The Benefits of Life Care Funding
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by corestis
1/24/2012
Center
for Economic Forecasting and Analysis (CEFA) estimates annual savings from
policy conversions over $150 million to Florida Medicaid and Tax Payers
Since the National Conference of Insurance Legislators
(NCOIL) unanimously passed the Life
Insurance Consumer Disclosure Model Law in 2010, states all across the
country have been looking at the cost savings impact on stressed Medicaid
budgets by converting life insurance policies into long term care benefit
plans. The policy conversion option was
one of the consumer protection disclosure requirements included in NCOIL’s
model law, and the nursing home and assisted living industries have been quick
to adopt this funding option to help beleaguered families struggling with the
costs of long term care across the United States. Life Insurance is an unqualified asset for
Medicaid eligibility and it has been standard practice to lapse or surrender a
policy as part of a Medicaid spend down plan.
With billions in face value being abandoned, NCOIL and state law makers
have come to realize that a better option for seniors, the long term care
industry, and tax payers would be to convert these policies instead.
According
to The Center for Economic Forecasting and Analysis (CEFA): In Florida, all Medicaid applicants are specifically
asked if they own life-insurance policies, and if so, they have to disclose the
full policy details. A failure to disclose and comply is fraud. A life-insurance policy is legally recognized as an asset of the
policy owner (with all rights of personal property ownership) and it counts
against the owner when qualifying for Medicaid. If a policy has more than
a minimal amount of cash value (usually in the range of $2,000) it must be
liquidated and that money is to be spent towards cost of care before the owner
will qualify for Medicaid.
According
to the Florida Legislature’s Office of Program Policy Analyses and Government
Accountability: A life-insurance policy
can be surrendered for its cash value to be spent down on care, or a policy can be converted for its
fair market value and the full benefit of that conversion can be used to pay
for long-term care as a qualified spend down. The owner of one or more policies
has a variety of options to consider:
- A
policy with more than a minimal amount of cash value must be surrendered
back to the insurance company with the proceeds spent down on care.
- A
policy with no cash value does not need to be liquidated but the death
benefit will be subject to federally required Medicaid recovery efforts to
return the amount of money spent on care.
- Many
states will exempt a small “final expense” policy if the full death
benefit value is assigned to a funeral home.
With
the introduction of HB1055 in 2012, the Florida legislature has taken the consumer
disclosure protections first introduced by NCOIL a little over a year ago to
its next logical steps. According to
CEFA, the bill introduced in both the Florida House and Senate, would require: a) use of an accelerated death benefit (ADB) rider, if
present, to pay for nursing home care, b) required disclosure to the consumer
of the National Conference of Insurance Legislators (NCOIL) Model Law, (which deals amongst
others with unclaimed property policies), and c) would allow policy conversions as an extended spend down
Medicaid eligibility requirement. The
objectives of the sponsors of the bill are twofold, namely;
·
To
protect consumers by giving policy owners as much information as possible about
their legal rights on life-insurance policy ownership; and
·
To
save taxpayers money by utilizing the value of life-insurance policies and to
delay the need for a citizen becoming dependent on Medicaid.
CEFA’s economic impact study released in January, 2012,
measures the cost saving implications of private market policy conversions for
Florida tax payers and the state Medicaid budget through passage of HB1055. According to the CEFA study entitled, Conversion
of Life Insurance Policies to Long Term Care Benefit Plans in Florida: The objective of this research project is to
examine the impacts of the objective of House Bill 1055, specifically the
opportunities for utilizing life-insurance policy assets as an available means
whereby private funding may pay for long-term health care needs. Medicaid expenses on long-term health care
services for residents may be offset by…
$157.4 million on conversion of their life-insurance policies into
long-term health care benefit plans per year.
Pressure on the Medicare and Medicaid safety nets are
growing daily (literally by 10,000 people per day) and it is imperative that
private market alternatives are embraced as quickly as possible. The primary champion for this consumer
protection disclosure law has been the Florida Health Care Association
representing nursing homes and assisted living communities throughout the
state. They recognize that it is in the
better interest of the consumer to be fully informed of their options to use a
life insurance policy to help pay for long term care as an alternative to
abandoning the policy. It is also in the
best interest of tax payers to extend the spend down period of a life insurance
policy by converting it to its fair market value, allowing someone to remain
private pay for as long as possible.
