From an underwriter’s perspective, long term care insurance is the most difficult personal insurance line to deal with. Underwriters have to be able to take an applicant’s current medical situation and look many years into the future. More than that, they also must take imperfect information about nursing home costs and other costs associated with long term care, and project that into the future as well – costs which are very different from standard, across –the-board inflation predictions. And they must also take into account advances in medical care that cause patients to live longer: A boon for life insurance pools, but potentially devastating for long term care financial predictions, since medical advances that lead to the happy result of many more years of life for those with debilitating medical conditions have significant impact on a long term care insurance risk pool. The added years of care have to be paid for somehow.

Most companies, however, will take on that very unknowable risk. They will not, however, be willing to “catch a falling knife” by taking someone applying in the individual market who is a long-term care claim waiting to happen.

Some cases are obvious: Current use of a wheelchair, for example, AIDS,  or a recent hip fracture on an elderly individual are easy cases. If you wait until you actually need care to buy insurance, you’re going to get a fast rejection.

Other cases, however, are less immediately obvious, both to the individual and to the agent. Underwriting guides from issuing companies can offer a few clues:

• Bipolar disorder.
• Blindness does not disqualify you, unless it’s due to disease or if you need current assistance with activities of daily living.
• Amputation from an accident does not disqualify you. But amputation from a disease does.
• Persistent forgetfulness will disqualify you, even in the absence of an Alzheimers/dementia diagnosis.
• The use of Antabuse, a common medication used to treat substance abuse is disqualifying for up to 12 months.

What doesn’t disqualify you?

There are some conditions that may on the surface appear problematic, but you can actually still get coverage provided there are no co-morbidity factors or other complications. For example:

• Kidney transplants. A kidney transplant by itself does not disqualify you with certain carriers.
• Oxygen use does not disqualify you if you only use it to treat headaches or sleep apnea.
• Use of a cane, unless it’s a quad cane or walker.

Alcoholism

If you have struggled with alcoholism in the past, and have a medical history documenting your alcoholism, all is not lost. Absent any other health issues, several companies will consider issuing a policy after at least two years of abstinence or sobriety. However, you cannot have been diagnosed with depression, and you cannot have lived in a halfway house for the last two years. If there are medical complications, such as cirrhosis, this is generally disqualifying.

Combinations

Long term care insurance underwriters will sometimes consider certain conditions, but only when not combined with certain others. For example, at Genworth, diabetes doesn’t disqualify you. But if it’s severe enough to have resulted in an amputation, blindness, skin ulcers or infections, or if you combine it with heart disease, it’s probably too late to buy long term care insurance.

Also, neither diabetes or smoking by itself will disqualify you. But if you are both diabetic and a tobacco user (within the last five years), you will not qualify for a Genworth policy.

Alcoholic liver disease, surprisingly, will not disqualify you by itself, if you’ve been sober for at least two years. However, if there are any other complications from it, or a history of liver cancer or if a doctor has already recommended a transplant, you won’t qualify.

Build

The link between obesity – a body mass index of over 30 – and long term medical complications is well known. At Genworth, you will have difficulty getting coverage if your BMI as a female is 36 or more, or if your BMI as a male is over 38. You will also generally not get coverage if your BMI is 17 or under.

Breast Cancer

You can get coverage, even with a history of breast cancer, provided there’s no evidence of metasticisization. Specific guidelines vary depending on the stage of the tumor. But if you complete your course of treatment on a stage 0 or 1 tumor, you may become insurable again as soon as 3 months after the final course of treatment. A stage II tumor is insurable after 12 months from your final treatment. If the tumor gets to stage III or IV, though, you are not insurable.

Skin Cancers

Skin cancer is common enough to warrant a discussion. A history of skin cancer does not necessarily disqualify you, provided there’s no evidence of spreading. Superficial or low stage melanomas must have a depth of less than 1.7mm, until you fully recover. If you have a deep or high stage melanoma, you become insurable again after at least 12 months have elapsed.

You are uninsurable at Genworth if the melanoma is deeper than 3.5mm.

Do you need a sneak preview? The Genworth guidelines cover scores of medical conditions in detail.

