Short Brief – Continuing Care

Retirement Communities

Robert Serena

August 2022

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The purpose of this short brief is to provide high-level, clear, and actionable background on
Continuing Care Retirement Communities (CCRCs). This brief supplements the information in
my detailed brief on Long Term Care Insurance (LTCi) from March 2022.

A CCRC is a type of retirement community that offers a range of living accommodations for
retired or elderly residents – these accommodations can be tailored to individuals or couples
(married or domestic partners):

• Independent Living Facility (ILF) – The individual is healthy and does not require any type
of health care assistance but wishes to live in a community with other individuals at a similar
age and life-phase.
• Assisted Living Facility (ALF) – The individual has lost a degree of their capability for self-
care, and requires assistance with basic life functions like preparing meals, cleaning clothes,
some personal care, taking medication, etc.
• Skilled Nursing Care (SNF) – The individual is no longer able to provide for their own self-
care and requires full-time support for basic life functions and healthcare. Additionally,
elderly individuals that have cognitive impairment or suffer from dementia/Alzheimer's may
need memory care, which is a specific form of skilled nursing care.

The exhibit below illustrates some of the typical personal, community, and healthcare services
that a CCRC can offer.1

1Connecticut Continuing Care Residents Association, Continuing Care Retirement Communities: A Guidebook
For the Connecticut Consumer

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The key selling point of a CCRC it that it offers residents the ability to enter the facility when
they are physically healthy, of sound mind, and functionally independent in their day-to-day
lives. Then, if in the future their health declines and they need either ALF or SNF services, they
will not be forced to leave the community. They will either be able to receive the care in their
current residence or move to another part of the community more suited to their specific
healthcare needs. CCRCs can offer several types of housing accommodations for new
residents that are still in the ILF phase of their lives, ranging from small apartments to
cottages/garden homes.

In the United States, like the regulation of different types of health insurance, CCRCs are
regulated by state insurance departments as to financial condition and consumer protections.
In the “additional resources” section below, I include links to two state insurance departments
– (1) The New York Department of Financial Services and (2) The Florida Office of Insurance
Regulation – and selected guidance that they offer on CCRCs. In addition to the state insurance
departments, the US Department of Health and Human Services (DHHS) specifically provides
oversight of the SNFs that are part of CCRCs, but the scope of this oversight is more narrowly
focused than the state insurance departments → DHHS focuses on the quality of care and
resident safety only for those SNFs that receive Medicaid and/or Medicare payments from the
US Federal government.

It is important to note that there are several varieties of retirement communities that are like
CCRCs but do not meet the legal definition. As one example, Massachusetts state law requires
that CCRCs must include the following elements:

• CCRCs must provide board and lodging together with nursing services, medical services or
other health related services, regardless of whether the lodging and services are provided
at the same location.
• CCRCs must have a contract that is effective for the life of the individual or for a period more
than one year.
• CCRCs charge an entrance fee. This entrance fee is separate and distinct from any fee
payable to the CCRC on a periodic basis for board, lodging, medical or other health related
services or an application fee.2

CCRCs can offer 1 of 4 different contract types to prospective residents, as follows. As part of
this description, let us first define some basic terminology:

• Resident(s) – The individual or couple making the decision to enter into a CCRC contract.

2Executive Office of Elder Affairs, January 2017 - Continuing Care Retirement Communities
Consumer Guide

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• Up-front or lump sum cost – Due from the resident to the CCRC owner at the time of entry
into the CCRC. May be partially or fully non-refundable.
• Monthly rate – Recurring monthly payment that covers (1) Basic living expenses (e.g., food
for resident, supplies, housekeeping services, room and board, utilities, garbage pick-up,
home and facility maintenance, etc) and (2) Healthcare expenses (e.g., medication, physical
therapy, personal care for resident, on-site medical care, monitoring, etc).

• Type A (Life Contracts)

• Financial structure consists of (1) An upfront/lump sum payment + (2) A monthly rate.
• Typically selected by healthy individuals that initially choose to live in the ILF section of
a given CCRC facility.
• The CCRC owner guarantees that when the individual’s healthcare needs increase and
the individual must move to either the ALF or SNF from the ILF, their monthly rate will
not increase. The CCRC owner contractually agrees to absorb any additional healthcare
costs that the individual may incur because of declining health (over and above the initial
monthly rate).
• To receive this guarantee, the resident agrees to some portion of the lump sum being
non-refundable.
• Type B (Modified Contracts)
• Financial structure like the Type A contract (lump sum + monthly rate), but the lump sum
is smaller than with Type A.
• In return for the lower lump sum, a Type B contract only provides a continuation of the
monthly rate for a limited period after the resident moves to the ALF or the SNF (e.g., the
CCRC owner agrees to fund any increased healthcare costs over and above the initial
monthly rate for a limited time window → 60 to 90 days).
• Then the total monthly cost increases to whatever the market rate is for that higher level
of care.
• Type C (Fee-for-Service Contracts)
• Financial structure like Types A & B, but with a lower lump sum lower than either.
• But with Type C, the resident bears the entire risk of increases in the monthly rate once
he/she requires an ALF or SNF.
• Type D (Rental Agreements)
• Financial structure involves only a monthly rate that covers basic living expenses with
guaranteed access to healthcare ALF/SNF services.
• The resident bears all the risk in future increases in both living expenses and healthcare
services.

So, with a Type A contract, the resident bears a higher up-front cost in return for the peace of
mind of not being exposed to cost increases in the monthly rate in the future when he/she
requires a higher level of care. Conversely, a resident with a Type D contract bears a much
lower (or no) upfront cost but is fully exposed to any future increases in the monthly rate. Any

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individual contemplating entrance into a CCRC with impaired health and already requiring a
higher level of healthcare services will pick a Type D contract since the “independent living”
option will not be practical for him/her.

CCRC can be an attractive financial planning and personal risk management tool for individuals
getting close to/at retirement that are still healthy, have sufficient financial resources, and that
are looking to secure their future living and long-term care/healthcare arrangements early and
at a predictable cost. I have compiled a list of resources below for anyone interested in learning
more about CCRCs.

Organization Website Useful

information
American Association of https://www.aarp.org/ How Continuing Care
Retired Persons (AARP) Retirement Communities
Work

National Association of https://content.naic.org/ A shopper's guide to Long-

Insurance Commissioners
(NAIC)
Senior Living
New York Department of
Financial Services
American Senior Housing
Association
US Department of Health and
Human Services
National Institute on Aging
Commission on Accreditation
of Rehabilitation Facilities
National Council on
Independent Living
Florida Office of Insurance
Regulation (FLOIR)
https://www.seniorliving.com/about-
seniorlivingcom
https://www.dfs.ny.gov/
https://www.ashaliving.org/
https://www.hhs.gov/
https://www.nia.nih.gov/
http://www.carf.org/home/
https://ncil.org/about/
https://www.floir.com/
Term Care Insurance
What is a Continuing Care
Retirement Community?
About Continuing Care
Retirement Communities
Understanding Continuing
Care Retirement
Communities
Continuing Care Retirement
Communities: A Background
and Summary of Current
Issues
Residential Facilities,
Assisted Living, and Nursing
Homes
CARF - Who we are
NCIL - About
Continuing Care Retirement
Communities

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