurred.
Contracts may also outline annual or care-based increases of the monthly fee to cover the increased cost of operations. Incoming residents move in as independent living residents. As advanced levels of care are required, such as assisted living or skilled nursing, the monthly fee may increase with some contract types because of the increased cost of care. Contracts with more costly entrance fees typically compensate for the higher cost of care is required. The contract type will determine whether the monthly fee will increase when higher levels of care are needed.
The 3 Main Full-Service Community Contract Types
The contract type you choose will dictate the amount of money you spend initially (entrance fees) and the costs of your monthly fees. To help you understand the differences between contract types, let’s look at each of them in more detail.
Type A: Extensive or Life-Care Contract
The type A contract, also referred to as an extensive or life-care contract, is the most full-service contract type available. Under a type A contract, residents pay a higher entrance fee to lock-in a monthly service rate for the duration of their stay (essentially for the rest of their lives) despite any rising needs in care.
Although a type A contract has the highest entrance fee of all contract types, locking in healthcare rates can add up to considerable savings over a resident’s lifetime. When care needs increase, the resident isn’t hit with a big increase in monthly fees because they have “pre-paid” a portion of those costs with the high monthly fees experienced in independent living.
A type A contract ensures that residents have more predictable long-term expenses despite potential changes in healthcare needs. In some cases, residents may even be guaranteed lifetime care even if financial assets have been exhausted.
Type B: Modified Contract
A type B contract, also referred to as a modified contract, offers lower entrance and monthly fees compared to the type A contract. Because the resident pays lower monthly fees as an independent living resident, they aren’t pre-paying for any future potential healthcare needs they may encounter.
When assisted living or skilled nursing support is required, residents are limited in the amount of healthcare services they may receive without incurring an increase in their monthly fee. For example, a resident may receive skilled nursing services for 30 days of every quarter at no additional cost. Anything above this amount will cause the monthly fee to increase but is often still below the going rate for healthcare services in the community’s location.
A type B contract is popular because paying a lower entrance fee and a lower monthly fee can make it easier to afford a Full-Service Retirement Community. The savings can be set aside and invested so the resident has funds to pay for any future needs, including assisted living or skilled nursing. Since the resident enjoys a reduced rate as an independent living resident and a lower entrance fee, the savings could be substantial, especially if the resident remains in independent living for a significant period of time versus assisted living or skilled nursing.
Type C: Fee-for-Service Contract
Type C contracts, also known as fee-for-service contracts, are the best choice for those who’ve already made arrangements to cover healthcare costs (such as through long-term care insurance) or for those who don’t anticipate needing advanced levels of care (healthy genes) in the future. The type C contract has a lower entrance fee and lower monthly fees compared to type A and type B contracts. However, costs of assisted living and skilled nursing care are higher for type C contracts because residents pay market rates for these services as they are needed. Costs increase with each level of care.
Long-term care insurance can help cover these costs, saving residents money overall. For those without insurance or who anticipate higher healthcare needs, type C contracts are often the least desirable.
Georgia Full-Service Retirement Community Options: The Lodge, A Magnolia Manor Community
Under all three contracts, residents enjoy the same living arrangements, amenities and services. The difference in cost is incurred when, and if, care levels change. Georgia Full-Service Retirement Communities often offer more than one type of contract, although they may not offer all three options.
No one contract is right for everyone. Educating yourself about the different contract types and considering how they apply to your situation will help you determine which choice is right for you. The Lodge in Columbus, Georgia, offers several contract options. If you’d like more information or have questions about Full-Service Retirement Community contracts, please contact us. We’re here to help!