NAIFA Blog

Many Americans Are Not Prepared for Long-Term Care

A mere 35 percent of Americans aged 40 and over have set aside money for their potential long-term care needs as they grow older, according to a new survey by the Associated Press-NORC Center for Public Affairs Research. Fewer than half (41 percent) have talked about their long-term care preferences with their families.

The survey comes at a time when the U.S. Department of Health and Human Services estimates that 70 percent of Americans who live beyond the age of 65 will need one type long-term care or another.

Americans 40 and over, according to the AP survey, frequently underestimate the cost of long-term care and over-estimate the amount government programs like Medicare will pay towards long-term care.

Only 21 percent of the survey respondents said they have long-term care insurance. When the survey drilled down on the question, only 12 percent were “very sure” their insurance policies cover long-term care, while 5 percent were “somewhat sure” and 4 percent were “less sure.”

More than three-quarters (77 percent) of Americans 40 and over favor federal tax incentives to encourage individuals to provide for their own long-term care expenses.

As a strategic partner of the 3in4 Need More Campaign, NAIFA is a strong supporter of education on the long-term care issue.

NAIFA encourages Congress and the administration to promote long-term care awareness. NAIFA also supports measures to encourage the offer of quality insurance products at people’s places of employment, such as allowing long-term care insurance to be included in employer-sponsored cafeteria plans and flexible spending arrangements.

Fiscal Cliff Deal Ups Taxes for “the Rich”

On January 1, 2013, the lame duck 112^th Congress approved a controversial bill, H.R.8, to avert the “fiscal cliff”—the $7 trillion + in higher taxes and deep spending cuts that would have taken place under current law had lawmakers not reached agreement. The package contains about $620 billion over 10 years in new revenue (higher taxes), mostly falling on high-income Americans. The Senate approved the measure at 2 a.m. on January 1 by an 89 to 8 vote. The House passed it at 11 p.m. on January 1 by a vote of 257 to 167.

H.R.8 does not impose new taxes on life insurance, annuities, pensions, retirement savings or employer-provided benefits. But because many Americans now face increased tax liability, these products may hold more appeal for those impacted by the new tax law.

H.R.8 is an expansive bill although much of its scope is focused on tax. Among other things, the bill permanently extends 2012 tax rates on adjusted gross income (AGI) under $400,000/individuals and $450,000/married, permanently raises tax rates on AGI above those levels, delays the across-the-board spending cuts (the sequester) by two months, repeals the shell of the federal government’s long-term care/disability insurance program (the CLASS program) and replaces it with a Commission, extends unemployment benefits for a year, provides a one-year delay in the almost 30 percent cut in Medicare reimbursement rates for doctors, and eliminates the 2013 cost of living adjustment to Congress’ pay.

Many of the tax provisions in H.R.8 are “permanent”—i.e., there is no built-in sunset, or expiration date, connected to them. Of course the 113^th (or other future) Congress can change these rules, but they will not automatically change as was the case with 2012 tax rates (and other tax rules).

 The new taxes that take effect on January 1, 2013 include:

• A permanent increase in the top two tax rates for adjusted gross income (AGI) that exceeds $400,000 for single taxpayers and $450,000 for married taxpayers filing jointly

• The two new permanent tax rates are 35 percent and 39.6 percent

• A permanent extension of 2012 tax rates for taxpayers with AGI under the $400,000/$450,000 levels

• Dividends will continue to be taxed under capital gains tax rules

• The capital gains tax rate is permanently set at 15 percent for those with AGI under the $400,000/$450,000 level; and at 20 percent for those with AGI above that level (the highest earners will actually see that rate rise to 23.8 percent because of an additional 3.8 percent investment tax included in the 2010 health care overhaul)

• The top estate tax rate is set permanently at 40 percent, but the personal exemption remains $5 million (indexed)

• The PEP (personal exemption phase-out) and Pease (limits on the value of deductions) rules were made permanent and indexed—PEP and Pease now apply to AGI of $250,000 for individuals, $275,000 for heads of household, and $300,000 for joint returns

• There is a permanent “patch” of the alternative minimum tax (AMT)—i.e., the exemption  amount for individuals rises from $33,750 to $50,600 and for joint returns from $45,000 to $78,750. The exemption amounts are then indexed (i.e., they will be adjusted for inflation after 2012)

• The bill contains authority to roll over certain retirement plan balances to Roth (taxable contribution/tax-free distribution) accounts within the retirement plan

The bill also repeals the CLASS Act, the moribund new federal program that would have provided long-term care/disability insurance through an employer-based automatic deduction system. It sets up a new federal Commission that would study and then recommend to Congress ways to address Americans’ long-term care needs. The Commission would include representatives from federal and state agencies, providers of long-term care insurance and services, and consumers.

