New York Times- A New Way to Pay for Long Term Care (October 9, 2013): I was visiting an assisted living facility recently with my sister, whose disability made that a prudent choice, when the marketing manager handed us a brochure. It asked, “Did you know a life insurance policy can pay for long-term care expenses?” Life Care Funding, said Chris Orestis the chief executive, pays older adults an average 40 to 45 percent of a policy’s face value.
Life Care Funding puts the money in an F.D.I.C.-insured account used to send monthly payments directly to a long-term care provider: a nursing home or assisted living facility, an adult day program, a home care agency, a hospice, an individual hired privately for home care. You can switch from one provider to another as your needs change, but you can’t use the money for a vacation (or blow it at a casino).
Wall Street Journal- States Ease use of Life Policies to Pay for Long Term Care (June 16, 2013): State lawmakers are encouraging elderly residents to use life insurance as a way to pay for long-term care—and lower the Medicaid tab in the process. States hope to stop people from dropping their life-insurance policies in order to qualify for Medicaid. To keep policy owners from spending settlements frivolously, the bills generally require that the money go straight to an irrevocable bank account used solely to pay for long-term care.
“This focuses on middle-class policyholders with coverage worth $100,000 on average,” said Chris Orestis, chief executive of Life Care Funding LLC of Portland, Maine. “They’re not wealthy enough to pay for long-term care for a long time, and they’re not poor enough to qualify for Medicaid right away.”
Investment Advisor- Big Questions Lurk in LTC’s Future (September 9, 2013): While the recommendations that the Long Term Care Commission voted Sept. 12 to include in its final report to Congress later this month are “Band-Aids on [the] large and ever-growing problem” of LTC financing, according to one LTC expert, another expert believes the report was “a step in the right direction as it makes very clear that there is a crisis situation facing the country.” Chris Orestis, CEO of Life Care Funding, a long-term care specialist and former insurance industry lobbyist, says he’s “glad” that the commission acknowledged there is a “national financial crisis surrounding long-term care,” he’s hoping “they will do more to act on solutions, such as Life Care Funding.”
As he explains, Life Care Funding is one private-funding option recommended to the commission. It would allow middle-class seniors with too much money for Medicaid and too little to pay for their long-term care to convert their life insurance policies into LTC benefits earmarked to pay for such services as in-home nursing care and assisted living.
“Numerous states introduced legislation this year, and Texas passed into law, a bill that would require their Medicaid departments to inform seniors” of the Life Care Funding option, he says. “The seniors can sell the death benefit — instead of just giving up the policy they’ve been paying premiums on for years — and use the funds to pay for their care.” This allows them to “avoid the restrictions imposed by going on Medicaid and they keep future Medicaid eligibility intact.”
InsuranceNewsNet.com- More than one way to pay for long term care (November 6, 2013): Life Care Funding reported that five of the top 10 homecare companies in the United States are now using an alternative arrangement to help pay for care.
This alternative entails converting a life policy death benefit into a living benefit which can then be used to help pay for senior care. According to the company, this option is not long-term care insurance and it is not a policy loan. Rather, the life care benefit “is an irrevocable, FDIC insured benefit account that is administered to extend the time a person would remain private pay and delay their need to go onto Medicaid,” Chris Orestis, Life Care Funding chief executive officer, said in a statement.
Wall Street Journal- Survival Tips for Caregivers: Are you ready for the great family caregiver shortage? (August 30, 2013): Use life insurance. In most cases, owners of life-insurance policies can sell them to life-settlement firms to pay for long-term care. Some adult children caring for their parents are helping their parents cash in to help pay for their care now instead of receiving an inheritance later. Chris Orestis, chief executive of Life Care Funding in Portland, Maine, frequently works with families of middle-class policyholders with term coverage worth $100,000 on average, he says. The amount they could receive would depend on the policyholder’s age and health status. State lawmakers who have introduced laws to publicize the option have pointed out that it beats surrendering a policy to access government benefits while also giving families more control over how to spend the money.
