Insurers Lukewarm Over LTC Bill Passed By The House
A modest long-term care bill recently approved by the House is drawing limited praise from insurers, who insist more is needed.
The legislation, H.R. 4946, provides an above-the-line deduction for a portion of long-term care insurance premiums, but only for low and moderate income individuals and couples.
An above-the-line deduction is one available regardless of whether or not a taxpayer itemizes.
Because of the income and other restrictions, supporters of an above-the-line LTC deduction say they are “encouraged,” but will work towards expansion.
“Because this bill only provides limited tax incentives, it is only a first step in creating an effective tax policy to expand long-term care insurance coverage,” says Donald Young, president of the Health Insurance Association of America.
“We hope Congress can do more to help make this benefit more fully and broadly available to Americans,” he says.
In a letter to supporters of H.R. 4946, the American Council of Life Insurers says one of the greatest risks of asset loss in retirement is unanticipated LTC expenses.
“Unless people are encouraged to plan for their future needs, soaring costs and rising demand for long-term care services could deplete personal savings and exhaust government entitlement programs,” ACLI says.
LTC insurance is the best way to address this emerging crisis, ACLI says, and life insurers will work with Congress to expand the tax incentives for all Americans.
Under H.R. 4946, the deduction would be phased in over 10 years. From 2003 through 2005, the deduction would be 25% of premium.
The deduction would be 30% in 2006 and 2007, 35% in 2008 and 2009, 40% in 2010 and 2011 and 50% in 2012 and thereafter.
However, the full deduction would be available only for individuals with adjusted gross incomes up to $20,000 and couples up to $40,000. Above those levels, the deduction phases out, disappearing at $40,000 for individuals and $80,000 for couples.
The insurance industry supports a 100% deduction without income restrictions.
Reproduced from National Underwriter Life & Health/Financial Services Edition, August 5, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.