Chris Orestis discusses Life Insurance Consumer Disclosure legislation before the NCOIL Life Insurance and Financial Services Committee 

(July 9, 2010)— Life Care Funding Group’s president, Chris Orestis testified in Boston on Friday, July 9^th about the important role that Consumer Disclosure Legislation in states such as Maine, Washington, Oregon and Kentucky can have as a model for other states to consider in the coming legislative year.  The legislation enacted in these four states has become an important precedent as it compels life insurance companies to disclose to policy owners at the time they would lapse or surrender a policy that they have other options to consider to receive higher market value for their policy.

Also appearing on the panel was Michael Friedman, Senior Vice President of Government Affairs for Coventry First and Michael Lovendusky, Associate General Counsel for the American Council of Life Insurers (ACLI).  Mr. Friedman spoke in support of the legislative precedent and the need to support state efforts as they consider legislative action to ensure policy owners are informed of all of their financial options.  Mr. Lovendusky speaking on behalf of the life insurance industry emphasized the industry’s staunch opposition to consumer disclosure, stating for the record that the idea is “abhorrent” to the industry.

Mr. Orestis discussed his company’s commitment since its inception in 2007 to working with seniors and their families to provide them with as much information and access to financial resources as possible.  He pointed to the law passed in Maine requiring insurance companies to disclose to policy owners that they have other options instead of lapsing or surrendering a life insurance policy they no longer can afford regardless of its death benefit amount as an example of what should be done around the country.

“We are living in a time when we must be doing all we can to get as much information as possible into the hands of seniors”, testified Chris Orestis.  “When a senior and their family is informed that an asset (life insurance policy) they are about to throw away has unrealized value for them, and it is a potential solution to a health care crisis they are confronting, the consumer wins when they are able to access the most appropriate form of long term care and the state wins when a citizen is able to extend their ability to cover the costs of long term care for as long as possible before accessing Medicaid”, concluded Orestis before the NCOIL committee.   

To obtain the complete transcript of Chris Orestis’ testimony before the Life Insurance and Financial Services Committee of NCOIL, Click Below:  

Remarks NCOIL.doc (30.00 kb)

UPDATE 7/12/10--

The National Conference of Insurance Legislators (NCOIL) plans to begin drafting a new model act requiring insurers to tell consumers of their options, including life settlements, if they plan to get rid of their policies.

Georgia state Sen. Ralph Hudgens said he reported to NCOIL's executive committee on Sunday that he was asking Kentucky Rep. Ron Crimm to craft a life insurance options model bill in the next few weeks by melding similar laws that already have passed in Maine, Washington and Kentucky.

Hudgens, who heads the Life Insurance & Financial Planning Committee of NCOIL, said this model legislation would be separate from the model act on life settlements that was adopted by NCOIL in 2007. Once the draft is complete, it will be sent to interested parties for comment, he said.

Hudgens said he expects the model act will be taken up at NCOIL's November meeting in Austin and adopted.

Now that we have arrived at the long awaited generational stage in our society that “Baby Boomers” are reaching the age of Medicare eligibility, the need to address the question of who is going to pay for a massive increase in long term care spending has become paramount.  Exacerbating the growing crisis is the impact of the economy on the availability of private pay dollars and government spending.  For the last two years we have watched as one of the primary sources of private funds, equity in the homes of seniors has evaporated.  Simultaneously, state and federal budgets feeling the pinch of an eroding tax base and out of control spending on health care have started cutting back on Medicare and Medicaid spending. 

We are at a crisis point in our nation’s history.  The cost of long term care continues to rise every year, and seniors (and their families) confronting the realities of what it costs to provide home based care, assisted living, or long term nursing home care are looking for solutions.

For those families with a long term care insurance policy, a portion of these costs may be covered if they meet the necessary eligibility requirements.  And for those families with the last name Gates or Winfrey, they can just cut a check.  But what about the vast and often overlooked middle market?  Where do they find the resources to cover all or a portion of these costs?

