Change is coming to the LTCI space!
By Alan Friedman
There is significant change coming to Long Term Care Planning space as several states are introducing legislation that creates a “public option” for Long-Term Care insurance.
The 15 States to Watch:
California
New York
Pennsylvania
Connecticut
Illinois
Maine
Massachusetts
Michigan
Minnesota
New Hampshire
New Mexico
North Dakota
Oregon
Utah
Vermont
Currently, in California there are five proposed plans (AB 567) awaiting Governor Newsom’s review. The final report is due Jan. 1, 2024.
5 Plans Being Proposed, with Total Benefits Ranging from $36,000 to $144,000
Plan 1: Maximum Benefit of $36,000 or $1,500 per month for 2 years (.50/$100 taxable income)
Plan 2: Maximum Benefit of $100,400 or $4,600 per month for 2 years (.90/$100 taxable income)
Plan 3: Maximum Benefit of $36,000 or $3,000 per month for 1 year (.55/$100 taxable income)
Plan 4: Maximum Benefit of $81,000 or $4,500 per month for 1 ½ years (1.30/$100 taxable income)
Plan 5: Maximum Benefit of $144,000 or $6,000 per month for 2 years (2.40/$100 taxable income)
Inflation Options: Varies for all plans, except Plan 5 – no inflation (1%)
Opt-Out Provision
Definition of the insurance products eligible for either opt-out or a reduced program contribution is yet to be determined
Opt-out Policy Type: Section 7702(b) contracts (i.e., Life+LTC rider, traditional, ABLTC plans) only.
Chronic Illness riders will not qualify under the current proposal
As it is currently written, the CA LTC legislation may offer an opt-out only if consumers have personal Long-Term Care coverage in place prior to the law going into effect. But, by the time the final details are known it could be too late to implement a strategy to allow clients to opt-out of the program and avoid any new taxation. That makes a “wait and see approach” potentially dangerous.
Ongoing legislative movement in various states may enact a mandated statewide LTC program via a payroll tax for many Americans.
California AB567 is just one example: Learn More
What is the overall need for LTC insurance?
The need for long-term care can arise at any time from various factors, including aging, chronic illnesses, disabilities or accidents. And, although November is Long Term Care Insurance Awareness Month, it is always a great time to speak to your clients and prospects about the importance of planning for Long-Term Care and to being prepared for when the need arises.
Long Term Care Insurance
Helps protect a family’s assets and provide a financial safety net.
Without insurance, a long-term care need can be expensive, especially if it involves services such as nursing home care or home health care. These costs can quickly deplete one’s savings and assets, potentially leaving your client and their family in a difficult financial situation. Also, average monthly LTC costs are expected to raise more than 80 percent by 2040.
Helps maintain a person’s independence and dignity as they age or face a chronic illness.
LTCI can cover the costs of in-home care, assisted living facilities or nursing homes, allowing people to receive the care they need while staying in a familiar environment or a facility that meets their preferences.
Helps ease the burden on a family
Without LTCI, the burden of caregiving often falls on family members. This can be physically, emotionally and financially demanding for loved ones. Having insurance can help ease this burden by covering the cost of professional care services, reducing the strain on a family.
Helps provide peace of mind
Having a financial plan in place for long-term care can provide peace of mind. It can alleviate worries about how to pay for necessary care and ensure access to quality services when needed.
Helps provide the flexibility to choose the care providers and services that best meet one’s needs and preferences.
LTCI allows a person to have a say in their care rather than relying solely on government programs.
Helps to avoiding Medicaid spend-down
Qualifying for Medicaid typically requires spending down one’s assets to a very low level. Long-term care insurance can help avoid this situation and provide greater control over one’s financial assets.
As insurance professionals and advisors — and acting as Financial Defensive Coordinators for our clients — it is important for us to educate our clients on how to protect their assets and lifestyles and to help them meet their retirement goals when the unexpected happens. LTC Insurance is one form of protection that you can provide.
Reach out to us so we can assist you in designing a custom LTC plan that is tailed to meet you clients’ needs.