To read the entire article, click here.
by corestis
12/30/2011
2011 was a
benchmark year for the Baby Boom generation.
By the time the clock strikes mid-night and we welcome 2012, almost 4
million Baby Boomers will have turned 65 years of age. During the 365 days of 2011, ten thousand
Americans turned 65 each and every day.
2012 is only the second of a twenty year journey where that pace
continues annually until it ends with almost 80 million Baby Boomers crossing
the threshold of age 65. What other
benchmarks occurred in 2011?
·
MetLife
exited the long term care insurance market, and additional departures from the
market are anticipated this year;
·
The
CLASS Act was enacted and then killed in the midst of a Medicaid funding crisis
to pay for costs of long term care across the United States;
·
Medicaid
spent $427 billion prompting CMS to summarily cut all long term care funding by
Medicare and Medicaid across the board 11.1%;
·
We
saw equity in American homes drop to under 50% for the first time in our
nation’s history to just under $10 trillion, and by comparison, in-force life
insurance now stands at almost $30 trillion;
·
NCOIL
passed the Life Insurance Consumer
Disclosure Model Law to attack the massive problem of seniors abandoning
life insurance policies because they are unaware of alternative options;
·
State
legislatures started looking at how converting life insurance policies into
long term care benefit plans could save tax payers money by extending the spend
down period before Medicaid eligibility;
·
The Florida Legislature introduced a first in the
Nation consumer protection bill (HB 1055) that provides for conversion of a
life insurance policy into a long term care benefit plan as a Medicaid
eligibility requirement, use of accelerated death benefits to pay for nursing
home (SNF) costs, and mandates the NCOIL Life
Insurance Consumer Disclosure Model Law.
What we are
seeing as we enter 2012, is a growing awareness that this $30 trillion pool of
in-force life insurance policies is an asset base of immense proportions and a
source for long term care funding solutions.
But, the policies are in the hands of owners that for the most part have
no understanding of their legal ownership rights and the variety of options
available to use their property while still alive. Seniors in particular have been the most
vulnerable to lack of information, and therefor disproportionately abandon life
insurance policies in their final years.
This lack of information coupled with difficulty affording premium
payments, disappearance of the original insurable interest when the policy was
initiated (the children have grown up and/or lack of spouse), and life
insurance ownership counting against Medicaid eligibility all conspire to push
seniors to needlessly abandon policies.
Consumer protection measures such as the NCOIL Model Law and Florida
legislation, long term care funding options such as policy conversions, and
education efforts spear headed by the assisted living and nursing home industry
will have a major impact in 2012.
This is the
year when policy owners will start to come out of the dark in large
numbers. As they become better informed
about their legal rights of ownership and alternatives to policy abandonment,
they will realize that a life insurance policy they are about to discard can be
put to much better use helping them pay for long term care. And based on the growing demographic tide,
ongoing economic malaise, cuts by the government in Medicare and Medicaid (as
well as elimination of programs like CLASS act), and the very challenging
marketplace for long term care insurance-- the emergence of another private
market funding solution for long term care services comes not a moment too
soon.
If 2011 was
the year of challenges and a search for solutions; 2012 will be the year of
awareness and implementing solutions.
by corestis
12/20/2011
As the Super Committee falters in its effort to reduce federal spending, mandated budget reductions create further pressure on the funding of long-term care
By Chris Orestis
From the December 19,
2011 issue of National Underwriter Life & Health Magazine (Click HERE)
Earlier this year, the so-called Super Committee could not overcome partisan differences over spending cuts and new revenues (taxes) within their mandated deadline and conceded defeat. That unfortunate outcome triggers mandated reductions in the federal budget of $1.3 trillion that will have an immediate impact on Medicare and Medicaid. This will be particularly disruptive for seniors and long term care providers already trying to absorb the 11.1% rate reduction that CMS instituted in October, 2011. After the demise of the CLASS Act, the long term care funding infrastructure of the United States is facing extreme pressure. Lackluster sales, rate increases and carrier casualties in the LTCi market combined with additional entitlement cuts as a result of the Super Committee outcome will conspire to make an already precarious situation worse.
People do not understand and are not prepared to pay the costs of long term care. In years past, seniors could rely either on the government, family, or equity in assets such as a home to offset a lack of savings. In today’s new economic reality, family members are struggling to take care of themselves, the government is making cuts and building barriers to entry for long term care coverage, and the value of assets such as homes have been eviscerated. In fact, today there is currently three times more in-force life insurance in the United States at almost $30 trillion (NAIC) than there is home equity with less than $10 trillion (Zillow Home Equity Index).