Company Variation

Each company is different, and some may have modestly different guidelines than others. Some companies are more favorable than others if you use anti-depressive medication. If you are a borderline case with any one company, it may make sense to do some homework before applying. No company wants to take cases that have just been declined elsewhere, though.

The best thing to do is to get your policy well before any of these medical conditions have a chance to develop. Because once they do, you may not even know about it until it’s too late – and then you lose a lot of options.

These are not necessarily problems for senior citizens. Some conditions, like cervical and ovarian cancers, schizophrenia, depression, alcoholism and multiple sclerosis, can easily strike people in their 20s. The bottom line: Get the coverage early, well before you need it.

]]> http://longtermcareinsuranceinfo.com/an-in-depth-look-at-underwriting-guidelines/feed/ 0 http://longtermcareinsuranceinfo.com/designing-a-long-term-care-insurance-policy/ http://longtermcareinsuranceinfo.com/designing-a-long-term-care-insurance-policy/#comments Mon, 30 Apr 2012 16:38:11 +0000 jmericle http://longtermcareinsuranceinfo.com/?p=1614

When you sit down with an agent to design a long-term care insurance policy, you’re going to be asked to make some key decisions that will have a great effect on your coverage, possibly decades ahead of time.

Whatever company you select, some of the key decisions you’ll make involve setting an exclusion period, a maximum daily benefit, a benefit period, and deciding on inflation protection.

The First Factor

The first factor to consider is your own budget. Go into your search for a long term care policy expecting to keep the policy in force for decades. This means you want to get a policy that you can easily afford. A policy that you can’t afford is going to lapse, sooner or later. The second best policy that you can afford is better than the best policy that won’t be in place when the time comes and you need long term care.

The richer the benefits you get in a long term care policy, the higher your premiums will be. And because the policies are designed for a risk that will play out years from now, and may have to pay claims of as much as half a million dollars or more per claimant over a period of years, in some cases, even small changes in your policy can result in a major change in premiums.

Exclusion Period

Your exclusion period, also called your “waiting period,” is the number of days after the need becomes effective that you have to wait before the policy begins paying benefits. Among the items to consider: Medicare. Medicare does not provide significant long term care benefits. It only pays for nursing home care for the first 20 days after a qualifying hospitalization of at least three days. After that point, Medicare requires a coinsurance of $128 per day for the next 80 days. Medicare does not pay for nursing home benefits beyond that point, at all.

Depending on your savings, you may want to consider setting your long term care insurance exclusion period either close to 20 days, or close to 100 days. For example, a 30- or 90-day exclusionary policy dovetail fairly well with the Medicare benefit periods for nursing home care Granted, not every nursing home stay will be as a result of a qualifying hospitalization. But enough of them are that it’s worth paying some thought to coordinating your benefits with Medicare ahead of time.

Note: Some insurance companies, such as New York Life will provide a care coordinator to assist you or your family in lining up care from the day you make a claim. Sometimes these companies will lower the contractual exclusion period from 60, 90 or 120 days down to 20 days, if you make use of the care coordinator.

Maximum Daily Benefit

The cost of care varies substantially depending on your location. The 2012 Genworth  Cost of Care survey breaks costs of care down to the state level. Across the board, the average cost of a semi-private room in a skilled care nursing facility was around $200 in 2011, and the average monthly cost of an assisted living facility was $3,300. But as with so many things, the cost of care is higher in places like New York City and Alaska.

Think about where you want to be when you reach the age at which you are most likely to need long term care. Where will you be? Do you want to be where you are now? Or where your adult children are? Is there a chance they will be living in an expensive area? Then you might want to shell out for a maximum daily benefit.

Inflation Protection

You may keep your long term care policy in force 30 or 40 years before you ever need it to pay a claim. That means inflation has a lot of time to wreak havoc on the cost of care. Over the years, long term care has increased in cost much faster than the rate of inflation, although that trend moderated in 2012. The long term inflation in the cost of care has generally been between 5 and 6 percent, compared to an overall inflation rate of 2 to 3 percent. This means that it is generally worth it to buy some inflation protection – either a 5 percent automatic annual increase in the max daily rate, or a CPI indexed inflation hedge – even if you need to roll back on your maximum daily rate to get it.

