The health care delivery system reform legislation unveiled Wednesday by Sen. Max Baucus, D-Mont., includes provisions that would allow cafeteria plans to offer tax-qualified long term care insurance.

The provisions are part of the Senator’s “America’s Healthy Future Act,” which the Senate Finance Committee will start debating Tuesday. Baucus is chairman of the panel.

The addition of LTC insurance to tax-qualified employer plans has been a long-term priority of the LTC industry.

“Finally, some meaningful progress in the effort to make long term care insurance more accessible and attractive to millions of younger, middle income Americans,” Jesse Slome, executive director of the American Association for Long Term Care Insurance, said of the provision. “This is the most positive step we’ve seen in some time and hopefully it won’t get lost in the great health reform debate.”

The proposal recommends creation of a so-called simple cafeteria plan, a vehicle through which small businesses could provide tax-free benefits to their employees. This change would ease participation restrictions and add self-employed individuals as qualified employees, according to Slome.

The proposal also would exempt employers that make contributions for employees under a simple cafeteria plan from pension plan nondiscrimination requirements that apply to highly compensated and key employees, he said.

Significantly, the proposal would allow qualified LTC insurance to be provided under a cafeteria plan to the extent the amount of such contributions does not exceed the eligible long-term care premiums for the contract, Slome said.

If included in a final bill, the LTC provisions would be effective beginning Jan. 1, 2011.