For the first time in American history there is more debt than equity in America’s homes. For seniors unprepared for long term care this new reality is a big problem. One of the most reliable sources of long term care funding for years has been home equity and then government backstops once assets have been depleted. This mix is now severely disrupted and a search for additional assets to help unprepared seniors pay for long term care is on.
Providers of long term care services such as nursing homes, assisted living communities and home health agencies, as well as state governments, are realizing that there is tremendous value for the consumer in converting life insurance policies to help pay for the costs of long term care. By converting a life insurance policy instead of abandoning it, the policy owner’s care can be covered by the monthly long term care benefit payout and the life insurance asset can be spent-down in a Medicaid compliant fashion.
With traditional resources to pay for long term care on the decline, it will take creative private market solutions and the use of non-traditional assets to make up the difference.
To read the entire article published in National Underwriter, click here.
by Chris Orestis
12/19/2011
Alyssa Gerace, Senior Housing News, December 18,
2011
According to a study by Avalere Health found that the 11.1 percent Medicare
funding cut to nursing homes that went into effect on October 1 will ultimately
reduce funding by $79 billion over the next 10 years. Alliance for Quality
Nursing Home president Alan Rosenbloom says that if the cuts were phased in
over a 3 year period, the impact would not be as drastic. “A gradual phase-in
of the federal regulation—which has been done in the past for other provider sectors—can
help alleviate a worsening direct care staff layoff crisis that is now a
documented fact in Ohio,” said Rosenbloom in a statement. “We respectfully urge
Congress to pursue a phase-in of the regulation, and we would be pleased to
work with lawmakers to help achieve this logical, fair and responsible policy
recourse before Congress adjourns for the year.” An Avalere Health survey also
found that nursing homes across the nation plan to lay off a total of
approximately 20,000 workers as a result of the cuts.
To read entire article, click here
by corestis
12/9/2011
When an
individual applies for Medicaid, the State conducts a "look back" to
find transfers of assets for 60 months prior to the date the individual is
institutionalized or, if later, the date he or she applies for Medicaid. All transfers made by the applicant or the
applicant’s spouse subsequent to January 1, 2010, whether from an individual or
to an individual or from a trust or to a trust, have a five year look-back
period.
These provisions apply when
assets are transferred by individuals in long-term care facilities or receiving
home and community-based waiver services, or by their spouses, or someone else
acting on their behalf. At state option, these provisions can also apply to
various other eligibility groups.
Transferring ownership of a life
insurance policy for less than its fair market value would be a violation of
Medicaid’s asset transfer and look back requirements. A policy can be surrendered for its cash
value to be spent down on care or a policy can be converted for its market
value and the benefit of that conversion can be used to pay for long term care
as a qualified spend down.
Medicaid
rules are very clear that a life insurance policy is an unqualified asset and
counts against Medicaid eligibility.
The
owner of one or more policies has a variety of options to consider:
- A policy with more than a
minimal amount of cash value (usually $1,500 or more depending on the
state) must be liquidated with the proceeds spent down on care.
- A policy with no cash value
does not need to be liquidated but the death benefit will be subject to
Medicaid recovery efforts to return the amount of money spent on care.
- Many states will exempt a
“final expense” policy if the full death benefit value is assigned to a
funeral home.
- Assignment of a life
insurance policy for less than its fair market value is a violation of
asset transfer rules if done within the 60 month look back period.
- A policy owner has the
legal right to convert a life insurance policy into a long term care
benefit plan at its fair market value and extend their spend down period
by covering cost of care while preserving a portion of the death benefit
until exhausted.
by Chris Orestis
12/6/2011
KIRKLAND, WA, November 21, 2011 (SEND2PRESS NEWSWIRE) This month the 3in4
Association added 6 new members to its advisory board, and got new support from
two insurance carriers: John Hancock and Genworth Financial. “We’re
gaining momentum,” says Mark Goldberg, Treasurer of the association that runs
the “3 in 4 Need More” campaign.
The
goal of the campaign is to warn Americans about a looming problem. “The
majority will be affected at some point by long-term care needs of themselves
or a close family member,” says Goldberg. “Yet few are prepared for this.” The
campaign is letting them know so they can avoid a financial and personal
crisis. “Our new board members and the new carrier support will add to our
ability to do this.”
