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Life Health > Long-Term Care Planning

OneAmerica: Long-Term Care Products Remain Viable Option

By Warren S. Hersch

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Asset-based long-term care products have taken on heightened importance in light of the potential repeal of a federal law designed to provide long-term care coverage, according to a Midwestern-based insurer.

The State Life Insurance Company, a OneAmerica company, Indianapolis, says that life insurance and annuity products with long-term care benefits remain a viable option despite the potential repeal of the CLASS Act. Part of the recent federal health reform legislation, the CLASS act was passed to create a voluntary public insurance program to pay for long-term care expenses, but last month the Obama administration announced it would not push forward with the program due to cost and sustainability concerns.

State Life, among other life insurers, offer asset-based long-term care products that use the structure of life insurance or annuities but provide long-term care benefits as needed. According to the insurance industry research organization LIMRA, these products – known as “hybrid” or “combo” products – saw sales growth across the U.S. of 62% in 2010.

“With the CLASS Act option likely being removed from the discussion, the onus is back on private insurance to provide quality long-term care protection,” said Bruce Moon, vice president of individual products for the OneAmerica companies. “Consumers need to know these options are available across the country, and that the federal government has provided tax advantages to make these products more attractive and beneficial to consumers.”

The market for annuities with long-term care benefits significantly expanded after a provision of the Pension Protection Act took effect in 2010, allowing the growth in cash value to be used for qualifying long-term care expenses without being subject to federal income tax.

In addition, other approaches to funding long-term care use the structure of cash value life insurance, payable with a lump sum (single premium) or annually. While guaranteed premiums make these options attractive, consumers also benefit because money is available to heirs even if long-term care ends up not being necessary. Asset-based long-term care products are available from ages 20 to 85.

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