Medicaid: Single Premium Life Insurance Policy; Penalty Reversed

Single Premium Life Insurance Contract; Penalty Reversed. On November 5, 2008, Petitioner filed an application to purchase a Single Premium Pure Endowment Life Insurance Contract. She paid $89,500 for the policy which, in five years, would pay her children $91,327.  The contract stated there was no cash surrender value and that no benefits would be paid prior to Petitioner’s death. It could not be modified and was unassignable. She entered the nursing home and on March 19, 2009, applied for Medicaid. DFCS determined that Petitioner was over-resourced and denied eligibility. DCh sent no representative to the hearing and the only explanation of its rationale for denying eligibility was provided by DFCS’s witness. The ALJ noted that the term “single premium endowment life insurance contract” is not found in federal law or in the ABD Manual. It was treated as a term policy since it had no surrender value, could not be sold or assigned and no loans could be made against it. Although it could be applied toward the burial exclusion, since it had no cash value, it could not be counted toward the resource limit. The ALJ found that the policy would be subject to estate recovery, which is odd since estate recovery takes place in probate court and the ALJ has no jurisdiction to determine the extent of the probate estate. The decision below was reversed, with the ALJ finding that the policy could not be considered an available resource.

Delaney v. Department (October 13, 2009).