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Life Health > Long-Term Care Planning

Hawaii panel adds LTCI tax break to study bill

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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.

Takenaka also asked whether the program could interfere with residents’ eligibility for Medicaid benefits.

AARP Hawaii wants the bill to have the state study the LTCI tax incentive and partnership program proposals along with the public LTCI program concept.

“Current programs and services are not able to help most residents needing long-term care,” Steve Tam, an AARP Hawaii representative, has written to lawmakers. “A key advantage of [a public] program is that it would benefit the majority of the adult working population.”

Mary Wagner, a resident of Maui, wrote to observe the five carriers have left the private LTCI market since 2010.

“Long-term care insurance rates are rising and [policies] offer fewer benefits,” Wagner wrote. “Because private long-term [care] insurance providers are fleeing the market and those remaining are escalating prices, it is crucial that the state of Hawaii provide direction and take the lead on this issue. We need to provide a public option.”

Other state House committees have also been looking at H.B. 1, and state Senate committees have been holding hearings and committee votes on the Senate version of the bill. Senate Bill 104.

The current draft of the Senate bill on the Hawaii legislative tracking website would require a public program feasibility study along with the actuarial study but does not include the tax incentive or partnership program study provisions.

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