Multiple States Introduce Laws To Stimulate Private Pay Dollars By Endorsing The Conversion Of A Life Insurance Policy Into A Long Term Care Benefit Plan.
Eight major states have introduced ground breaking consumer laws in 2013 to help seniors gain more choice and access to funds to pay for senior care services while saving state Medicaid budgets millions of dollars.
Texas was the first state to enact a life policy conversion law to give seniors more senior care choices and save Medicaid Departments and tax payers millions of dollars. Eight major states have introduced ground breaking consumer laws in 2013 to help seniors gain more choice and access to funds to pay for senior care services while saving state Medicaid budgets millions of dollars. Among them, Texas is the first state in the nation to enact this law giving the state Medicaid Department authority to notify and educate their citizens that they have the legal right to convert an in-force life insurance policy into a Long Term Care Benefit Plan. This “Policy Conversion” or “Medicaid Life Settlement” option allows a senior to remain private pay longer and delay their need to go onto Medicaid. By remaining private pay, the senior is able to choose the form of long term care they desire including Assisted Living, Private Duty Homecare, Skilled Nursing Home Care, Memory Care, or Hospice.
A Life Care Benefit or Long Term Care Benefit Plan is the conversion of an in-force life insurance policy into a pre-funded, irrevocable Benefit Account that is professionally administered with payments made monthly on behalf of the individual receiving care. It is a unique financial option for seniors because all health conditions are accepted, and there are no wait periods, no care limitations, no costs to apply, it is not a policy loan, and there are no premium payments. Policy owners use their legal right to convert an in-force life insurance policy to enroll in the benefit plan, and are able to immediately direct payments to cover their senior care costs.
In addition to Texas, this law has been introduced in California, Florida, Kentucky, Louisiana, Maine, New Jersey, and New York as well as a number of other states still pending for 2013. Florida State University released an economic impact study that estimated Florida’s Medicaid budget would save $150 million annually in their state. Upon introduction, AARP of Florida was quoted in testimony before the Senate Banking and Insurance Committee, “I believe it could be a win for Medicaid service recipients, a win for the fiscal soundness for Medicaid, it could be a win for potential beneficiaries under life insurance policies and I think it could be a win for long-term care service providers,” said Jack McRay, a spokesman for the Florida AARP.
As highlighted in the Wall Street Journal article of June 17th, “States Ease use of Life Policies for Elder Care”; the new Policy Conversion law calls for a specific structure based on the Long Term Care Benefit Plan designed and offered by Life Care Funding. Specifically, the bill accomplishes two primary outcomes:
Grants authority to the Medicaid department to inform and educate citizens that they can convert life insurance policies into a Medicaid qualified Long Term Care Benefit Plan to remain private pay and choose any form of long term care they want instead of abandoning a policy to go straight onto Medicaid.
To qualify, the Long Term Care Benefit Account must be an irrevocable, FDIC insured account that makes payments directly to the care provider; the person must be able to choose the form of care they want; a funeral benefit must be preserved; and if there is any unpaid account balance when the person dies it must go to the designated account beneficiary.
Chris Orestis, CEO of Life Care Funding explained, “Texas is the first state to enact this important legislation to stimulate more private pay dollars by encouraging the conversion of a life insurance policy into a Long Term Care Benefit Plan. But Texas is not the only state to recognize the importance of making sure that the owners of a life insurance policy are informed of their right to convert their policy as an alternative to abandoning the policy and going directly onto Medicaid. Life Care Funding has testified in Florida, Texas, Louisiana, Maine and New Jersey so far this year about the benefits for seniors converting a policy so that they will remain private pay longer, and then be able to choose the form of care they want which is in their best interest and it will save tax payers’ money.”