Federal Long Term Care Insurance Plan Closer To Repeal

The deficit-reduction proposal released Tuesday by the reconvened Gang of Six would repeal the Community Living Assistance Services and Supports Act (known as the CLASS Act).

Created as part of health reform legislation passed last year by Congress political experts refer to the CLASS Act as one of the late Sen. Ted Kennedy’s most cherished programs. It is also a favorite target of Republicans.

"America is facing a future long-term care crisis as the aging population balloons," explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance, the insurance industry's national trade group. "CLASS has been highly controversial because on one hand it is at least some effort to address the problem though many see it as a very costly future new taxpayer-borne entitlement program."

The President-appointed fiscal commission led by former Senators Alan Simpson and Erskine Bowles singled the CLASS Act out as an “unsustainable” entitlement that would most likely saddle taxpayers with a major new liability, a finding that deficit hawks have latched on to in their attacks.

"Despite the fatal flaws of the CLASS Act, the Obama administration continues to push ahead in implementing this unsustainable entitlement program,” Sen. John Thune (R-S.D.) said in a statement last week. He added that the Department of Health and Human Services is ignoring “all of the red flags raised by the massive new entitlement program that is being created.”

CLASS establishes a voluntary long-term disability insurance program that would pay disabled enrollees a cash benefit for assistance with basic daily living activities such as dressing, bathing and eating. The insurance would be offered through the workplace, where employers who agree to participate would sign up their employees automatically — but also give them a chance to decline the coverage. If they keep the coverage, they’d be able to use the benefits after they’ve paid the premiums for five years.

CLASS Act critics including many leading industry actuaries with decades of experience in pricing and marketing long-term care insurance products argue that the voluntary CLASS program is vulnerable to adverse risk selection. "Critics expect that primarily health-challenged people will sign up for CLASS, those with expensive health problems which means CLASS would not be sustained by premiums alone," Slome explains. "Or, if they artifically price it too low in order to attract more healthy individuals, you face a serious shortfall when they ultimately go on claim."

Some of these problems were intended to be worked out before the Affordable Care Act was passed, but because of its unusual route to becoming law, that never happened experts acknowledge. "The nation definitely needs to discuss how to handle providing care for aging Americans," Slome concludes. "Kicking the can down the road isn't going to keep people from growing older and needing costly long-term care."

To learn more about the CLASS Act visit the American Association for Long-Term Care Insurance website at http://www.aaltci.org/class.

New Report Examines What Consumers Really Pay For Long-Term Care Insurance

One fourth (27.8%) of individuals purchasing long-term care insurance during the first half of 2010 who were under age 61 pay less than $1,000 a year according to a new report issued by the American Association for Long-Term Care Insurance (AALTCI).

"The single greatest misconception held by consumers is the actual cost of coverage," explains Jesse Slome, AALTCI's executive director. "Most people perceive the cost is actually quite a bit higher than the real amounts paid by large percentages of those purchasing coverage."

The Association reveals that nearly one-in-five (19.4%) purchasers under age 61 pay between $20 and $30 a week for new policies. Over one-fourth of buyers (28.9%) in this age band pay between $1,500 and $2,500 a year with the remainder paying more. Less than one-tenth of these buyers (6.8%) pay $4,000 or over.

"Studies that report average premium costs regrettably mislead the public into the perception that long-term care insurance is expensive," Slome explains. "Averages include large numbers of older buyers and other factors that result in higher costs. The fact is that many people pay far less than the average amounts released by industry sources."

Costs for long-term care insurance can vary significantly based on the age when one applies, the ability to take advantage of discounts offered to healthier applicants as well as the amount of future benefits desired.

Insurance rates are based on the attained age of the applicant. Older buyers pay more and according to the latest data of real buyers, less than a tenth (9.0%) of buyers between ages 61 and 75 paid $1,000 or less when they applied for new coverage.

According to the Association, the average age for new individual purchasers is now 57. Eight out of 10 (80.5%) of new individual buyers in 2009 were younger than age 65 when applying for long-term care insurance according to AALTCI's annual research of 155,000 new applicants. The pricing data is based on an analysis of over 200,000 purchasers of partnership qualified LTCi policies.

What Real People Pay Yearly

Buyers Under Age 61

Less than $999 27.8%
$1,000 - $1,500 19.4%
$1,500 - $2,500 28.9%
$2,500 - $4,000 17.1%
$4,000 and over 6.8%

Buyers Age 61 - 75

Less than $999 9.0%
$1,000 - $1,500 12.5%
$1,500 - $2,500 34.5%
$2,500 - $4,000 28.4%
$4,000 and over 15.6%

Source: American Association for Long-Term Care Insurance, November 2010, Price Study

2011 Long Term care Insurance Tax Deduction Limits Announced

November 2, 2010. The Internal Revenue Service (IRS) announced increased deductibility levels for long-term care insurance policies purchased in 2011.

"For taxable years beginning in 2011, the limitations have been increased," explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI), the industry's trade association.

“Tax advantaged long-term care insurance remains one of the few remaining significant tax-savings benefits especially meaningful for small business owners."

The deductible limits under Section 213(d)(10) for eligible long-term care premiums includable in the term ‘medical care’ are as follows:


Attained Age Before Close of Taxable Year

2011 Deductible Limits
40 or less $ 340
More than 40 but not more than 50 $ 640
More than 50 but not more than 60 $1,270
More than 60 but not more than 70 $3,390

Source: IRS Revenue Procedure 2010-40

The American Association for Long-Term Care Insurance (http://www.aaltci.org/) is the national association serving insurance and financial professionals who provide long-term care financing solutions. A complete explanation of tax deductible rules for individuals and business owners can be found on the Association's website: http://www.aaltci.org/tax .