National LTC Plan Proposed
Kennedy and DeWine preparing a voluntary payroll deduction program
By trevor thomas
Leading insurance industry groups are giving a lukewarm reception to proposed legislation that would create a national voluntary long term care insurance program.
Sens. Ted Kennedy, D-Mass., and Mike DeWine, R-Ohio, are preparing the legislation, known as the Community Living Assistance Services and Supports Act, or Class Act of 2005.
The proposed insurance would cover nonmedical long term care and services to elderly and disabled Americans, and would be offered to working people age 16 and up and to their spouses, paid through payroll deductions.
Among other provisions, the bill would amend the Internal Revenue Code to allow above-the-line deductions for premium costs, let employers include LTC insurance in cafeteria benefits plans, provide a tax credit to low income enrollees and give tax credits to employers for costs of administering the system.
The bill seeks to help individuals unable to perform two or more activities of daily living, so they can live independently within their communities, and it aims to ease burdens on family caregivers, according to a draft of the legislation.
The program would be financed through voluntary payroll deductions of $30 per month. Employees would be enrolled automatically but would be allowed to opt out.
Money deducted from paychecks would be placed in individual accounts in a national fund run by the U.S. Department of Health and Human Services.
To build a financial reserve, the Class program would not pay any benefits for the first five years of its existence. After that, it would pay benefits of $50 to $100 a day to individuals needing care, depending on the extent of their disability.
Industry representatives note the legislation could boost LTC insurance sales because it includes tax incentives to employers offering private LTC insurance as part of their cafeteria plans.
Overall, however, they favor other bills before Congress that would push Americans toward private coverage.
“We’re working on a range of legislation to provide a level playing field on tax advantages for long term care, just as there are for health care,” says Karen Ignagni, president and chief executive of America’s Health Insurance Plans, Washington.
“The answer is not a new public program,” Ignagni says. “It’s to have a level playing field for long term care insurance and health care.”
AHIP’s first lobbying priority is to gain an above-the-line tax deduction for LTC insurance premiums, she says. (Such a proposal is included in the proposed Long-Term Care and Retirement Security Act, S. 1244, and other bills before Congress.)
“If that happened, you’d see an explosion of people buying long term care insurance,” Ignagni says.
Alane Dent, a vice president of the American Council of Life Insurers, Washington, says her organization welcomes the Kennedy-DeWine bill but is placing its bets on other legislation.
“The more bills they talk about, the better to prepare citizens for their retirement,” Dent says. “However, we feel another national program is probably not viable in this age, where there’s a lot of overspending and deficits.”
It’s better to provide tax incentives for private LTC insurance, which would reduce the burden on Medicaid to provide LTC services to the elderly, Dent says.
Another shortfall of the Kennedy-DeWine bill is its focus on physical impairments rather than cognitive illnesses such as Alzheimer’s disease, she says.
ACLI likes bills that would permit an above-the-line deduction, permit LTC insurance as part of employers’ cafeteria plans and flexible spending accounts, and remove restrictions on annuity and life products that carry LTC riders, Dent says.
ACLI also wants to see the state Partnership Program expanded, she adds. That program, currently limited to only four states, allows buyers of private LTC insurance to protect their assets if they exhaust their benefits and have to turn to Medicaid for LTC.
An executive of an association for the disabled also was cool to the Class Act.
“It doesn’t seem like it hurts,” says John Lancaster, executive director of the National Council on Independent Living, Washington. “But I’m not sure it helps. There are a lot of [bills and laws] available that can be tweaked and that might be more helpful to disabled Americans.”
What The Class Act Would Do
–It would cover nonmedical long term care and services to elderly and disabled Americans.
–It would amend the Internal Revenue Code to allow above-the-line deductions for premium costs.
–It would let employers include LTC insurance in cafeteria benefits plans.
–It would provide a tax credit to low income enrollees.
–It would give tax credits to employers for costs of administering the system.