Hawaii panel adds LTCI tax break to study bill

Supporters of private long-term care insurance (LTCI) have won a battle in the Hawaii House Consumer Protection & Commerce Committee.

Members of that committee have voted 10-0, with five excused absences, for an amended version of House Bill 1, a bill that would create a long-term care insurance (LTCI) study commission.

The original version of the bill called for the state to pay for an actuarial study of the idea of creating a mandatory, government-run, limited-benefit LTCI program.

The amended version of the bill calls for the state to commission a feasibility study as well as an actuarial study, and also to look into the idea of creating a tax incentive that would encourage state residents to buy private LTCI coverage.

Another provision added calls for the study to include a look into the idea of having the state set up the kind of long-term care partnership program that many other states offer.

When state residents buy private LTCI coverage through partnership programs, they can use the private LTCI benefits to protect some, or, in some cases, all of their assets if they run out of private LTCI benefits and end up needing Medicaid nursing home benefits.

Cynthia Takenaka, executive director of the National Association of Insurance and Financial Advisors (NAIFA) in Hawaii, has written to lawmakers to say NAIFA Hawaii supports the idea of creating private LTCI tax incentives and a partnership program but opposes the idea of creating a public LTCI program.

Because a mandatory social insurance program usually does not reward low-risk insureds by giving them lower rates, “a mandatory program compels low-risk participants to subsidize high-risk participants,” Takenaka said.

A public program with a flat tax would be regressive, because it would be more burdensome to workers with modest incomes, and administering the program would be burdensome for employers, Takenaka said.