Length of Benefits

This is the number of years your policy will pay benefits. Some policies even offer an unlimited benefit. Others will max out at five or 10 years. The average nursing home stay is several years, and some 10 percent of those who enter the long term care system will require a stay of seven years or longer, according to the U.S. Department of Health and Human Services.

Medicaid Issues

At the end of that period, you’ll start spending down your own resources, and those of your family. When those are exhausted, except for some exempt assets such as a limited amount of home equity and a bare minimum for a spouse, you will become a Medicaid patient. After you pass on, the state’s Medicaid Estate Recovery Program will seize your assets until the taxpayer has been reimbursed for any benefits paid on your behalf. To protect your assets, you may want to investigate your state’s Long Term Care Partnership Program. Generally, if you buy long term care benefits at least equal to your assets, the state will allow you to keep that amount of assets and still let you qualify for Medicaid once your long term care insurance benefits are exhausted. If you have a house or other assets you want to pass on to your children, this can be a key element in your overall estate plan.

By the time the year is out, about 9 million Americans over age 65 will need some form of long-term care. This care could run the gamut anywhere from in-home assistance to adult day care facilities to skilled nursing facilities.

But the population is aging. By 2020, that 9 million figure will expand by 33 percent, to some 12 million elderly requiring long term care, according to the U.S. Department of Health and Human Services.

The bulk of that care – accounting for about 70 percent of that number, will come largely from family resources at any given time. But the facts are still startling: 4 out of every 10 Americans who make it as far as age 65 will enter a nursing home at some point – at a cost of as much as $85,000 per year and more, according to the Long Term Care Clearinghouse. About 1 out of 10 of those 4 will stay in that nursing home for five years or longer, again according to the Department of Health and Human Services.

Many people operate under the assumption that the government will take care of their long term care needs. This is not the case. The government, via the various state Medicaid programs, only picks up the tab for those who have spent themselves down to the poverty level. With very limited exceptions, if you have assets, you will be expected to spend them down to provide for your own care – or spend down your kids’ assets, even as they themselves struggle to provide for their own retirement.

Medicare does provide some support for nursing home care, but it is extremely limited:

First of all, Medicare is designed only to support care in a few Medicare-certified care communities, and then only for care incident to a qualifying hospitalization for at least three days. No  three-day hospitalization? No Medicare nursing home benefit.

This means that Medicare is really only helpful for acute care circumstances. That is, to qualify for Medicare nursing home benefits, you need to have a specific medical event that leads to a hospitalization for at least three days. Medicare does not provide for long-term care for those with more chronic, slow-acting, long term conditions, such as Alzheimer’s disease, dementia, or degenerative disorders not requiring an immediate hospitalization.

Furthermore, Medicare only covers skilled care facilities. If you don’t need medical professionals attending you regularly, and your needs are more in the area of assisted living, and you haven’t arranged for your own private funding source for long-term care, you are going to fall through the cracks.

Medicare Length of Benefit

At best, Medicare will cover up to 100 days of care. But only the first 20 days are free.  After 20 days, you will still need to pay a $128 co-insurance fee toward your long-term care costs per day. At the end of the 100 day period, you’re on your own.

No coverage for homemaker services

In many cases, elderly people are able to stay in their homes for a very long period of time – provided they get a little help around the house. Homemaker assistance, however, is not a Medicare responsibility – nor is Medicaid likely to cover it, though state Medicaid programs vary on this point.

This is one area where family support can make a huge difference – though we no longer have the extended families living in close proximity to one another as we had in past generations.

Homemaker services and in-home assistance then, will have to come from a combination of family, community and charitable organizations, including church and synagogue congregations, and long-term care insurance.

Many long term care insurance plans today do include some benefit for in-home assistance with homemaking and in-home assisted living. In many cases, you can choose the level of benefit. For example, you can choose a policy that has no in-home benefit, or pays 50 percent or more of the costs of bringing in a homemaker or in-home care provider, including mobile nursing service.

