Company Size and Long Term Care Coverage
The majority (58%) of the largest U.S. employers have embraced long term care insurance as an employee benefit. The inclusion of long term care insurance (LTCI) in benefit plans has accelerated astoundingly in the last 15 years, as explained in a March 2013 report released by the SCAN foundation. Size of the Employer and Self-Employed Markets Without Access to Long-Term Care Coverage Options reports that, among employer groups of 500-999, 27% offered long term care coverage in 2010 vs. only 9% in 1998. Among the largest employers, those with 20,000+ employees, fully 58% offered long term care insurance, up from only 13% in 1998. Smaller employers are lagging behind this trend. Only 5% of businesses with less than 100 employees offer LTCI. In companies with 100 or more employees, the rate is four times that of smaller businesses, or 20%. The report estimates that approximately 28 million employees now have access to employer-sponsored long-term care coverage. This represents approximately 20% of the total workforce. However, access to LTCI isn’t the same as actually having purchased a policy. If 20% of the total workforce has access to employer-sponsored LTCI coverage, that means that substantially less have actually purchased coverage. Small businesses owners and self-employed individuals have jumped on the LTCI bandwagon. About 17 percent of the nation’s approximately 16 million self-employed individuals in the U.S. have long-term care coverage. This adoption rate is close to the rate of small business owner coverage (20%). As the SCAN report says: Roughly one-in-five companies with at least 10 employees offers long-term care coverage to their employees. Get a big-company benefit for a company of any size. Contact me to get the facts on what a plan would look like for YOUR...
read moreRetirement Confidence, Alzheimer’s, and Long Term Care
Most Americans are not confident in their ability to maintain their lifestyle in retirement, as reported by “Employee Benefit News.”[i] Although the online publication reported that retirement confidence levels are below 50% no matter the age of the responder, those between ages 40-50 were most likely to say they were ‘not confident’ or ‘completely doubtful’ in their ability to retire in the way they would like. What is the reason retirement confidence is so low? For some, it may be an acknowledgement that their jobs may not last as long as they previously thought. Others who may have thought they were on track for a successful retirement might be shaken by low interest rates and the resulting decline in interest income. Could the low retirement confidence number be due to a nagging feeling: what was once adequate for retirement has become inadequate – given longer lifespans and the possibility of long term care? Retirement surveys have historically focused on income in retirement. It’s easy for individuals to focus on income and overlook the unfunded and uninsured health care expenses that may be incurred in retirement. Is the awareness that financial health is more than simply retirement income on the rise? Consider the impact of Alzheimer’s disease, for example. In the report “2013 Alzheimer’s Disease Facts and Figures[ii],” published by the Alzheimer’s Association, we learn: – One in 9 people age 65 and older has Alzheimer’s disease; – 32% of those age 85 and older have Alzheimer’s disease; – Alzheimer’s disease is the 6th leading cause of death. As the report states, “In 2012, 15.4 million caregivers provided an estimated 17.5 billion hours of unpaid care, valued at more than $216 billion.” That averages 114 hours per year per caregiver. The gloomy news regarding the costs of unpaid and paid caregiving are sobering facts for family members and employers. When considering whether retirement plans are adequate, the cost of extended long term care must be considered. Long term care insurance is the only insurance specifically designed to both protect someone against the potentially devastating cost of this care, while making private pay options more affordable. [i] “OneAmerica survey finds generational retirement ‘confidence donut’ “ as reported on Employee Benefit News http://ebn.benefitnews.com/news/oneamerica-survey-finds-generational-retirement-confidence-donut-2730976-1.html [ii]...
read moreGender-specific Pricing for LTC Insurance
March 2013 Since the inception of modern long term care insurance, premiums have been the same for men and women of the same age and rate class. That will change soon for many individuals: already, at least one leading long term care insurance company has begun the process of filing for gender-specific pricing. This move provokes two obvious questions: how soon we can expect to see these changes, and by how much will premiums increase? Although there’s no definitive information on either of these issues yet, here’s my analysis of the situation: How soon? The only accurate answer is, “It depends.” Industry insiders’ best guess is April-May of 2013. The uncertainty derives from the fact that the filing of prices on new (yet-to-be-issued) policies is a patchwork-quilt process. Each state’s insurance division must give its OK for the individual policies sold in that state. How much will policy premiums change? It’s estimated that pricing will rise by as much as 20-40% on premiums for women over the equivalent policies for men. Presumably, the price for men will drop (again, there will be no certainty until the new prices are either announced by the insurers or made public by the states’ Divisions of Insurance). Keep in mind: 1) Existing in-force policies will not be impacted by gender-specific pricing. Only new policies purchased after the pricing change has occurred will be affected. 2) Not all insurers are moving to gender-specific pricing at this time; this state of affairs will heighten the importance of working with an independent specialist who represents multiple insurers. 3) Females who may at some point in their lives want to have long term care insurance are encouraged to look into coverage NOW, in order to enjoy the widest selection of favorably-priced coverage. Since women live longer than men — usually outliving their husbands — they use more professional caregiving and use long term care insurance for longer durations than do men. As many insurers move to re-price future policies to reflect this reality, there ‘s now a window of opportunity for women to lock in pricing that in the not-too-distant future may be described as “the good old days of low premiums for...
