Maintaining LTC's New Momentum

Given that more than 78 million Americans will turn 60 over the next 18 years, the benefits of LTC insurance should already be evident. But the industry has had to fight hard for LTC insurance’s acceptance, continuously having to argue for its potential as a product beneficial for government and consumers alike. With the new legislation, our efforts have paid off.

Introduced in the 1980s as nursing home insurance, regulations specific to LTC insurance first were developed by the National Association of Insurance Commissioners, via its Long Term Care Insurance Model Act and Regulation. Its intent was to protect applicants from unfair practices and introduce policy requirements and consumer protections that would ensure the availability of excellent products. Over the years, these models have evolved and been widely adopted by the states.

In 1996, the federal government further legitimized LTC insurance as a bona fide product through provisions of the Health Insurance Portability and Accountability Act. HIPAA essentially treated LTC insurance similar to other health insurance benefits in terms of federal income tax treatment–for example, deductibility of premiums, benefits not taxable and not considered imputed income. HIPAA also said LTC insurance premiums paid by an employer on behalf of an employee are not considered income to that employee yet can be deducted as a business expense. It also provided that benefits paid under such a tax-qualified plan are generally not taxable as income, subject to an annual limitation.

The passage of DRA continues the trend to assimilate LTC insurance as a mainstream product. It is the result of concerted efforts by insurers, distributors and trade associations such as the American Council of Life Insurers and America’s Health Insurance Plans.

Next steps

The federal Department of Health and Human Services will begin implementing the partnership legislation by providing initial guidance to the states on developing partnership programs. Most states, already seeking relief for overburdened Medicaid budgets, certainly will want to implement these programs. In fact, we could start seeing participation by some states later this year, depending on how quickly HHS acts. We hope that most states will have their partnership programs in place within the next year or so.

In the meantime, the closing of the Medicaid loopholes in the law provides excellent reason to approach clients about LTC insurance. This, in combination with the market having stabilized over the past few years and increasing consumer demand for this coverage, underscores that there has never been a better time to sell LTC insurance.

It is important the LTC insurance industry take advantage of the momentum that this legislation has sparked. Distributors should focus on sales, while carriers and trade organizations must work toward a smooth implementation of partnership programs nationally.

As always, the industry will continue to fight for even broader support of this product. This means convincing lawmakers to pass an above-the-line tax deduction for LTC insurance and permit LTC insurance in cafeteria plans and flexible spending accounts while persuading employers to embrace LTC insurance as a voluntary benefit.

Working together as an industry, we can achieve these goals.