The more benefit you choose, of course, the higher your monthly or annual premium will be, all else being equal. If you have a lot of local support from your family, you may want to elect a lower in-home benefit to save premiums – or buy a higher per diem nursing home maximum benefit or a longer time period. If you are relatively young, it may be worth buying the most powerful inflation protection rider you can get.

If you have relatively little support from younger family members living nearby, you may want to invest in a more robust in-home nursing care benefit.

Bottom Line

The aging baby-boomers are going to pose a significant strain on available long-term care resources. Medicaid resources are likely to become even more scarce in the coming years – and Medicare is under significant fiscal strain as well. Don’t rely on the government to pick up the tab for your long term care needs. This is a crucial aspect of retirement planning that you are responsible to address yourself.

Americans are living much longer lives which is positive, but this is raising the costs of long term care, assisted living care, and nursing home care, thus the question arises how to pay for this care. With the demand increasing as the baby boomer generation retires the amounts can increase dramatically. This year private room nursing home care is an average of $81,000, as polled from Genworth Financial, one of the major long term care insurance carriers.

Investing in a long-term care insurance policy gives the insured a cash benefit that can assist or cover the costs associated with long term care. Under the condition that the recipient meets certain needs to receive care. These include assistance with a minimum of two ADL’s (active daily living), such as dressing, eating, bathroom needs, and bathing. Dementia is also a factor that will meet these requirements to receive the insurance payouts.

The recommended age to buy long term care insurance is starting in your 50’s on up to your 60’s. The younger the least expensive it is. Additionally the healthier one is also keeps costs down. Waiting longer one risks the chance of not qualifying for ltc insurance because of poor health or medical problems. LTC insurance eases the burden of care on ones family and the stress of financial supporting the costs of long term care. Remember that Medicaid requires recipients to use up all their assets before the government run program can start paying the costs. Unfortunately then the person has no choice in the type or location of care. Long term care insurance protects those assets and provides the freedom to choose the type and location of care needed. Policies are relatively inexpensive compared to the costs associated with receiving long term care. Add up those costs, the asset protection, and freedom of choice makes long term care insurance a no brainer for the middle class and wealthy individuals and couples.

The tax treatment of long term care insurance differs somewhat from that afforded to individual/sole proprietors and partners in a partnership. Intuitively, it makes sense: I’ve never visited a corporation in a nursing home!

Long term care insurance is becoming increasingly popular as an employee benefit. Workers can see what is happening to their parents as they age, and awareness of the need to insure against the potential devastating costs of long term custodial care is growing. Some workers are finding out the hard way – through the decline of the health of their own parents as they age – that Medicare does not provide a significant long term care benefit. As the burden of caring for aging baby boomers grows, the awareness of the benefits of long term care should fuel the growth in popularity of these policies, both in the individual and group markets.

Meanwhile, employers, too, are gaining awareness of the value of this benefit. Offering long term care insurance to employees is increasingly seen as a valuable differentiator in the competition for talent in some circles. Currently, employers can offer long term care insurance to employees via voluntary payroll deduction, as part of a cafeteria benefit plan under Section 125, or, given enough employees and participation, as a standard employee benefit, possibly qualifying for simplified or guaranteed issue.

C Corporations

As a rule, a C corporation can deduct the full cost of all qualified long-term care insurance premiums paid as an ordinary business expense, just as they can with wages and health insurance premiums, per IRC Section 162(a). This includes extending coverage to employee family members as well. All premiums are tax deductible to the corporation.

What Defines a “Qualified” Long-Term Care Insurance Policy?

Under the Health Insurance Portability and Accountability Act (HIPAA), a qualified long term care insurance policy will include the following provisions:

Guaranteed renewability.

Benefits triggered by the inability to perform at least two activities of daily living (ADL): bathing, dressing, eating, toileting, transferring, and continence

OR

The presence of a substantial need for close supervision and assistance due to a severe cognitive impairment, such as Alzheimer’s disease or dementia.

A projected need of 90 days or more.

The policy must not duplicate benefits provided under Medicare.