read moreThe Rise and Fall of CLASS
Febuary 2013 The Patient Protection and Affordable Care Act (aka Obamacare), which was signed into law in 2010, included a provision creating Community Living Assistance Supports and Services (CLASS). CLASS was a voluntary insurance-like program intended to provide a cash benefit for long term care. It was the first government program that, in theory, would allow taxpayers to plan for long term care, much in the way they now pay into a government program for health care during retirement (Medicare), or for retirement income (Social Security retirement benefits). Those who signed up for CLASS — and who needed long term care — would be able to collect under the program if they had met premium-payment and employment criteria. From the beginning, CLASS was controversial. Many employers wondered whether or not they should offer the program to their employees. Although employer participation was described as “voluntary,” details on participation incentives or disincentives were never announced, nor were the program details. Actuaries, and organizations such as the Congressional Budget Office, argued that it was impossible to set premiums that would not only be attractive to taxpayers, but at the same time would sustain the program financially (the law required that CLASS be fiscally self-sustaining). As CLASS’ implementation schedule plodded along, it became obvious to many observers that those tasked with designing the self-sustaining program were increasingly perplexed by how to make it happen. So, few were surprised in October 2011, when, Secretary of Health and Human Services, Kathleen Sebelius, announced that the program would not be implemented. However, the law remained on the books. That is, until January 2, 2013, when the American Taxpayer Relief Act of 2012 (ATRA) was signed into law. Most people know ATRA as the piece of legislation that partially resolved the U.S. fiscal cliff. However, benefits specialists, human resources professionals, and insurance agents also know it as the bill that repealed CLASS (section 642 of the bill). Despite ongoing dire predictions regarding the ability to provide retirement and old-age benefits to the growing baby boomer population, with each passing year the lack of a government solution for long term care becomes clearer. Now is the time for workplaces and individuals to seek an alternative solution — by taking a hard look at the variety of long term care insurance programs already available in the...
read moreHSAs, FSAs, HRAs and Long Term Care Insurance
Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and Health Reimbursement Arrangements (HRAs) are all tax-favored vehicles to pay for health care costs. Some, though not all, may be used to pay long term care insurance premiums. Health Savings Accounts Health Savings Accounts (HSAs) allow taxpayers to claim a tax deduction for qualified medical expenses. While most insurance premiums cannot be treated as qualified medical expenses for HSA holders, long term care insurance premiums are specifically ALLOWED as a qualified medical expense. This provides an opportunity for many individuals to take a deduction for their long term care insurance premiums, coverage which otherwise would not be deductible. An HSA is a tax-exempt trust or custodial account set up with a qualified HSA trustee, usually a bank or an insurance company. Contributions remain in an HSA from year to year, and interest or other earnings in the account are tax-free. HSAs are portable when an individual changes employment or leaves the work force. To be eligible for an HSA, an individual must meet several criteria: Be covered under a high-deductible health plan (among several other requirements, for tax year 2013 the minimum deductible for individuals is $1,250; for families $2,500), Have no other health coverage (some exceptions apply), Not be enrolled in Medicare, Not be eligible to be claimed as a dependent on someone else’s tax return. The maximum allowable HSA contributions for 2013 are $3,250/individual and $6,450/family (exclusive of the $1,000 catch-up contribution for age 55+ participants). Flexible Spending Arrangements Flexible Spending Arrangements (FSAs) allow employees to be reimbursed for medical expenses. FSAs are usually funded through a voluntary salary reduction agreement, and the employer may also contribute. FSAs are often offered in conjunction with a cafeteria plan, and normally, funds left in the plan at year-end are forfeited. Self-employed people cannot have an FSA. Distributions for the purpose of paying long term care insurance premiums are NOT ALLOWED from FSAs. Health Reimbursement Arrangements Health Reimbursement Arrangements (HRAs) are funded by employers only, and can be offered with other plans, such as FSAs. Premiums paid for long term care insurance coverage ARE ALLOWED as qualified medical expenses for HRA purposes. Whether long term care insurance is purchased for a self-employed individual or for employees, opportunities abound to make its premiums tax-deductible. Consider Uncle Sam’s contribution as yet another reason why long term care insurance can be a smart component of any comprehensive retirement and financial...
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