Ltc Coverage Comes Of Age


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Generations ago, aging parents who could no longer take care of themselves went to live on a dutiful son or daughter's farm. Today, adults live a lot longer after retirement and often spend their twilight years in a commercial care facility, which costs much more than any home on the range. Adults who are concerned about their future welfare, especially those with catastrophic diseases in their family history, should explore Long-Term Care (LTC) coverage.

Tax Deductibility Finally Arrives

For years, improvements to LTC coverage hardly improved its popularity with the public. Without tax deductibility, employers were reluctant to offer this benefit. With just the incentive of convenience, many of the employers that offered LTC coverage deducted the premiums from their workers' salaries. Recently, the Kennedy-Kassebaum's Health Insurance Portability and Accountability Act gave LTC coverage a new luster.

As of January 1997, the act allows employers to pay LTC premiums for an IRS-approved Qualified Long-Term Care insurance contract without taxing employees for the employer's contribution. Under a Qualified LTC insurance contract, the employer can cover each employee for up to $175 per day without incurring new taxes.

Firms that can't meet the whole premium find that most employees are content with partial employer contributions and are willing to pay the balance themselves. Employees who share or pay for all their LTC coverage premium can count their contributions toward the allowable deduction for medical expenses on their federal income taxes.

LTC Coverage Gains a Following

Making LTC coverage more economical for employees and employers should raise the public's awareness of its importance to their financial future. The Health Insurance Association of America observes that 60% of people over 55 have little or no awareness of LTC insurance. Many in this population will eventually need nursing care or in-home services beyond their budget.

In a speech about LTC, Glen Pomeroy, North Dakota's insurance commissioner, stressed the importance of cooperation between insurance regulators and LTC industry leaders to ensure that the LTC products sold today can pay for the worker's future needs. He called for LTC coverages 'that offer meaningful benefits at a reasonable price.' To obtain secure LTC coverage, Pomeroy advocates such controls and restraints as complete disclosure of benefits, provisions instituting plan limits, appropriate insurer and agent marketing practices, and guaranteed renewable policies.

To bolster the public's trust in LTC coverage, the Kennedy-Kassebaum Act prohibits an insurance company from canceling a policy because of age or deterioration of mental or physical heath. For a more mobile workforce, employees can switch jobs without switching coverage as long as premiums are paid.

Many families have witnessed firsthand the financial drain that can be caused by a household member's protracted illness. They understand the importance of LTC insurance.

LTC: More TLC Than Medicare

The National Center for Financial Education (NCFE), a nonprofit organization (that doesn't sell insurance), laments that few employers offer LTC coverage. NCFE President Loren Dunton thinks workers should enroll in an LTC plan pronto because:

  • The annual cost of nursing home care ranges from $24,000 to more than $50,000 and remains on the upswing.
  • Medicaid (Medi-Cal in California) will pay for long-term care only after a person is impoverished.
  • Medicare covers only skilled care for a limited time after hospital confinement.
  • Medicare doesn't cover custodial or intermediate care.
  • LTC insurance is normally underwritten with medical provisions, which may be unavailable should a person decide to purchase it later, after his or her medical condition changes.
  • LTC premiums are age-rated, so the longer a person waits, the more it costs.

Almost half a million employees purchase their LTC plans by payroll deductions; another 4 million hold individual policies. Employers usually pay little or none of the employee's LTC premium. Companies using an LTC program should let employees know:

  • that LTC cannot be purchased once the person starts to need long-term care, so they should sign up before they turn 50 years old
  • about the astronomical cost of nursing home benefits in their communities for a glimpse of what LTC can do for them
  • whether their LTC plan provides home-care benefits in advance of nursing-home benefits
  • if the policy's definition of 'dependent' includes persons who are unable to eat, bathe or dress, or only those who require full-time care
  • if the policy offers inflation protection, which is a major concern for persons under 70 years old, who may need the designated health-care benefits at the established price to last several decades

Dunton expects a rash of employee lawsuits against employers for not recommending LTC coverage as an effective health-care option. To avoid such claims, the NCFE offers a waiver form and information about the LTC project. Just call their San Diego office at (619) 232-8811.

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