How Do Life Plan Communities Work? Fees and Contract Options Explained
Entrance fees, monthly fees, refund percentage, Type A contracts—what do they all mean when it comes to Life Plan Communities?
Here’s everything you need to know about the financial structure of a Life Plan Community, as well as four main contract types you’re likely to come across.
Life Plan Community Fees
There are two main fees associated with Life Plan Communities: entrance fees and monthly fees. The amounts depend on a variety of factors, including:
- Contract type
- Floor plan of choice
- Refund percentage
Let’s take a closer look at what each fee entails.
An entrance fee at a Life Plan Community (which are also known as continuing care retirement communities or CCRCs) is an upfront, one-time fee paid to the community to prepay for care before a resident moves in.
The amount of the entrance fee depends on the type of housing you choose and your contract. Some communities also offer refundable entrance fee options, meaning a certain percentage of the entrance fee will be refunded to either the resident or their estate if the resident no longer lives at the community.
For example, Presbyterian Homes Life Plan Communities offer non-refundable (0%), 50% refundable, or even 90% refundable entrance fees. The fee amounts are then based on which refund option you choose.
Note that some senior living communities may not require an entrance fee. However, this will likely translate to higher monthly fees.
Like entrance fees, monthly fees depend on the housing type and contract you choose. The monthly fees cover services and amenities at the community.
When researching your options, it’s important to ask the community if the fees are all-inclusive or if there are certain services that cost extra outside of the monthly rate.
Related: The Hidden Costs of Aging in Place: What You Need to Know
There are a few standard contract types that Life Plan Communities offer. We’ll outline some common ones below.
Keep in mind, though, that even among these main contract types, there may be variations depending on the community you’re looking at. Each community offers different contracts specific to their services, and some communities may offer all contract types listed below, or only a select few.
Type A (Extended or Life Care) Contract
The Type A contract typically comes with the highest monthly and entry fees. The benefit, though, is that it typically covers almost all services (including health services) at little to no increase in monthly fees.
In other words, if a resident with a Type A contract moves from independent living to assisted living, they would experience little to no change in their monthly fees.
“In essence, a resident of a CCRC [or Life Plan Community] with a lifecare contract pre-pays for some portion of health-related services that may be needed in the future,” Brad Breeding of MyLifeSite writes. “The benefit of a lifecare contract is that it provides better predictability of expenses for the rest of one’s life, regardless of healthcare needs in the future. On the other hand, a resident with a lifecare contract is paying more on the front end for care services that may not be needed in the future.”
Type B (Modified) Contract
Compared to the Type A contract, the Type B contract will likely come with lower monthly fees. It will cover residential services and amenities for independent living, but if a resident later needs assisted living, skilled nursing or some other level of care at the community, they will need to pay some of the cost.
In this model, there is typically a specific amount of healthcare spelled out in the contract that a resident can receive without a substantial increase in monthly payments. After that time period, that’s when they would be responsible to pay either a discounted rate or per diem rate for services.
Type C (Fee-for-Service) Contract
The benefit of the Type C contract is that it usually comes with a lower entrance fee and potentially lower monthly fees than the above contract types. The drawback of this model is that assisted living or skilled nursing services will be charged to the resident at the market rate.
There’s a bit of a trade-off at play with Types A, B, and C. Higher entrance fees translate to more stable monthly costs down the road, while lower entrance fees may mean higher monthly fees if health needs change in the future.
Some Life Plan Communities offer rental contracts that do not require entry fees. Residents pay monthly fees that may be higher than what you would see at communities that do require entrance fees. In this model, residents can receive health care services for an extra cost but may not be given priority access to it.
“Many CCRC rental contracts do not provide residents with priority access to healthcare services, therefore, available spaces may just as easily be filled with someone in need of care and coming from outside of the community,” Breeding says. “As with a type C contract, the resident will pay the full market rate for healthcare.”
Related: Future Planning Resources
Questions About the Costs of a Life Plan Community?
As we touched on above, contracts reflect the services and amenities offered at the Life Plan Community, so there will naturally be some variance between communities. For specific questions about what contracts a community offers and what is included in each, you can contact the community you are considering and an expert will be able to walk you through your options.
If you’re curious about the costs of a Presbyterian Homes community, download one of our Costs and Benefits Guides to learn more.