ThirdAge.com- Convert a Life Insurance Policy into a “Life Care Benefit” (September, 2013): We don’t often think of living a long life as a problem, especially for those we love. But what happens when Mom, Dad, a spouse or another beloved family member need regular health care yet are apparently short on finances.
Actually, paying for care may be well within your loved one’s means, says insurance expert Chris Orestis.
“It’s a secret the life insurance industry has managed to hide for decades: Your policy can be used to pay for long-term health care such as home care, assisted-living or nursing home expenses,” says Orestis, a former insurance industry lobbyist.
“Many people who need long-term care can’t afford it, so they drop the policies they’ve been paying on for years in order to qualify for Medicaid. The life insurance companies profit from the fact that they get all those years of premiums and never have to pay out a death benefit.”
Orestis, who’s been lobbying state legislatures to make the public aware of their legal right to use this option, says seniors can instead sell their policies for between 30 and 60 percent of the death benefit value. The money can be put into an irrevocable fund designated specifically for their care.
Think Advisor (sponsored by Nationwide Insurance)- Medicaid Privatization Begins in Florida, Likely to Grow Nationally (October, 2013): “You only have so many dollars to go around, and we have a growing senior population,” said Chris Orestis, CEO of Life Care Funding. “The sad reality is that very few people plan for long-term care.” While retirements are ideally funded by long-term investments and Social Security, the sudden and unexpected need for assistive services can quickly drain savings and drop seniors into the low income brackets necessary to qualify for Medicaid.
In fact, Orestis said he has already worked with several states, including Florida, to introduce legislation that allows seniors to augment Medicaid payments for long-term care by selling their life insurance policies. Designed to lower future Medicaid bills and increase middle class access to much-needed care, one of these bills has already passed in Texas. Similar to Florida’s program, this new law allows seniors to use the proceeds from their policies to pay for the long-term care providers of their choosing.
“But people need to remember that when they’re on Medicaid and funded by taxpayer dollars, they have very limited choice. Both privatized and public have pros and cons, and you’re not going to get the same benefits that you would if you were paying with your own money.”
“I think it’s inevitable that more seniors are going to have to fund their own care, long-term and otherwise.”
InsuranceNewsNet Magazine- Hybrid Policies Add to the LTCi Market Challenge (November, 2013): Another trend that has appeared is the use of traditional life insurance products to fund long-term care. In 2013, eight states (California, Florida, Kentucky, Louisiana, Maine, New Jersey, New York and Texas) introduced Medicaid Life Settlement legislation as a way to encourage more use of private pay dollars for long-term care through the conversion of a life insurance policy into a long-term care benefit plan.
Among these states, Texas is the first state in the nation to enact this legislation into law. The law grants authority to the Medicaid department to inform and educate citizens that they already have the legal right to convert life insurance policies into a Medicaid qualified long-term care benefit plan and can choose any form of long-term care they want instead of abandoning a policy to go straight onto Medicaid.
“Seniors have been abandoning their life policies because they can’t afford the premiums and they’re looking at the Medicaid spend-down,” said Chris Orestis, chief executive officer of Life Care Funding. “We are seeing the trend of converting policies – selling them on the secondary market – to pay for care. It’s a great way to keep more people off Medicaid and remain private pay.” He added that the proceeds of this policy conversion are “locked” in a fund that can be used only for long-term care.
The U.S. Department of Health and Human Services estimates that at least 70 percent of those over the age of 65 will require some long-term care services at some point in their lives. And every day for the next 16 years, another 10,000 baby boomers will celebrate their 65th birthday. This all adds up to a “silver tsunami” of Americans with a need for care and the funds to pay for it.
