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Life Health > Health Insurance

State Incentives Fail To Boost LTC Sales

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State tax incentives and partnership programs for long term care insurance have not stimulated LTC insurance sales in the states that offer them, a researcher concludes. Many states have been using incentive programs to try to boost LTC insurance sales to help ease a potentially significant financial crisis for Medicaid due to the aging of the baby boom generation, notes the researcher, David Nixon of the University of Hawaii Public Policy Center.

The aim of the incentives is to help the federal government and the states to restrain the explosion of Medicaid costs. However, they have had little or no success, Nixon believes.

Using regression analysis of data collected by America’s Health Insurance Plans, Washington, Nixon found the effect of either individual or employer tax incentives on purchases of LTC insurance appeared to be negligible. Even states with relatively generous tax incentives saw no detectable increase in sales of the policies, he says.

In fact, tax incentives are so small in comparison to the total cost of LTC premiums that they probably “have not induced a single new person to purchase long term care insurance” in the states that offer them, Nixon writes.

State tax subsidies for individual policies vary from $30 in Missouri to $250 in North Dakota, based on a $1,000 yearly premium, Nixon’s study found.

State “partnership” programs, which permit consumers buying qualified private LTC insurance to protect some assets against future Medicaid claims, also appear to have little or no effect on consumer behavior, Nixon writes.

“It remains an open question how many of the partnership purchasers would have applied for Medicaid in the absence of the state program,” observes Nixon.

Rather than state incentives, it appears that financial, health and family structure factors appear to be the main forces that drive LTC insurance sales, Nixon writes.

For instance, “states with relatively more wealthy seniors experience significantly more long term care insurance sales,” the report states.

Seniors in states with a more limited availability of children for caregiving and where seniors are more likely to require long term care also represent a significantly larger market for LTC insurance, according to the report.

Moreover, in states where seniors are more likely to live with their children, LTC insurance sales are significantly lower than average, the report notes.

Some 15 states offer a tax deduction or tax credit to individuals for LTC premiums. (See chart.) In addition, Maine and Maryland allow employers to take a $100 tax credit for each employee covered by LTC insurance, up to 20% of the premium paid.

Four states currently have an LTC partnership program and 21 other states have introduced partnership legislation under enabling provisions of the Deficit Reduction Act of 2006, according to the National Association of Health Underwriters, Arlington, Va.

Commenting on the University of Hawaii report, a New York Life executive demurs, expressing confidence the new partnership programs will be a spur to LTC insurance sales nationwide.

“We believe the LTC marketplace will be aided next year by publicity surrounding the implementation in the states of the new, easier LTC partnership programs, as allowed by the Deficit Reduction Act of 2006,” says Dennis O’Brien, first vice president of LTC for the company.

Jodi Anatole, vice president, MetLife LongTerm Care, predicted the arrival of new state partnership programs would have a potentially important impact on sales.

“These new partnership programs differ significantly from the existing programs,” remarks Anatole. “The new partnership plans are far simpler for carriers to implement, simpler for agents to understand and sell and, importantly, simpler for consumers to understand.”

Furthermore, she says, “the new partnership program will be available when Medicaid eligibility rules have tightened, thus providing greater incentives for consumers to purchase private long term care insurance.”


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