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The National Association of Insurance Commissioners has sent a package of 10 proposals for reforming the U.S. long-term care finance system to Congress.

The package of federal LTC policy options has been in the works for more than a year.

Regulators included four options for improving the private long-term care insurance market; four aimed mainly at creating or strengthening other types of long-term care funding options; a plea for better alignment between federal and state rules; and a request for more federal support for general retirement security and long-term care planning awareness campaigns.

(Related: 5 Long-Term Care Hybrid Perspectives)

The first option on the list calls for Congress to let the holders of individual retirement accounts, and the participants in 401(k)s and other types of employer-sponsored retirement plans, use plan assets to pay long-term care insurance premiums.

Congress should consider the possibility letting IRA holders and plan participants use cash to pay for life insurance policies that offer LTC benefits, annuities that offer LTC benefits, and offer hybrid products, the NAIC said.

Congress should also consider letting consumers start long-term care savings accounts, or enhance consumers’ ability to use health savings accounts to pay LTCI premiums and for LTC services, the group said.

The NAIC also recommended that Congress let stand-alone LTCI policies offer a cash value.

Life and annuity LTC hybrids can offer a cash value feature, the group said.

“Prohibiting cash value creates a ‘use it or lose it’ design for LTCI, because a policyholder only receives a benefit from their policy if they need LTC services,” the NAIC said.

The NAIC encouraged Congress to let insurers create new types of hybrids, and new products designed to offer one type of coverage in the beginning and to turn into LTCI later.

“Products that offer life, disability, critical illness, supplemental and other benefits could be allowed in various combinations with or for conversion to LTCI, such as after the policyholder reaches a certain age,” the NAIC said.

— Read 5 Ways Genworth Wants to Reboot LTCI on ThinkAdvisor.