The terms defining qualified long term care benefits are specifically outlined in IRC Section 7702(B), which establishes that qualified long term care insurance policies are entitled to the same tax treatment as health and accident insurance policies.

Executives and Discrimination Considerations

While business owners and HR specialists must rightly consider the effects of discrimination with regard to ERISA-qualified benefits, long term care insurance is not subject to the same “top hat” restrictions as, say, 401(k) plans. Although both long-term care and pension plans frequently carry the term “qualified,” the term means something very different in each case:

A “qualified” retirement plan is a plan that meets the criteria set forth for favorable tax treatment under the Employee Retirement Income Security Act of 1974, where the term “qualified,” when used with respect to long term care insurance, indicates that the policy meets the criteria for favorable tax treatment outlined in HIPAA. ‘

Because C corporations are independent entities for tax and legal purposes, the corporation can deduct benefits paid to executives just the same as benefits paid to rank and file employees.

In addition, the ERISA standards for non-discrimination do not apply to long term care programs, provided the employer can show that they have developed a “plan of insurance” that covers at least some employees besides owners and officers. A company could extend coverage to all salaried employees, or all manager-level employees, as opposed to covering every rank and file employee.

Employee-paid premiums for QLTC coverage, such as those collected through a voluntary payroll deduction plan, are considered taxable income and may not be included in a Section 1258 plan or a flexible spending account. This means that the employer may not use salary reduction dollars to pay its premium contribution. The QLTC plan may be offered to retired employees, eligible dependents of employees and retirees, including dependent parents, and surviving eligible dependents after an employee’s death.

Taxability to Employees

Premiums paid on behalf of employees, likewise, are not taxed to those employees. They do not show up as wages or other income on the employee’s W-2. Long term care insurance benefits therefore receive a favorable tax treatment on par with medical insurance benefits, per HIPAA.  However, long term care insurance premiums are generally not tax deductible to the employee. As such, they cannot generally be included in a Section 125 or flexible spending account. Employers cannot use dollars from salary reduction to pay long term care premiums.

Looked at another way, you cannot exclude contributions to the cost of long-term care insurance from an employee’s wages subject to federal income tax withholding if the coverage is provided through a flexible spending or similar arrangement. This is a benefit program that reimburses specified expenses up to a maximum amount that is reasonably available to the employee and is less than five times the total cost of the insurance. However, you can exclude these contributions from the employee’s wages subject to social security, Medicare, and federal unemployment (FUTA) taxes. (See IRS Publication 15-B, Employer’s Guide to Fringe Benefits, for more information).[u1]

Benefits to employees and other plan beneficiaries, on the other hand, are likewise tax-free, up to a per diem limit of $310 per day, as of 2012. Amounts paid to nursing facilities and other care providers on behalf of the beneficiary in excess of $310 per day are taxable as income. The $310 threshold is periodically adjusted for inflation.

Special Rules for certain S Corporation Shareholders

Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. A 2% shareholder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation’s stock or stock with more than 2% of the voting power. Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder.

Looking ahead over the next few decades, the United States has a severe fiscal problem coming down the pike. The oldest of the baby boomers are just now hitting their retirement years. This is a massive chunk of the population that is shortly to qualify for Medicare, and will increasingly be requiring long term care and nursing home services. This population is vastly under insured for this eventuality, and much of the financial burden is going to fall on individuals, family members, and ultimately the Medicaid system.

The problem: The Treasury is already mired in red ink. Congress does not have the resources to pay for this care, without a substantial hike in tax revenues, or draconian cuts elsewhere in the budget.

Both the federal and state governments would like to get out of the business of funding long term care as much as possible, except for the truly indigent. With that in mind, they have come up with a number of tax incentives, encouraging individuals and small business owners alike to purchase their own private long term care insurance coverage.

Individuals

If you are an individual wage earner and you buy your own long term care insurance, or if you are sole proprietor, you may be able to discount part of your long term care insurance premiums. This is a much more favorable tax treatment than life insurance and other forms of coverage enjoy, since life insurance premiums are normally not deductible to the individual. However, the IRS allows you to deduct long term care premiums as a medical expense. You can therefore deduct long term care to the extent your premiums exceed 7.5 percent of your adjusted gross income, as calculated on your IRS Form 1040.