Examiner.com- How to keep the gold in your Golden Years (October, 2013): Since ancient times, alchemists have attempted to convert lead into gold; however, none were successful. Now, with our tough economic times, many seniors have seen their golden years turn into lead. The senior population is soaring, due to the influx of baby boomers. Beyond physical health is financial health. Finances will be a major problem for many of them, especially if boomers develop health problems that affect their ability to live independently, notes insurance expert and CEO of Life Care Funding Chris Orestis. Orestis notes that a life insurance policy can be converted into a Life Care Benefit; this conversion is an accepted method of payment for private duty in-home care, assisted living, skilled nursing, memory care, and hospice care. Financial concerns can cause a senior to cash out their life insurance to avoid saving the premiums. Orestis notes that a better option is to take the present-day value of the policy while they are still alive and convert it into a Long Term Care Benefit Plan. In so doing, seniors will remain in private pay longer and be able to choose the form of care that they prefer as well as be Medicaid-eligible when the benefit is spent down.
AgingCare.com- How to use a Life Insurance Policy to pay for Long Term Care (April 18, 2013): Anyone in possession of an in-force life insurance policy has the ability to transform that policy into a pre-funded financial account that will disburse a monthly benefit stipend to help pay for that individual’s long term care needs. Unlike life insurance, a long term care benefit plan account is a Medicaid qualified asset. If this process sounds unfamiliar, don’t worry, you’re not alone. Most people don’t know that the long term care benefit conversion option exists.
“For the last 100 years, anyone who’s owned a life insurance policy has had the right to do this,” says Chris Orestis, co-founder and CEO of Life Care Funding, a company specializing in life insurance policy conversions. “The problem is that most people are unaware that this option exists.”
The pros and cons of conversion
On the surface, it seems like life insurance policy conversion is a no-brainer. But, like everything, the method has its advantages and disadvantages:
- There are no monthly premium payments
- You can convert any type of life insurance plan: whole, term or universal
- Monthly payout amounts are adjustable based on how many months a person wants to receive payments. For instance, a person whose life insurance policy converts into $12,000 in total benefits could choose to receive 12 monthly payments of $1,000, or 24 monthly payments of $500)
- These monthly payouts would not count against an individual seeking to qualify for Medicaid coverage sometime in the near future. A long term care benefit plan is recognized by Medicaid as an acceptable spend-down during the five year look-back period.
- A long term care benefit plan is comprised of “private pay” dollars, which means that it can be used to pay for any kind of care—home care, nursing home, assisted living and hospice.
- A special fund is set aside for future funeral expenses
- Anyone wishing to apply for a long term benefit plan must have an immediate need for some form of acceptable long term care (see examples above). This is because monthly payments are made directly to a long-term care provider, not the previous holder of the life insurance policy.
- It’s not ideal for everyone. Orestis says that individuals with smaller policies ($10,000 or less) are probably better off holding on to their plan, or giving it up it in exchange for the cash surrender value. Also, people who’ve got a life insurance policy with a large cash value built into it (i.e. a $100,000 policy with a $90,000 cash value) are better off taking that cash value than converting it.
It is also important to note that a long term care benefit plan is not the same as a long term care insurance plan.
According to Orestis, the biggest benefit of transforming a life insurance policy into a long term care benefit plan is that it allows a person to remain private pay for a longer period of time. “The process can actually help aging individuals maintain some financial independence and dignity. It helps them exert more control over the type of care they receive,” he says.
Florida Public Broadcasting System (PBS)- Life Insurance Proposal Gives Families a Financial Lifeline (March 8, 2013): Right now policies are counted as assets, and a person would have to cash it in, often at a reduced value, as part of the Medicaid spend down. The second part of the bill would allow the life insurance policy to be sold to a third party—often at a far higher value. The money would then be deposited into an account with automatic withdrawals going directly toward the facility. It’s very similar to a sort of reverse-mortgage for healthcare. And Chris Orestis, CEO of the company Life Care Funding, which specializes in these kinds of transactions, says they are beneficial to middle class families who have too many assets to qualify for Medicaid, but not enough to foot the bill for long-term care.
“You have this middle class bulge, that is quite frankly, penalized for having too much assets to go onto government assistance, but not enough that they can afford their choice of care and extend their ability for private pay,” Orestis said.
