Bill Introduced That Gives Deduction For LTC Insurance Premiums
Two members of Congress have introduced legislation that would establish an above-the-line deduction for the cost of long term care insurance premiums.
Reps. Nancy Johnson, R-Conn., and Earl Pomeroy, D-N.D., introduced the legislation, called the Long-Term Care and Retirement Security Act, at a press briefing last week.
The legislation (bill number not available at press time) calls for a phased-in deduction over six years.
Under the bill, 25% of the premium could be deducted from 2003 through 2005. The deduction would then be 35% in 2006, 65% in 2007 and 100% in 2008 and thereafter.
An above-the-line deduction means it is available to all taxpayers, whether or not they itemize.
The legislation also allows long term care policies to be offered under cafeteria plans and flexible spending accounts.
Pomeroy says nearly everyone should have LTC coverage but almost no one does.
“If you dont have it,” he says, “youve got to impoverish yourself for Medicaid to pay for prolonged care.”
This legislation, Pomeroy says, can stabilize public assistance while preserving individual choices and protecting family assets.
Johnson says senior citizens are living longer with chronic health problems that require expensive LTC. “The time for action was yesterday,” she says.
The American Council of Life Insurers, the Health Insurance Association of America, the National Association of Health Underwriters and the Association of Health Insurance Agents all endorsed the Johnson-Pomeroy bill.
In other news, the CEO of the National Association of Insurance and Financial Advisors, says Congress can play an invaluable role in ensuring a healthy environment for addressing the insurance and financial needs of senior citizens.
In testimony before a House Financial Services Committee panel on retirement security needs of seniors, David F. Woods says Congress can pass legislation that would help build trust in the industry.
Woods, who is also president of the Life and Health Insurance Foundation for Education, notes that last year, the House of Representatives approved legislation that would have created an anti-fraud network among all financial regulators to allow them to share information about potential rogue actors in the financial services industry.
The legislation, H.R. 1408, died in the Senate.
Woods says the legislation would have enabled state insurance regulators to have access to the FBIs criminal database to conduct background checks on applicants for insurance licenses.
“NAIFA was fully supportive of H.R. 1408 for two primary reasons,” Woods says. “It is essential to the well-being of all consumers, not just seniors, that fraudsters and others intent on playing upon the ignorance or misfortune of potential insurance consumers be tracked down and barred from the financial services arena,” he says.
“And it is equally essential that consumers have confidence that this is the case so that they can feel more comfortable in their choice to work with insurance agents and financial advisors who have so much to offer them,” Woods adds.
He says both the House and the Senate should pass H.R. 1408.
Frank Keating, president of the American Council of Life Insurers, adds that senior citizens need to understand the nature of the risk they confront.
“Insurance products are about risk management, and todays retirees are facing one of the least understood risks of all–longevity,” he says.
Keating says financial literacy for seniors is more than just knowing the difference between a stock and a bond and more than just saving money.
“It is the responsibility of managing those assets so they last a lifetime,” Keating says.
However, he notes, recent surveys indicate that less than 40% of Americans believe they will have enough money to live comfortably themselves when they retire.
“With the Social Security system under strain and employer-sponsored pension plans offering fewer guarantees, the life insurance industry can help supplement retirement planning with savings and asset management options,” Keating says.
“An annuity can become a personal pension plan to provide a guaranteed lifetime income,” he says.
In addition to annuities, a key element in managing assets for a lifetime is long-term care insurance, Keating says.
He notes that it currently costs more than $16,000 annually for daily visits by a home health care aide and more than $55,000 per year for a nursing home.
Within the next 30 years, Keating says, these expenses will likely reach $68,000 and $190,000, respectively.
“ACLI believes that protection and coverage for long term care is critical to the economic security and peace of mind of all American families, and it is an important part of the solution for tomorrows future,” he says.
Reproduced from National Underwriter Edition, May 19, 2003. Copyright 2003 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.