Note that to claim this deduction, you must use the long 1040 form. You cannot take advantage of this deduction if you

Congress is wary of planners using “Cadillac” plans as an income tax shelter, and therefore has set limits on how much long term care insurance premium you can claim as a deduction. The amount of premium you can deduct varies with your age, and applies to tax-qualified long term care insurance plans.

The criteria for a tax-qualified plan are as follows:

1. The policy must be guaranteed renewable,
2. The policy must provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed,
3. The policy must provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract must be used only to reduce future premiums or increase future benefits.
4. Generally a tax-qualified policy not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses.

The annual limits on deductibility are as follows:

Example:

Suppose a married couple, ages 53 and 50 buy long term care insurance. The family had other medical expenses that amounted to 7.5 percent of their annual income, so they are able to deduct the cost of their long term care premiums over and above their other medical expenses. The amount of long term care premiums the older spouse can deduct, exceeding 7.5 percent of AGI for the year is $1,310. His spouse can deduct up to $660. But next year, his wife will be age 51, and will fall into the next age category. They can both deduct the maximum amount for 2013 – $1,310 each, plus whatever the inflation adjustment will be.

Note: If you are subject to the alternative minimum tax, or AMT, your AGI threshold for medical expenses is 10 percent, rather than 7.5 percent. Furthermore, you may lose some of your other deductions. Consult a tax advisor for information specific to your individual situation.

Health Savings Account (HSA)

Long term care insurance interfaces well with health savings accounts: HSAs allow you to use tax-free dollars to pay your long term care premiums, up to the dollar limits shown above.

Taxation of benefits

Benefits paid to care providers on your behalf are tax-free to you. If you have an indemnity plan that pays you rather than the care providers, your benefits are tax free, up to a daily limit of $300 for 2011, and $310, for tax year 2012 – and then adjusted for inflation after that.

Considerations

The tax benefits of a long term care policy may not be readily apparent. The deductibility of long term care premiums becomes much more significant when combined with other health care expenses. Since these expenses tend to increase as we get older, a long term care policy that yields no deduction benefit this year may become much more valuable as you get older, and your other medical expenses increase.

Special Treatment for the Self-Employed

Self-employed individuals enjoy a specific tax break when it comes to long term care – they can deduct all their premiums paid for long term care, up to the limits in the table above, without having to exceed the 7.5 percent threshold.

Flexible Spending Account (FSA)

You cannot be reimbursed under an FSA for long term care insurance premiums.

Upcoming: Long Term Care Insurance Tax Considerations for Small Business Owners

For further reading: IRS Publication 502 – Medical and Dental Expenses

Many people operate under the mistaken belief that Medicare will take care of them in the event they need long-term care over the age of 65. But the fact is that the long-term care benefits covered under Medicare are extremely limited. Medicare only covers 100 days of long-term care, and then only incident to a qualifying hospital stay. After that, you’re on your own.

After Medicare, and some very small programs available through the Veterans Administration for impoverished military veterans, the only large-scale public assistance program that provides significant long-term care benefits is the Medicaid system.

Qualifying for Medicaid

The catch: Unless you have assets that are specifically exempted by state law, you will first have to spend down nearly everything you have – before you can even apply for Medicaid benefits. Specific rules vary by state, but typically, you will have to impoverish yourself down to your last $2,000 of net worth prior to qualifying for Medicaid benefits.

Yes, the different states generally allow you to keep some specific assets and still qualify for Medicaid. For example, your state may allow you to qualify for Medicaid benefits if you own up to a certain amount of home equity, a modest car, a few heirlooms, a pension (provided you don’t own it!) certain kinds of annuities, a funeral plot, and a small life insurance policy– often amounting to little more than a final expense policy.

The Medicaid Estate Recovery Program

Sounds nice, right? You get to keep the family homestead in the family!

Not so fast.

If your state’s Medicaid program administrators allow you to keep your home equity or other assets, but pay benefits on your behalf, they will get you sooner or later. For example, if you manage to exempt $500,000 of home equity from the Medicaid eligibility calculation, but spend down all your other assets, the state’s Medicaid program will place a first-position lien against your home.