Orestis says converting life insurance policies into a form of long-term care insurance is something people can do now, but many families aren’t aware of it. And advocates of the proposal say as long as the bills reporting and disclosure requirements are left in place, they’ll continue to back it.
Wall Street Journal- New State Laws Threaten Insurers (June 27, 2013): There’s growing recognition among state lawmakers that elderly residents with modest life-insurance policies could be using it to pay for long-term care – and delay, or maybe avoid altogether, having to use Medicaid, which pays for such care for Americans whose resources run out. Now, insurance industry analysts are trying to measure the impact of older adults’ tapping their life insurance to pay for long-term care, rather than surrendering such coverage to qualify for Medicaid.
“Seniors have been abandoning policies needlessly, and the insurance companies have been benefiting at the expense of the policy owners and taxpayers who have been picking up the tab with Medicaid to cover long-term-care costs,” says Chris Orestis, chief executive of Life Care Funding of Portland, Maine.
“Now that the word is really starting to spread, more seniors will understand they have this option to help them, and it is a much better option than abandoning their life policies to go on to Medicaid,” he adds.
Fox Business News- Why it’s time to change our approach to Long Term Care (September 19, 2013): One of the biggest question marks hanging over every boomers’ retirement plan is how much money they will need for medical costs. It’s a figure that is impossible to predict, and can be financially devastating if not adequately covered.
Last week, the federal Commission on Long-Term Care released more than two dozen recommendations detailing ways to enhance and make services for older Americans and people with disabilities more affordable. While the commission didn’t endorse specific new programs, it draws more attention to the growing affordability problem.
Chris Orestis, a long-term care specialist and the CEO of Life Care Funding, has made formal recommendations to the commission and created a model to provide an option for middle-class people who are not wealthy enough to afford paying for long-term care out of pocket, and not poor enough to qualify for Medicaid assistance. Orestis discussed some of the findings of the commission and how we need to change our approach to long-term care. Here’s what he had to say:
Boomer: Does the Congressional Long Term Care Commission report offer new ways in which long-term care is financed?
Orestis: The LTC Commission deliberations and report are a confirmation that Medicare and Medicaid alone cannot sustain the aging population’s reliance on these programs to fund long-term care services. The commission stated that it is an unsustainable proposition to expect Medicare and Medicaid to continue paying the vast majority of long-term care costs in this country and that private market solutions will need to be a growing contributor to the equation.
Boomer: Why is long term-care insurance no longer the solution?
Orestis: In 2000, there were over 100 long-term care insurers in the market. Today there are less than a couple dozen. Major companies like MetLife and Prudential have abandoned the market because they cannot make the product work profitably. Remaining companies such as John Hancock and Genworth have been forced to increase premiums and reduce benefits on existing policies they sold in years past. Ironically, as the baby boomers began turning 65, the long-term care insurance market shrank instead of growing as had been expected.
Boomer: What are a few of the report’s highlights?
Orestis: The report was a step in the right direction as it makes very clear that there is a crisis situation facing the country but six of the panel members voted against the commission’s final report because they do not believe it goes far enough in recommending specific ways to address the financing of long term care.
Boomer: What are some underutilized private-funding options recommended by the report?
Orestis: There were numerous policy proposals given to the commission that are part of the record, but not specifically included in the final report. The report calls for private market innovations to help create cost savings and new financial options but does not give enough specifics.
Boomer: What is the option for middle class people who are not wealthy enough to pay for long-term care and not poor enough to qualify for Medicaid?
Orestis: One option recommended to the commission that addresses the middle class is converting life insurance policies owned by seniors into long-term care benefits instead of encouraging seniors to lapse or surrender policies to qualify for Medicaid quicker. Numerous states have introduced legislation in 2013, and Texas passed a law that would require its Medicaid department to inform seniors that own life insurance that it is their legal right to convert those policies into a long term care benefit by selling the death benefit and using the available funds as a living benefit to pay for their senior care and remain private pay for a longer period of time.