The
new carrier support includes –
·
A study sponsored by Genworth
Financial. Released earlier this
month, the study found that most adults believe that long-term care insurance
should be purchased between the ages of 45-64, yet 82 percent of this age group
have not purchased a policy. The study also found that since the 2008 financial
crisis, only 20 percent of adults have taken any action on their financial
strategy.
·
Marketing support by John Hancock. The company applied the
“3in4” logo to education materials supplied to its network of LTC agents.
The
3in4 Association’s advisory board has been expanded from 14 to 20. The six new
members are –
· Chris Orestis, Co-Founder and President, Life Care
Funding Group
· Joseph Pulitano, President, Advanced Resources
Marketing
· Bill Herring, President, Online Insurance Services,
LLC
· Steve Dozier, President, AIMS Benefit Solutions
· Mark Leighton, Chief Marketing Officer, Connect
America
· Carol Gardner, President of LifeStyle Insurance
Services
To
take advantage of the “3 in 4 Need More” campaign, LTC agencies, brokers,
agents, and advisors may use a number of resources found at http://www.3in4needmore.com.
About the 3in4 Association:
The 3 in 4 Need More campaign is dedicated to raising awareness of the
importance of long-term care planning. The campaign utilizes multiple marketing
strategies to increase awareness. The 3 in 4 Need More campaign is a public
service of the 3in4 Association, which operates as a nonprofit 501(C)(6)
corporation. Members of the campaign cross all industries, genders and ages.
The campaign supports an online platform located at www.3in4needmore.com. This
resource supports consumer plan development, and products and services that
should be considered in long-term care planning. The platform also provides
awareness support for long-term care planning specialists.
www.3in4needmore.com
Click HERE to see a
overview of our national tour & $50,000 contest
by corestis
11/7/2011
New Legislation Supports Use of Life Policies to Pay for LTC
Cuts to Medicare and Medicaid funding specifically for long term care services coupled with the growing Boomer and senior population of this country are driving the need to fund more and more LTC costs through private pay dollars. Unfortunately, there is a lack of consumer awareness about how LTC funding works and the facts about private market funding options. There is more than $20 trillion of in-force life insurance in the United States (NAIC, 2010) but insurance carriers are resistant to inform policy owners about their legal rights of ownership, and a majority of these uniformed seniors allow their policies to lapse or surrender without ever being aware of other options to use life insurance to pay for long term care services.
Millions more seniors own life insurance then LTCi and for many their policy is an unneeded, undervalued, and illiquid asset. Senior policy owners and their family prefer using the life insurance asset in a productive way to help solve their financial and healthcare challenge instead of lapsing or surrendering it-- and most would prefer to stay off of Medicaid if given the financial option. With mandated access to information and resources, those most in need of financial solutions can make an informed decision about what is the more important priority for them— the value of a death benefit and keeping the policy in force, or the value of a living benefit and converting the policy to its present day value to pay for long term care.
By converting an existing life insurance policy to a long term care Assurance Benefit plan, the owner is spending down the asset towards their cost of care in a Medicaid compliant manner while still preserving a portion of the death benefit. If the insured passes away while spending down via their Assurance Benefit enrollment, any remaining death benefit would pay out to the designated beneficiary without being subject to Medicaid recovery. A life insurance policy is legally recognized as an asset of the policy owner and it counts against them when qualifying for Medicaid. If a policy has anything more than a minimal amount of cash value (usually in the range of $2,000) it must be liquidated and that money spent towards cost of care before the owner will qualify for Medicaid. All Medicaid applications specifically ask if the applicant owns life insurance and full policy details. Failure to disclose and comply is fraud.
Federal and state budgets can only accommodate so much, and when dollars are shrinking while populations are growing it becomes pretty simple math to see that something has to give. If history is our guide, then it will be the individual who ends up giving the most. For people to come even close to meeting their expectations for a high level of senior housing and care it will require a firm grasp of the options available and a plan to take action before its too late. Now is the time to prepare by understanding the funding options that are available to help cover the costs long term care as the responsibility shifts more and more to the individual.