When you and your surviving spouse, if any, pass on, the state will assert its claim in probate, and force either a cash payment from your heirs or the sale of your family home, with your state’s Medicaid Estate Recovery Program collecting whatever they paid in benefits on your behalf.

Example: You have a stroke, and live in a nursing home for four years, at a cost of $50,000 per year. You had no other assets, other than the home. Your state allows you to keep the home, and pays $200,000 to your nursing home on your behalf.

When you pass on, leaving no surviving spouse, Medicaid officials will claim title to the house, and force an auction, keeping the first $200,000 they paid in Medicaid benefits on your behalf. Your family gets what’s left over.

Why the Long-Term Care Partnership

Medicaid administrators in the different states realized they do not want to be in the business of placing liens on peoples’ homes if they can avoid it. Their preference would be to preserve limited Medicaid resources for those who are truly indigent, and provide an incentive for those with some means to purchase long term care coverage.

As a result, a number of states have enacted a so-called long-term care partnership program. Here’s how it works: In a nutshell, if you buy a given amount in long-term care benefits from a private insurance company, Medicaid officials will exempt that amount in your estate from recovery.

For example: You have a house worth $500,000 that you would like to pass on to your heirs. You purchase a long-term care policy that will provide a daily benefit worth up to $100,000 per year for up to five years. You have therefore protected the state from having to pay this amount. In return, if the state does have to kick in benefits after your insurance policy is exhausted, they will not place a lien on your home (assuming its value is still $500,000 or less).

Considerations

As a result, a long-term care insurance policy can be an important part of an overall strategy for asset protection, risk reduction, retirement and estate planning in any portfolio.

Not all long-term care insurance policies qualify for state partnership programs. Some states impose specific minimum requirements, such as a minimum daily benefit, or a certain level of inflation protection.

These requirements, of course, vary state by state. It is imperative to work with an experienced a knowledgeable agent licensed and familiar with the requirements in your specific jurisdiction. A few states, including Hawaii, Michigan, Alaska, Utah, New Mexico and Mississippi, have not adopted a partnership program yet.

To learn more about your states long term care insurance partnership program please contact us at (877) 402-2235 or complete a long term care insurance quote request.

Tuesday the Senate Appropriations Committee passed a bill making long term health care needs more affordable for the middle class family. Rep. Steve Farley, D-Tucson, sponsored House Bill 2713, that will residents of Arizona to invest or put aside funds into a tax free health savings account allowing them to pay for their future long term care needs. This bill also will allow a tax deduction for premiums of long term care insurance. The next step in the legislation process if to pass it in the Senate then for final approval by Gov. Jan Brewer.

This bill will provide relief for middle class families that don’t qualify for Medicare because they have assets, yet don’t have enough funds to pay for long term care services which can cost $80,000 a year on the average in Arizona. As with all taxes the middle class get hurt the most with high taxes and receive less of the benefits from the government.

Many people don’t find out till its too late that Medicare does not pay for any long term care services, and for the middle class this is not even an option. Unfortunately some politicians on the left think government funds come out of thin air and don’t realize that the taxes middle class pay could instead remain with the middle class to help pay for their health and long term care needs. But that will not increase the size of government and control of a national health care. Fortunately Arizona is a majority of right thinking politicians who realize that government controlled health care will cost tax payers more money and give worse results then allowing the middle class to save and choose their own care.

This will bring relief to the middle class who will have to go through some experience of long term care either for themselves or loved ones.  It’s not a matter of “IF” but a matter of “WHEN”. The middle class should also look at other options such as long term care insurance and compare the difference of savings vs. investing in a long term care insurance policy. A long term care insurance quote comparison can be provided on our website.

Rates for long-term-care insurance have increased between 5% and 17% when compared to last years insurance rates. A hostile White House administration to business and investments have caused low interest rates and low bond yields forcing insurance companies to either raise rates or removing long-term-care-insurance altogether such as the move by Prudential, and last year it was MetLife.