For the ANSWER-- Click Here to read the complete article by Chris Orestis published by Insurance News Net Magazine

National Underwriter (published June 14, 2010)

by Chris Orestis, President Life Care Funding Group

The question was: My client would like to use a life settlement to help pay the assisted living expenses for her mother, who is alert but frail and needs the care the community provides. The mother is the owner and insured of a $250,000 UL in-force policy, but the daughter (my client) has power of attorney for her mother’s financial affairs. Is a life settlement the best option in this situation and how do you recommend I proceed?

The answer is: Monetizing life insurance policies to help cover the costs of long term care in its various forms has grown much more common in the last couple of years.

Providers of assisted living, skilled nursing home care and home healthcare have come to realize the financial opportunity for policy owners in need of their services but lacking in funds. States are now waking up to see that the use of a life insurance policy to access money is a better route for seniors than letting a policy lapse or be surrendered. Maine, Oregon and Washington are three examples of states that have passed laws requiring insurers to notify policy holders of their legal right to a life settlement at the point that a policy would lapse or be surrendered. As time marches on, more states are considering and will enter this law onto their books. 

Simultaneously, more seniors and their families are becoming aware that a life insurance policy can be cashed in through a variety of mechanisms to raise money to help cover the very expensive costs of long term care.

In this particular example, the family’s representative will need to be aware of a few factors. First, when going down the path of monetizing a life insurance policy, it is critical that the family members are in agreement and are active participants in the process. Working with the daughter as POA will help move the process along and not burden the mother. Unfortunately, a policy of this size will not find many interested life settlement companies as most have minimum face size requirements in the range of $500,000-$1,000,000. Also, the companies that specialize in underwriting for life expectancy evaluations do not have the ability yet to accurately account for the sudden dynamic of “Life Expectancy Compression” that occurs in a long term care scenario.

You will need to look for a company that specializes in working with the long term care space and understands how to underwrite this specific population. Also, keep in mind that a life settlement is one possible option, but it is not the only option to monetize a life insurance policy to raise money for long term care.

As part of the recently passed healthcare reform bill signed into law by President Obama, an act to address the long term care funding crisis in our country was included.  The Community Living Assistance Services and Support (CLASS) Act provides a voluntary long term care benefit for participants that elect to participate.

To participate, you must enroll through your company or a self-employed pension plan and pay a monthly premium for five years to qualify for the benefit in the future.  CLASS will not be active for two more years, so the soonest someone will begin collecting the benefit is at least seven years from now.  As with any new government program, there are still details to be worked out through regulation and comment periods which will happen over these next two years.

Some details about the program have emerged making it clear this is not going to be a magic bullet cure for the massive funding crisis impacting seniors and their families requiring long term care.  First of all, the benefit paid out will be in the range of $50-$75 per day which falls far short of the actual costs of daily care (and those costs will continue to rise annually over the next seven years).  Also, the benefit will be limited to the costs of at home care and will not cover assisted living or nursing home care.  Further issues around rolling over the benefit year to year, opt-in / opt-out penalties and the effects of adverse selection will all prove a challenge for participants.

Although CLASS Act alone is not enough for an individual or our nation to deal with the massive costs of long term care, it is a positive first step for the government in acknowledging the hardships faced by Americans trying to meet these obligations.  If nothing else, it will do much to educate people that they must prepare now for the financial challenges that lay ahead in their future.

To read an analysis on CLASS by UNUM, click below

CLASS Act Summary - UNUM 5 10.pdf (655.39 kb)

" The federal budget is on an unsustainable path, primarily because of the rising cost of health care and the aging of the U.S. population."-- Congressional Budget Office March, 2010

When you visit the CBO's website that is the very first message to greet you in a very PROMINENT headline on their homepage!  The chart below this dire warning is a graphical depiction of how sharply spending on Medicare and Medicaid escalates above spending on Social Security and on every other Federal expenditure combined will continue to rise for years to come.