To read the original article as it appeared in its entirety in E-Producers Source, click here
by Chris Orestis
11/2/2011
Long term care funding options with Chris Orestis, Click Here for VIDEO
By Paul Wilson, ProducersWEB
I recently sat down with Chris Orestis, a 15 year veteran of both the insurance and long term care industries. Chris spent several years representing the health and life insurance industry as Vice President and Senior Vice President respectively for the Health Insurance Association of America (HIAA) and the American Council of Life Insurers (ACLI). He is an expert on insurance and long term care issues, and is a frequent speaker, featured columnist and contributing editor to a number of industry publications.
His company, Life Care Funding Group, assists people in need of funds to cover the costs of senior housing and long term care. LCFG specializes in converting the death benefit of an in-force life insurance policy into a long term care benefit to cover the costs of skilled nursing home care, assisted living, home health care and hospice.
In the first part of the interview, Chris talks about the current state of the long term care insurance industry. He also discusses the "wake-up call" facing producers and carriers and details some of the challenges, opportunities and responsibilities resulting from the current economic climate. He goes on to explain his recent involvement in the passage of the National Conference of Insurance Legislator's (NCOIL) Life Insurance Consumer Disclosure Model Law, which ensures policy owners "will be informed that they have a number of options to consider first that could make a significant difference in their lives, and at a time when they need it most.”
In the second part of the video, Chris provides further detail about the NCOIL Model Law and its effects on the industry, and talks about his company's partnerships with assisted living communities and nursing homes to help clients convert their life insurance policies into long term care benefit plans. Finally, he looks into his crystal ball and gives his best guess as to the future of the life insurance industry, LTCI industry and disability insurance.
by corestis
11/1/2011
Check out these two videos produced by groups about the Life Care Assurance Benefit---
VIDEO 1: http://www.youtube.com/watch?v=hJpMixsh_0E&feature=youtu.be
VIDEO 2: http://www.youtube.com/watch?v=hZ0jZ8xiokw
Life Care Funding Group's Assurance Benefit program converts the death benefit of an in-force life insurance policy into a long term care benefit. Qualifying for the benefit is quick, uncomplicated, and can be done in as little time as 30 days.
Key Benefits of the Program Include:
• Simple application and review process
• No age or policy size minimum
• No premium payments
• All types of in-force life insurance qualify
• Fixed payments made directly to care provider/facility
• Preserves partial death benefit
• Provides final expense funeral payment
• Benefit can stop and start or be adjusted to match changing needs
• SNF, AL, Home Health and Hospice all qualify
by corestis
10/25/2011
“The two most important driving forces for the federal budget are the aging of the U.S. population and rapidly rising health-care costs.”
- Federal Reserve Chairman Ben Bernanke
Law makers from both sides of the aisle have come together to create a “Super Committee” comprised of six Democrats and six Republicans, half come from the House of Representatives and half come from the Senate. The members of the Super Committee are tasked with finding at least $1.5 Trillion in budget cuts over 10 years. Reports are that the Committee is struggling to meet its goal because they are facing deadlocks over how to handle a mix of cuts and taxes to bolster two of the biggest budget areas of our country—Medicare and Medicaid.
The Super Committee must present their recommendations to Congress by November 23 to face an up or down vote before Christmas. The question for Christmas this year is which groups will be visited by St. Nick and which will meet the Grinch. Some very tough decisions need to be made and no area is protected. Adding to the pressure of the situation is the fact that if Congress rejects the recommendations of the Super Committee then automatic cuts of $1.2 Trillion as well as possible tax increases will be enacted across the entire federal budget sparing no one.
Families already under enormous economic pressure will find it even more difficult to pay for long term care services for loves ones. Government dollars will pay for less and it will become more difficult to qualify. It has become more important than at any time in our nation’s history to prepare for the costs of long term care and make use of programs such as long term care insurance, life insurance policy conversions to long term care benefit plans, and other financial vehicles to ensure sufficient private pay dollars are available when the time comes.
As a nation, we have truly arrived at the point where we can no longer kick the can down the road. We have all been enjoying a fantastic dinner party for years but the check is now on the table and everyone has to get out their wallets to help pay. The question for seniors and families faced with long term care expenses—have you prepared for this day (are you even paying attention!?) and do you understand all of your available options to help cover the costs?
To read the entire article published on ProducersWEB, click here.
For some fast facts and sources on Medicaid, click the link below:
KFF quick reference MCaid stats 2009-2011.doc (187.00 kb)
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