Comparing rates and coverage between insurance companies is very important to determine the premium amount you are comfortable with and the coverage these policies include. The coverage for long term care insurance policies offer a broad range of protection that are not covered by Medicare or health insurance, including assisted living, nursing home, day care for adults, Alzheimer’s, at home care, and help with your ADL’s (Active Daily Living).

When buying long term care insurance some main options to consider between long term care insurance quotes are:

• Limits on coverage such as a maximum amount on the daily pay out, monthly, or the maximum amount over your life time. Some policies might restrict the amount of years too.
• The sooner you buy the less the premiums and easier it is to qualify. Waiting too long will cause the premiums you pay to increase and you risk the chance of being denied based on your current age and reason of ill health or previous medical conditions. For this reason along it makes sense to invest in long term care insurance while you are healthy and young.
• There are tax incentives and deductions for investing in a long-term-care insurance policy. Every year the Internal Revenue Service will increase the deductibility limits on LTC insurance to adjust for inflation. Check with your accountant or the IRS.org website to find out what you are eligible for.
• Long Term Care Insurance payments can be deducted as a legitimate medical deduction if your medical costs are over 7.5% of your income after being adjusted for gross. Again speak with your accountant.
• Self-Employed and business owners can write off the premiums for themselves and employee’s covered by a group long term care insurance policy.
• Another option is a combo-life insurance pack whereby your life insurance is part of your long term care insurance.  The policy will pay for your long term care needs and pays out a benefit to your beneficiaries if the long term-care proceeds are not completely used.

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When reviewing long-term-care insurance rates and plans you might expect to see big differences in costs and a more difficult approval process because MetLife and Prudential Insurance Companies are no longer selling long term care insurance policies. As of Mach 30^th Prudential will no longer be accepting applications for individual LTC policies.

In 2010 MetLife stopped accepting new long term care insurance applications, and Unum Insurance Group stated that is no longer selling group long term care insurance. All three of these companies cited that the uncertainty in the economy, and interest rates they can make on their investments have caused them to reconsider their ability to make a profit considering future claims against their profit line.

Most long-term care insurance policies are bought by people in their early 60’s, which often pay premiums for 20-30 years before making an insurance claim. The insurance carriers can build up a reserve that allow them to pay those claims and make a profit, usually with high quality bonds.  The current issues are that the current White House administration has ruined our economy with the massive debt, hostility towards business, and investing. Additionally with no relief in sight unless we see positive signs of a new administration in the White House this coming election, these insurance carriers have no reason to turn course and offer long term care insurance coverage.

With the hostility towards investing, high tax rates, and massive debt, bond yields are not high enough for insurance companies to make a profit, along with the aging policy holders continuing to make more claims are some of the negative effects of this current administration.

Most voters don’t realize that the crushing blow to business this White House administration is doing has repercussions that trickle down to the middle class and seniors. For example Prudential policy holders could see a premium increase of around 20% if approved by state insurance regulators. This will cause many seniors to cancel their policy, trim their coverage, and leave them to have to pay for a large share of their long term care costs.

It’s becoming more common for people to buy 3-5 years of long term care benefits and some couples are buying one policy with are shared-rider which allows the couple to split the benefits. Other options include lowering the daily benefit amount and paying for the difference, and lengthening the elimination period  in which the insured pays the costs until the insurance kicks in. Additionally lowering the inflation period from 5% to 3%. However keep in mind all these options mean the insured will pay more out of pocket expense for their long-term care services received.

Qualifying for long term care insurance is becoming more difficult as insurance companies scrutinize each application checking an individual’s health records, prescription history, and medical services received. Not being honest on your application can also deny your claim.

Over the long run it’s still less costly to pay for a long term care insurance policy vs. paying for long term care services yourself.  Its not a matter of “if”. But a matter of “when” you will need long term care services. For example a policy that costs only $2500 a year over a period of 20 years cost $50,000, and the insured could be covered up to $800,000. If one invested that money it would take them decades longer to have enough coverage to match the policy amount. Yearly costs for long term care can easily run into over $100,000. Start the process with a long term care insurance quote and compare long term care insurance costs.