The impact of the healthcare reform package signed into law by the President still has many unknowns.  Like anything else it has its positives and negatives, supporters and detractors, but one thing is certain-- we could not as a nation continue down this path to certain calamity. 

FACTS:

- Aging Baby Boomers (the "Silver Tsunami") will spark an explosion of demand on healthcare and long term care services/spending

- The U.S. and world economy continues to confront challenges and a changing dynamic that will limit the ability of the U.S. government at the state and federal level to give everyone everything they need/want 

- Pressure on the individual to be able to maintain a reasonable standard of living in retirement and senior care is going to increase as government dollars/programs become more difficult to access

The sweeping changes in the newly enacted health reform legislation came amidst much debate and political battle-- but when you consider the demographic and economic realities over the next 10-20 years, what we have just witnessed is just the warm up.  When serious reform efforts turn to Social Security, Medicare and Medicaid we will see a battle that will make us look back on the last two years of economic and political upheaval as the "good old days".

The very popular Medicare Advantage coverage that seniors elect as part of Medicare to cover medical and prescription drug coverage became significantly more expensive in 2010 than it was last year.  Reflecting cut backs in government funding, private insurers who offer elective Medicare Advantage coverage decided they would raise rates this year instead of reducing services. 

This is bad news especially for the 8.5 million seniors currently enrolled in these cost saving programs.  The premiums increased by more than double for some seniors that are enrolled, and many fear they can no longer afford to maintain their coverage.  These increases are another blow for President Obama’s goal for healthcare reform this year, because additional Medicare and Medicaid cuts are a major part of how the costs of reform would be paid for.

This is further evidence that pressure on the individual is increasing to shoulder more of the costs of their own healthcare and long term care. "These premium increases fit within a broader trend of increased financial pressure on the insured," said Lindsey Spindle, a vice president of Avalere Health, a data analysis firm that produced the statistical study. "We see very large premium increases and a continued upward creep in how much out-of-pocket expenses beneficiaries are expected to pay, such as copayments."The bottom line of this story is simple-- the need for private funding solutions for health care and long term care costs are going to pushed back on the individual more and more now and into the future. 

To read more about the increase in Medicare Advantage premiums, click here.

A report tracking Medicaid spending going back over the last seven years showed that Medicaid underfunded payments for services to all patients by $14.17 everyday in 2009.  Projections are that this alarming underfunding trend will get worse in 2010 and 2011.  The economic crisis has robbed state budgets of funds available to support Medicaid funded programs and as a result there was a national deficit of almost $5 billion.   

Medicaid funds at least 2/3 of all spending for nursing home care. Spending shortfalls of this magnitude threaten the ability of nursing homes to offer the highest levels of care for the most vulnerable populations.  Frustratingly for nursing homes and those in their care, state governments were given money in 2009 via the American Recovery and Reinvestment Act to make up this deficit.  But guess what—governments diverted the money away from providing the healthcare it was intended, and instead used the money to shore up their own budget deficits.   

As readers of the Life Care Funding BLOG know, we continue to bring awareness to the unavoidable trend of reducing the amounts of money that are available for Medicare and Medicaid.  And why is that?  Because we are now in the throes of an explosion of Baby Boomers reaching retirement age at the same time that our country’s economy is under siege and entering unfamiliar territory.  Washington, DC and 50 state capitols have no choice but to figure out how to make do with less. 

They have two tools to work with:

1.      Make it harder for people to qualify for Medicare and Medicaid, and--

2.      Reduce what is available for those that do qualify. 

What tools do seniors and their families have to work with? 

1.      Information

2.      Time 

People need to arm themselves with information about how the system works and what kind of funding options (and limitations) they have to work with.  And, people need to stop waiting until the last minute to plan for their inevitable time in long term care.  In one form or another, (home or facility based) as people age and/or become frail they will need someone to help care for them.  That care will cost money and that money has to come from somewhere.  As the government makes it harder and harder to access less funding, people need to prepare to bear much of the financial burden on their own.  To ensure quality of life and dignity when the time for long term care arrives; people must make the effort today to understand what kind of financial options are out there such as the VA Benefit, Life Insurance Settlements, Credit Programs, Reverse Mortgages, Long Term Care Insurance and other sources of private funding.

