Keeping up with the LTC market

As we begin Long-Term Care Awareness Month, it’s important to recognize a few basic issues shaping today’s long-term care landscape.

Advisors are likely to face several challenges when working with clients on comprehensive plans. First off, few people have planned for potential extended or LTC needs, and many consumers and professionals lack in-depth education about the scope of planning options. This includes a large cohort of maturing baby boomers, many of whom will require some level of care as they age.

Complicating the outlook is that COVID-19 highlighted and exacerbated the shortage of skilled and unskilled care providers. The rising costs of health care and prescription drugs show no sign of abating.

Consumers consistently fail to plan for LTC, so crisis planning is becoming more common. The results are negative consequences felt by family members and friends as well as federal and state budgets.

Many consumers do not understand current programs or are misinformed about who qualifies for long-term services and support. The oldest of the baby boomer generation are in their late 70s, and many mistakenly believe government Medicare and Medicaid programs are equipped to handle their LTC needs. In reality, longevity is impacting programs not designed to handle the growing volume or required length of care. These are some factors influencing state and federal governments to consider legislative options.

Government LTC proposals

NAIFA’s Limited and Extended Care Planning Center — supported by sponsors specializing in all aspects of limited, extended and long-term care — formed a legislative working group that follows, discusses and influences legislation relating to federal and state LTC proposals. The LWG consists of participants from carriers, broker general agencies, work site specialists, advisors, agents and NAIFA staff. The group stays up to date about both federal and state initiatives.

Developments in the federal space the group is engaged on include:

WISH ACT, the Well-Being Insurance for Seniors to be at Home Act:
» Would charge 0.6% payroll tax (50/50 cost share by employee and employer).
» Elimination period is one to five years — means-tested by income.

Social Security Caregivers Credit Act:
» Would provide retirement compensation in the form of Social Security credits to individuals forced to leave the workforce to care for loved ones.

Better Care Better Jobs Act:
» Would expand Medicaid to home and community-based services.
» Increased wages and benefits for paid caregivers.
» Funded by Medicaid in the federal budget to cover home and community-based services.

Credit for Caring Act:
» Would create a nonrefundable tax credit of up to $5,000 for caregivers.

The Long-Term Care Affordability Act:
» Would allow use of qualified money to purchase LTC insurance.
» Excludes from gross income retirement plan distributions up to $2,500 a year to pay premium.
» No income tax or pre-age 59 ½ penalty on distribution used.

At present, none of these proposals is moving forward.

States move in

State budgets are becoming increasingly stressed as demands for services and support for LTC increase. Washington is the first state to pass legislation establishing a publicly funded LTC program.

» Funding will come from a mandatory payroll tax: 0.58% of all W-2 income, with no cap or limitation. It will be assessed via payroll deductions.

» Employees had until Nov. 1 to apply for an exemption if they had qualifying private traditional LTC insurance, group LTC coverage, linked and hybrid life, or annuity hybrid policies in place.

» The maximum lifetime benefits are $36,500 (adjusted annually with Consumer Price Index).

» Gov. Jay Inslee and Washington Democratic legislative leaders announced an agreement to delay the new WA Cares payroll tax on employees as they address issues with the new LTC program.

Acknowledging the importance of planning for LTC needs is an important first step. However, the program is undergoing further clarification. Other states — including California, Michigan, Minnesota, South Dakota and Vermont — may soon follow suit with public-option LTC plans of their own.

California established the Long-Term Care Insurance Task Force, which will present a feasibility report to the state’s insurance commissioner, governor and legislature early next year.

Significantly, the program is not expected to give state residents notice of a period to purchase qualifying insurance to opt out of the tax once the legislation is adopted. Hawaii has proposed a plan (Kapuna) focused on supporting working caregivers.

The long-term care industry is responding to these initiatives by working toward developing supplemental products that will enhance public-private programs. Additionally, carriers are creating new innovative products to expand options for consumers to plan for funding care.

Cooperation between states and carriers concerning efficient product approval and consumer education will be essential to the success of any program. It is important that advisors stay well informed during Long-Term Care Awareness Month and throughout the year to understand how these developments might impact clients.

Carroll Golden, CLU, ChFC, LTCP, CASL, FLMI, CLTC, LACP, is executive director of NAIFA’s Limited and Extended Care Planning Center. She is the author of How Not to Tear Your Family Apart: A Practical Guide to Caregiving and Financial Stability. She may be contacted at [email protected].