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.

500,000 Long-Term Care Insurance Applicants Expected

Over half a million Americans are expected to apply for long-term care insurance before the year concludes according to a projection from an industry trade group.

This marks significant continued growth in awareness and action among consumers explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance http://www.aaltci.org. "In 2010 the Association reported that 475,000 Americans obtained long-term care insurance coverage either on an individual basis or through their employer an increase over the prior year."

According to the projection, interest and sales continue to trend up which can be attributed to several factors. "Consumers in their 50s and young 60s are more aware than ever of the risks involved in living into their 80s and 90s," Slome explains. "The millions of pre-retirees understand that government programs will not be sufficient to deal with the burgeoning number of aging baby boomers and that new federal programs will be more suited to those with existing health limitations."

The Association director notes that significant growth in sales will result from the thousands of federal employees signing up for coverage through the Federal Long-Term Care Insurance Program (FLTCIP) where open enrollment closes June 24. "I would expect tens of thousands of newly covered individuals in the program with an equal number who searched and compared coverage on an individual basis," Slome adds.

Over eight million Americans currently have long-term care insurance protection and roughly 200,000 received benefits from their coverage in 2010 according to the 2011 Long-Term Care Insurance Sourcebook. The majority (56 percent) of individual applicants are between the ages of 55 and 64. "People increasingly understand the need to look into this protection prior to retirement age," Slome concludes. "That is when costs are more affordable and you are still most likely able to health qualify for coverage."

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 .

LTC Association Marks Long-Term Care Awareness Month

November is Long-Term Care Awareness Month, an industrywide event established in 2001 by the American Association for Long-Term Care Insurance (AALTCI).

"Each year awareness efforts tied to Awareness Month grow," explains Jesse Slome, executive director of the industry's trade group. "From a Congressional Resolution, to proclamations issued by governors and mayors across America, support for the campaign's goal continues to grow."

Slome urges insurance professionals to capitalize on the occasion by using November as an opportunity to discuss long-term care planning with clients. "It's as simple as asking people if they have a long-term care plan in place," Slome notes. The vast majority of individuals and families over age 50 have no plan in place he adds. "As the saying goes, a failure to plan is a plan for failure and while insurance isn't a solution for all, everyone needs to weigh their options."

The Association makes available free marketing tools that insurance professionals can use to promote awareness during Long-Term Care Awareness Month. They can be accessed via the organizations website: http://www.aaltci.org/aware.

Long-Term Care Insurance Sales Summit Set For Vegas

The 9th National Long-Term Care Producers Summit will take place April 3-5, 2011 at the Tropicana Hotel in Las Vegas, NV.

Organized by the American Association for Long-Term Care Insurance, the conference program focuses on four specific areas; selling long-term care insurance during difficult economic times; selling combo or annuity and life products with linked LTC benefits; selling multilife LTC and the CLASS Act.

For the first time, the nation's leading trainers - Phillip Sullivan of SellingLTC.com and Phyllis Shelton, president of LTC Consultants will be part of the Summit program.

The majority of Summit attendees are relatively new agents and brokers who want to learn from the leading trainers and successful producers. This is the largest industry conference specifically for top long-term care insurance sales and marketing professionals.

Members of the American Association for Long-Term Care Insurance can take advantage of significant savings when they register early.

The complete program and registration details for the program can be found on the Association's website. Click here for the Summit's homepage. Or for more information call AALTCI at (818) 597-3227.

Congressman Launches Effort To Stop The CLASS Act

A letter from Congressman Charles W. Boustany, Jr. (R-LA) seeks cosponsors for proposed legislation (H.R. 5853) that reverse legislation creating a new federal long-term care program (CLASS). According to Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI), CLASS will likely not be implemented until 2013. "If the plan is going to be changed now would be the time before employers have to evaluate the pros and cons and dollars are withheld from employee paychecks," Slome notes.

The Congressman's letter released reads as follows: Most Americans remain unaware of the CLASS program, a new government-run long-term care insurance program that was slipped into the health-care law.

Speaker Pelosi and her allies behaved recklessly when they used the CLASS program as a $70 billion budget gimmick to fund other portions of the new health-care law. Congress has a duty to stop the implementation of this new unfunded entitlement before a single premium dollar is collected from hard-working Americans.

Instead of setting money from CLASS premiums aside solely for promised benefits, Democrats used it to pay for other parts of the new health law and merely put an IOU in a government trust fund. Americans could be required to repay these IOUs in the form of higher taxes.

Actuaries and budget experts widely agree CLASS is fatally flawed. Senate Budget Committee Chairman Kent Conrad publicly called the program “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would be proud of."

The Congressional Budget Office, the American Academy of Actuaries and CMS’s own actuary warn the program will disproportionately attract enrollees with the highest costs. Premiums will skyrocket and discourage young and healthy workers from enrolling. The program will enter what Medicare Chief Actuary Rick Foster called “an insurance death spiral.”

The Chief Actuary predicted that CLASS will begin to run deficits in 2025 and continue to run deficits thereafter. He also estimated that an initial average premium of about $240 per month would be required to adequately fund CLASS program costs. CBO said CLASS “…would add to budget deficits in the third decade – and in succeeding decades—by amounts on the order of tens of billions of dollars for each 10-year period.”

I urge you to cosponsor the Fiscal Responsibility and Retirement Security Act (H.R. 5853). This bill would stop the Obama Administration from implementing a final CLASS plan without a vote of approval by two-thirds of the House and Senate.