Other elements of the tax package include a decision to let the temporary Social Security payroll tax holiday expire (that means all taxpayers will pay an additional two points in FICA or SECA tax in 2013 and thereafter); a five-year extension of the child tax credit, the opportunity tax credit (education tax incentives), and the earned income tax credit; a one-year extension of the rule that allows small business to expense up to $250,000 in qualified expenditures; and extension/reinstatement through 2013 of the tax-extender package, which includes the rule that allows a direct tax-free gift from an IRA to a  charity.

Next Steps: H.R.8 does not contain instructions or an expedited process for tax and/or entitlement reform in 2013. However, in the next two months Congress will again be tackling deficit reduction due to the expiration of the sequester delay, the need to raise the debt ceiling, and the fact that funding for the federal government runs out in March. It is likely there will be a renewed effort to include instructions and an expedited process for tax (and possibly entitlement) reform in this upcoming legislative process.

Further, even without statutory instructions and/or an expedited process, it is widely expected that tax reform will be among the 113^th Congress’ top priorities. Work on tax reform is likely to begin early in the new year, probably before spring.

November Is Long-Term Care Insurance Awareness Month

Seven out of 10 people aged 65 and over will require long-term care at some point during their lives, and more than 40 percent will need care in a nursing home, according to the U.S. Department of Health and Human Services.

Many do not realize that the majority of LTC costs are not covered by traditional health insurance or Medicare.

For many Americans, long-term care insurance is a necessity to help them cover the cost of LTC services as they grow older. That’s why the industry has named November Long-Term Care Insurance Awareness Month, to help educate the public and policymakers about this important product.

Consumers with questions about long-term care insurance should consult with a professional insurance advisor.

Additional information and resources for consumers and insurance professionals are available at:

• The LIFE Foundation
• The 3in4 Need More Campaign
• The National Association of Insurance Commissioners
• The National Clearinghouse for Long Term Care Information

NAIFA Comments on House Vote to Repeal CLASS Act

NAIFA President Robert Miller released the following statement on the House of Representatives’ vote last night to repeal the CLASS Act:

“The House of Representatives vote to repeal the CLASS Act is a good first step towards getting a bad law off the books and developing sustainable solutions to address Americans’ long-term care insurance needs. A program that would inevitably require a government or industry bailout or else would leave the people it was designed to help in the lurch is not a good program. Now, NAIFA urges the Senate and President to do their parts to complete the CLASS repeal.

“While the Class Act is not the right law, the long-term care problem is not going to go away. NAIFA encourages Congress and the executive branch to promote long-term care awareness. Also, NAIFA supports measures to encourage the offer of quality insurance products at people’s places of employment, such as allowing long-term care insurance to be included in employer-sponsored cafeteria plans and flexible spending arrangements.”

Rep. Boustany: MLR ‘inhibits’ marketplace

The Medical Loss Ratio “is overly restrictive, inhibits the market and has a direct impact on what (NAIFA members) do,” Rep. Charles Boustany, Jr., MD (R-LA) told NAIFA members today during the National IFAPAC and APIC Training Meeting in Washington.

Boustany, who holds a seat on the House Ways and Means Committee, supports legislation to exclude agent commissions from the MLR calculation, a major priority NAIFA members are taking to Capitol Hill during the winter “Day on the Hill event.” A heart surgeon of 20 years, Boustany addressed 150 NAIFA members before their meetings with legislators and staff today. Among the issues he addressed:

Tax reform: “We want to do a fundamental rewrite of the tax code, and when we do that, I will take my own (favorable) experience with life insurance and bring some reality to the Halls of Congress. … As we look at tax reform we have to get rid of uncertainty that’s afflicting our economy. A business cannot plan with uncertainty.”

Repeal of the CLASS Act: “CLASS is a program that is unsustainable. But most people don’t know they need long term care. Using tax-free savings to take care of health needs is a very important component.” (Boustany supports the idea of long-term care insurance being included in employer-sponsored cafeteria plans and flexible spending arrangements so premiums could be paid for using pre-tax dollars).

