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CLASS Is Dismissed; Go Teach

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As financial professionals, our message to consumers is clear and consistent: Do something! We deliver that message when it comes to the many ways we help people protect themselves and their families: Retirement services, life insurance and disability, and certainly not least, long-term care protection.

If you’ve been monitoring Washington lately, you know that the government’s latest potential option for paying for long-term care (LTC) is dying on the vine. The Community Living Assistance Supports and Services program (CLASS) is no longer being supported by the Obama administration. CLASS was passed as part of the broader health care reform bill to create a voluntary public insurance program to pay for LTC expenses. It’s been deemed unsustainable, and members of the House are pushing for outright repeal.

Here’s where we need to step in. The failure of CLASS, coupled with the well-documented challenges found in the traditional long-term care insurance (LTCI) market, might lead people to believe there are no viable options. However, there are specific options that appeal to a consumer’s need to have predictable premiums and benefits available, even if long-term care is never needed. 

A quickly expanding base of agents, professionals and others in our business is finding success by promoting viable options that use life insurance and annuity products with LTC benefits. (And in this case, the federal government has actually done something to help. More on that later.) These asset-based products use the structure of life insurance or annuities but provide LTC benefits as needed. They are payable with a lump sum (single premium) or via guaranteed annual premiums.

The value proposition consumers seem to like most is that with asset-based LTC protection, people don’t feel like they’re paying for something they might never need. The money in the policy or annuity is paid to heirs at death if it is not used for long-term care. 

With the CLASS program off the table, the onus is back on private LTC funding options. Fortunately, the federal government has already provided some support. At the beginning of 2010, a provision of the Patient Protection and Affordable Care Act (PPACA) took effect, allowing certain annuities to be used for qualifying LTC expenses. The major benefit is that the cash values from these annuities can be used federal income tax-free. This has helped drive the tremendous growth of annuity with long-term care benefits combinations – sales were up 62% in 2010 according to LIMRA.

So there is something we can all do. Turn your clients’ attention away from a promise Washington couldn’t keep and help them find the protections for their potential long-term care needs that are available in the marketplace right now.


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