The Court of Appeals of Ohio holds that irrevocably assigned insurance policies do not count toward Ohio Medicaid’s resource limit. In Shell v. Ohio Department of Job and Family Services (Ohio Ct. App. No. 112448, Jan 18, 2024).

Dorothy Shell entered a long-term care facility, Highland Pointe. She owned five life insurance policies with a combined cash surrender value (CSV) of about $5,400. She entered into a planned funeral contract with Calhoun Funeral Home, in which she transferred her insurance policies to them. She only retained one policy, valued at less than $600.

The Ohio Department of Job and Family Services (ODJFS) denied Medicaid coverage of long-term care for Ms. Shell, determining that the cash surrender values of her insurance policies were excess resources. She appealed.

When she applied for Medicaid long-term care benefits, the countable resource limit was $2,000. She could not qualify for benefits if she had more than $2,000 in countable resources when she applied.

On review, the appellate court finds that the notice ODJFS gave Ms. Shell was defective. Although it informed her that she exceeded the resource limit, it failed to specify which resources put her over the limit. It also referenced a section of code that did not exist at the time, and a notice must reference an appropriate code to be valid.

A life insurance policy can be a countable resource. It is a countable resource when it has a cash surrender value. A CSV is an accrued value that the owner can access by canceling the policy prematurely. For a policy to be a countable resource, the individual must own the policy. Only when the total value of policies is greater than $1,500 are they counted.

If someone else’s consent is necessary to access the value, the individual must make reasonable efforts to obtain that consent. Should these efforts fail, it is not a countable asset.

When she transferred the life insurance policies, Ms. Shell executed an irrevocable agreement with the funeral home. She would need their consent to access the policies. Yet, since she made an irrevocable transfer, asking them for consent would be illogical. Because she cannot obtain consent to access the policies, they are not countable assets. The only remaining policy to which she had access is valued at less than $1,500 and, therefore, is not countable.

An irrevocable assignment of a life insurance policy is not a countable resource for Ohio Medicaid law, the appellate court holds.

As irrevocably assigning the insurance policies put her under the resource limit, Ms. Shell was eligible for Medicaid. The trial court erred in finding her ineligible.

Read the full opinion.