On the role of the agent: "You can help us educate the American public on these (healthcare issues.) We’ll need your help as we craft legislation to fix them."

NAIFA's Robert Miller Comments on Congressional Committee Vote to Repeal the CLASS Act

NAIFA President Robert Miller issued the following statement on the House Ways and Means Committee vote in favor of HR 1173 to repeal the CLASS Act:

“NAIFA applauds Congressman Boustany’s leadership and the Ways and Means Committee’s decision to repeal the unsustainable long-term care insurance program called the CLASS Act.  NAIFA supports the goal of achieving financial security to cover long-term care services. However, we believe there are better ways to help people plan for their long-term care needs, such as offering quality insurance products at people’s places of employment. We look forward to working with Congress in a bipartisan manner to enact sustainable long-term care reform.”

For more information, see:

• Congress Moves One Step Closer to Repealing the CLASS Act
• The CLASS Act Is Down. Let’s Get It Out!

 

Congress Moves One Step Closer to Repealing the CLASS Act

The House Energy and Commerce Committee yesterday voted 33-17 in favor of H.R. 1173, a measure to kill the CLASS Act and the federally run long-term care insurance program it would create.

NAIFA and other critics have provided many reasons why the CLASS Act is unsustainable and potentially dangerous. In October, the Department of Health and Human Services came to the same conclusion, with Secretary Kathleen Sebelius announcing that the agency could not successfully implement the law.

So if HHS has no intention to act, why does it matter if CLASS remains on the books? For one thing, officials at HHS could change their mind (or new appointees could reexamine the matter) and decide to move forward with a program likely to hurt the people it is supposed to help, impose harsh regulations on the insurance industry, require a government bailout, or all of the above. Secondly, the Congressional Research Service has concluded that if the law is not repealed, a federal court could force HHS to create a CLASS plan, even if the department remains convinced that the plan would fail.

There is no reason to let this bad legislation linger. NAIFA commends the members of the Energy and Commerce Committee for acting to address the matter and encourages the full Congress to pass a repeal measure quickly.    

While the CLASS Act is not the answer, Americans' lack of long-term care insurance remains an issue. For some better ideas, visit the 3 in 4 Need More campaign.

"3in4 Need More" Raises Long Term Care Insurance Awareness

Guest Blogger: Margie Barrie, Vice President, 3in4 Need More Association

“It makes it easier to open the door to the subject of LTC insurance.”

“Conveyed the concepts easier.”

“Helps the family who is thinking of buying LTCI to explain it to others or family members who sometimes don’t want to spend the money.”

These are actual comments voiced a few weeks ago by agents at a financial services conference. They were referring to the materials provided as part of their FREE membership to the LTCi’s industry’s new consumer awareness campaign.

Called “3in4 Need More,” the campaign is focused on educating Americans about the need to form a long term care plan and what products and options could be part of their plan. We’re using the phrase “Health Insurance Isn’t Enough, 3in4 Need More.”  And who better to raise that awareness than producers, financial advisors and planners.

The 3in4 campaign is the LTC industry’s version of the “Got Milk” campaign, where the dairy industry rallied behind a slogan and used creative marketing and celebrities to successfully raise awareness of the importance of drinking milk. What’s especially exciting is that the campaign provides a proven approach to help producers successfully explain to their clients and prospects the need for planning. 

Here are the key facts on which the 3in4 concept is based: 

• 77% of Americans age 30 to 65 think they should know more about LTCI than they currently do.  That’s more than 3in4 of your prospects. (2010 Prudential Long-Term Care Consumer Awareness & Attitudes Study)
• 74% of consumers age 55 to 65 said they are concerned about needing some kind of long term care. Again that’s nearly 3 in 4 of us. (2010 Prudential Long-Term Care Consumer Awareness & Attitudes Study) 

How can you use the campaign to increase your marketing opportunities and to differentiate yourself from the competition?  Specific benefits include:

• Be listed as a LTC resource
• Obtain educational materials that can be co-branded or private labeled,
• Receive training on how to use the 3in4 brand for marketing
• Gain access to lead campaigns
• Use 3in4 materials such as videos and a new electronic producers kit to increase  local awareness

It’s FREE to join the campaign. To learn more, visit the website www.3in4needmore.com and to join, go to the “Stay Informed and Join” area. The basic level is FREE; other levels provide marketing support such as training and personalized branding materials and are available for a small annual cost. All proceeds go to fund 3in4 media activities and create educational materials. For questions, email us at contact@3in4needmore.com.

