Free-Look Waiver Enforced in Recent New Jersey Fair Hearing
A recent case out of Cumberland County, New Jersey has provided clarification regarding the effective date of an applicant’s eligibility for benefits when an Immediate Irrevocable Election Form is utilized in combination with the purchase of a Medicaid Compliant Annuity (MCA). Read the full decision.
Laying out the Case Facts
Shortly after entering a skilled nursing facility in January 2021, the Petitioner and their spouse purchased a Medicaid Compliant Annuity as part of their Medicaid spend-down efforts. The MCA was issued with an effective date of May 20, 2021, and a first payment date of June 5, 2021, to be paid out over a six-month term. Following the purchase of the MCA, the couple submitted an application to Medicaid requesting approval for benefits effective June 1, 2021.
The Issue at Hand: The Free-look Period
According to the terms of the annuity contract and in compliance with state insurance laws, the policyholder has a 30-day right to examine and cancel the contract should it not meet the policyholder’s expectations. This cancellation period is often referred to as the policy’s “free-look period.” Should the policyholder cancel the contract during the free-look period, they would be refunded their full premium amount. For Medicaid purposes, a few states consider the MCA to be revocable during the free-look period. In these states, the annuity may not be considered Medicaid compliant until the free-look period expires.
However, at the time that the annuity application was executed, the Petitioner had also signed an Immediate Irrevocable Election Form voluntarily waiving the free-look period requesting that the policy become immediately irrevocable. While some states accept this form as a true waiver of the free-look period, the New Jersey Medicaid agency has not. Therefore, despite the execution of the Immediate Irrevocable Election Form, the agency determined that the Petitioner would not be eligible for benefits until July 1, 2021, based on the 30-day cancellation provision.
The Court’s Decision
The Court determined that according to N.J.S.A. 17B:25-39 and following the specific approval of the Commissioner of the New Jersey Department of Banking and Insurance of our exclusive carrier’s Immediate Irrevocable Election Form, the annuity should have been considered immediately irrevocable as of the issue date. As such, the Petitioner should have been approved for benefits as of June 1, 2021. Upon review, the Administrative Law Judge reversed the agency’s determination.
What it Means for New Jersey
This decision provides future applicants who elect to waive the thirty-day cancellation period of the annuity contract the opportunity to accelerate their eligibility for benefits without planning around the free-look period. By enforcing the policy’s immediate irrevocability as of the issue date due to the implementation of the Immediate Irrevocable Election Form, the Department has set the standard for how an applicant’s eligibility effective date should be calculated. This is a big win for attorneys and their clients in New Jersey!