Insurance commissioner warns on false Calif. LTC plan information

California’s insurance commissioner, Ricardo Lara, has put long-term care insurers and agents on notice for spreading misleading marketing materials and emails that falsely warn consumers the state is about to implement a new payroll tax and urges them to buy long-term care insurance before the end of the year.

“The Department condemns these tactics and will take all steps it deems appropriate to curtail these ploys, up to, and including, legal action,” Lara’s department said in a letter to the companies and agents. “These tactics are not only unfair to the insurers and agents who are acting honestly and ethically, they are also illegal.”

The missive comes amidst deliberations by the California Long-Term Care Insurance Task Force that was established in 2019 to formulate recommendations for the development and implementation of a public long-term care insurance program. The Task Force was mandated to produce two distinct reports, one exploring the feasibility of proposed program designs and another providing an actuarial analysis of these designs.

The feasibility report was submitted to California’s governor in December. It recommended various possible structures for a public LTC program, including different funding mechanisms such as potentially using a payroll tax on employees. The Task Force has recommended that consideration be given to allowing residents who have a qualifying private LTC policy to opt out of the public program, which would mean they would not be subject to a payroll tax.

But the actuarial analysis won’t be submitted to the state’s legislature until January of 2024 and there’s no guarantee it will amount to anything. Everything is speculative as nothing has been cast in stone.

'Fear tactics' cited

“Unfortunately, several agents and insurers have chosen to rely on fear tactics and misleading consumer communications to persuade consumers to purchase LTC policies prior to 2024, including assertions that a program will be enacted on January 1, 2024, that the Legislature has already approved a tax, and that January 1, 2024, is the deadline to have an LTC policy in place to avoid a tax,” the commissioner wrote. “None of these statements are true.”

The Department is actively investigating instances of misleading marketing and communications, the commissioner said, and has urged consumers to report any such activity to help ensure that fair and ethical practices are maintained in the long-term care insurance industry. It has also advised consumers to exercise caution and verify information before making any significant insurance decisions.

The commissioner did not identify the source of the misleading material and emails but said the department had received complaints about them.

Pace of Calif. LTC plan hit

However, some decried the slow pace of progress on developing a Long-Term Care Insurance Program, especially in the face of a rapidly growing elderly population.

“Here’s an indisputable fact: LTC is a big issue in America and in California,” said Steve Cain, a director of LTCI Partners one of the largest LTC-focused brokerages in the industry. “And it’s going to get bigger as more California residents age and begin to need LTC support and services.”

Writing in the Voluntary Advantage newsletter, Cain agreed industry members have falsely spread information about the Task Force’s progress on the California long-term care plan.

“Misleading email after email crossed my desk and I just didn’t have the time or energy to play ‘Whac-A-Mole’ and correct,” he said. “Many of these emails assumed that this feasibility report would definitely lead to law and some emails even pushed dates in which people must purchase LTC Insurance in order to qualify for an exemption from any forthcoming tax.”

But Cain seemed to attribute some of the false information to the eagerness or impatience by some in the industry to have a new comprehensive and necessary state policy on long-term-care insurance and have clients and customers prepare for it.

“As a response to this significant risk to our state’s population and budget, [the Legislature] established the task force to explore the feasibility of developing and implementing a culturally competent statewide insurance program for long-term care services and supports,” he said. “That’s right, the state is studying this issue. But that’s it. They’re just studying the issue. There’s not been a bill submitted to the legislature or law that’s been passed. This may lead to legislation or a program…or it may not.”

Cain said instead of leading clients on conversations about tax avoidance, the industry should be promoting conversations about the importance of planning for LTC.

“Help protect families, retirement income and lifestyles,” he said. “And then if you want to bring up the bigger issue for the state and how California is studying ways to help residents plan and finance LTC events, then go for it. But stick to the facts…”

Even if the California Legislature does proceed with implementing an LTC program, it may choose to adopt some, all, or none of the recommendations of the Task Force,” the insurance commissioner noted.

”In short, the Legislature has not made any decisions about a public program at all,” the commissioner said. “No payroll tax is being implemented, and there is no “opt-out” date at this time.”

 

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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