The CLASS Act Is Down. Let’s Get It Out!

The CLASS Act, which charged the federal Department of Health and Human Services with establishing a voluntary, employer-funded long term care/disability insurance program, was doomed to failure from the start. The program, had it been implemented, was financially unsustainable and inevitably would have collapsed or forced a government bailout. Alternatively, Congress may have tried to rescue the program by making employee participation mandatory, causing extreme hardship for many small businesses.

HHS admitted that the program was unworkable last week, with Secretary Kathleen Sebelius writing to Congress, “I do not see a viable path forward for CLASS implementation at this time.”

Yet, while HHS has said that it cannot implement the program and satisfy all of the conditions in the act, the law remains on the books. Some analysts argued that repeal could be problematic, because the Congressional Budget Office (CBO) had scored the CLASS Act as saving the federal budget some $86 billion over ten years as a result of the premiums the program was to have brought in. That figure, they said, would have to be offset elsewhere in the budget. 

However, the CBO said today that repealing the act would not have budgetary implications, seemingly removing that roadblock. Unfortunately, an administration official said President Obama nonetheless opposes repealing the CLASS Act and may veto any repeal legislation, according to The Hill’s Healthwatch blog. It's not clear why the administration would want to keep the law after HHS has said the department cannot implement it.

We believe it’s time to wipe the slate clean.

“NAIFA would like to see the law taken off the books,” said Diane Boyle, NAIFA vice president of federal government relations. “There’s no good reason to leave flawed legislation in place.”

Sen. John Thume (R-S.D.) has introduced a bill to repeal the CLASS Act, and Rep. Charles Boustany (R-La.) has introduced a similar measure in the House. The bills have dozens of cosponsors. 

The Importance of Long Term Care

While supporting the goal of achieving financial security to cover long-term care services, NAIFA has long argued that the CLASS Act was not the answer and there are better ways to help people plan for their long-term care needs. These include quality insurance products offered to workers at their places of employment. 

NAIFA believes the following efforts are better suited to address the long-term care financing needs:

• Increase awareness of long-term care planning needs, including increased funding for the Long-Term Care Clearinghouse run by HHS.
• Expand State Partnership Program that allows participants to keep some or all of their assets if they apply for Medicaid after they use their long-term care insurance benefits.
• Allow long-term care insurance to be included in employer-sponsored cafeteria plans and flexible spending arrangements so premiums could be paid for using pre-tax dollars, making long-term care insurance more accessible for all Americans.

NAIFA is also a proud supporter of the 3 in 4 Need More long-term care awareness campaign. The 3 in 4 campaign focuses on four objectives:

• Spread the word among the public that "3 in 4 Need More".
• Support congressional moves to provide additional tax deductions or rebates to help people better afford long term care insurance.
• Stimulate others in industry, education, government to join the "3 in 4 Need More" campaign, making use of the logo and other visuals to spread the word.
• Educate the public that long term care insurance or federal entitlement plans may not be a solution for everyone, but everyone needs a long term care plan.

NAIFA looks forward to working with Congress and the administration to enact sustainable solutions to the long term care financing challenge.

NAIFA Responds to HHS Decision to Abandon the CLASS Act

NAIFA today issued the following statement in response to Health and Human Services Secretary Kathleen Sebelius's letter to Congress stating that HHS has suspended implementation of the CLASS Act:

"NAIFA applauds the Obama administration’s decision to abandon the unsustainable long-term care insurance program called the CLASS Act," said NAIFA President Robert Miller. "NAIFA supports the goal of achieving financial security to cover long-term care services. However, we believe there are better ways to help people plan for their long-term care needs, including the offer of quality insurance products at their place of employment."

NAIFA believes the following efforts are better suited to address the long-term care financing needs:

• Increase awareness of long-term care planning needs including increased funding for the Long-Term Care Clearing House run by HHS.
• Expand State Partnership Program that allows participants to keep some or all of their assets if they apply for Medicaid after they use their long-term care insurance benefits.
• Allow long-term care insurance to be included in employer-sponsored cafeteria plans and flexible spending arrangements so premiums could be paid for using pre-tax dollars, making long-term care insurance more accessible for all Americans.