To read more about Medicaid budget deficits, click here. 

State of Maine Announces proposal to cut 10% out of nursing home Medicaid spending in 2010:

Governor Baldacci released his proposed FY 2010-2011 State budget Friday afternoon. As in previous years, the Departments of Health and Human Services and Education are being asked to bear the brunt of significant cuts including 10% rate cuts to some MaineCare providers including nursing homes and residential care facilities. Preliminary analysis shows that the cut to nursing homes is in the area of $26 million. It is harder to separate the hit to res care, but we estimate it to be in the area of $10 million or a little over $9.00 per resident day. The newest figures (Nov. 2009) from AHCA indicate that Maine currently underfunds its nursing homes by $25.5 million per year. This translates to an average loss of $16.20 per resident per day. So, it seems reasonable to estimate that the proposed cuts will double those shortfalls.

Demand to help seniors with the costs of senior housing and long term care continues to rise across the country.  In response,  Life Care Funding Group has begun adding “Network Partners” at the local level around the U.S. to support senior living facilities and work directly with families.

Starting in the Midwest with Jo Letwaitis, Founder and CEO of the The Senior Site, Inc., senior care experts are being endorsed to represent Life Care Funding Group and make Funding Solutions available to help more people.

In the coming weeks, more Network Partners will be announced in other regions of the country.  To learn more about how to access the Network Partner program, contact Life Care Funding Group at info@lifecarefunding.com.

To read the Network Partner announcement, click here.

In a move that will bolster the Democratic coalition in the Senate and the need to hold on to 60 votes, the AARP announced their support today for the reform plan that includes massive reductions to Medicare. AARP says that the cuts will be paid for in reduced waste and fraud, improved efficiencies and elimination of duplicative benefits. 

The support of AARP is a huge boost for Democrats that have been struggling to keep the 60 votes needed to prevent a filibuster that would kill the legislation. The AARP is a trusted source for many seniors, and this endorsement may ease fears that proposed cuts would have a negative impact on seniors already struggling to pay for the costs of health care. 

The ultimate outcome of the reform legislation is still up in the air, but one thing has become certain—when the AARP supports cutting almost half a trillion dollars out of Medicare it becomes that much more certain it will happen. 

To read more about AARP’s support for the Senate bill, click here.

Senate Democrats prevent measure to take Medicare cuts out of healthcare reform bill, click here.

In a report released this past Saturday, the government agency that administers Medicare and Medicaid detailed the possible impact of cuts proposed in healthcare reform passed by the House of Representatives.  The study states that the proposed $500 billion in cuts would be so severe that hospitals and nursing homes would be forced to stop accepting Medicare as payment. 

The report says that seniors would suffer form additional reductions in benefits and services to pay for the $500 billion in reduced spending. The White House answered back against the report’s findings by saying the reductions would come in the form of reduced wasted spending on fraud and abuse in the system and from administrative savings through such efficiencies as expanded use of electronic medical records.  Democrats also contend that these cuts would extend the life of Medicare a number of years before becoming insolvent. 

As is often the case, both sides are focusing on the aspects of this study that bolster their position in the debate.  But regardless of who is right, one truth is clear—seniors need to be preparing themselves for less and less financial support coming from the government.  The burden to cover the costs of senior housing and long term care will continue to be pushed back on seniors and their families and people should do all they can to prepare for the inevitable. 

To read more about the various points of view on the CMS study, click here.

The U.S. Senate begins debating healthcare reform legislation today.  Critical to the proceedings will be Medicare cuts and its impact on seniors across the country.  Click here to read more about how the votes are lining up.

Senate Democrats were able to hold a filibuster proof 60 vote majority to introduce the Senate verison of heathcare reform legislation for debate and a final vote.  Action on this legislation will begin after the Thanksgiving recess.  Click here to read more about how today's proceedings unfolded.