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Below are actual questions that we have received from LTC insurance agents, with the answers from Phyllis Shelton. If you have a question that you do not see below, please click HERE. We will respond as soon as possible. If it is applicable to other agents, we will post it here with our other “Most Common Questions”.

105: Question:
As a former participant of Mrs. Shelton's LTC educational program, I would like to get a message to her and ask her opinion about the recent increase that the Department of Insurance has allowed John Hancock to levy on all policies with some up to 100%. And those policies are not that old (less than 10 years). As an agent, I feel that I have lied to my clients who purchased these policies. Any ideas on anything that will help?

I'm very unhappy about the 90% rate increase myself and don't see it as a responsible rate increase as I feel that John Hancock should have seen this coming and addressed it much sooner. Having said that, the best way to handle it is compare it to the rate increases we see on most other products. My health insurance has increased from $330 a month to $1100 a month since 1996! Med supp goes up almost every year and we don't have to mention homeowners and auto insurance. Doing it in one fell swoop though was totally unexpected, especially from John Hancock. But looking at the very big picture, the main reason we've seen rate increases like this is simply because we as an industry have not sold the masses. I'm working on some intense lobbying efforts to do that so I haven't given up on this market. I've seen way too many families helped by long-term care insurance and even with that awful rate increase, I would venture to say the premium is still far below paying $6000 a month for the care. Thanks for writing me. If you will give me your address, I'll be glad to send you a complimentary copy of my latest lead generation tool, The ABC's of Long-Term Care Insurance. If you like it, it is available in hard copy and audio CD.

104: Question:
I personally have LTC with Met Life and am wondering if I should keep it. It is about 5-6 years old now so my husband and I are both older. We are ages 53 and 55. Would you replace them or do you think Met Life will find a buyer and the policies will survive with minimal increases. I really appreciate your prompt response and always have admired your advice as a LTC specialist. Thanks for sharing. C. Cole

I think it was purely a financial decision for MetLife. People are living much longer to collect these benefits and hardly anyone gives up the policy. Low investment earnings add to the problem. You know, Getahn, here's an angle. We keep saying a large company that is diversified (sells a lot of different products) is the safest. However, just like CNA did several years ago, this is a great example of how a large company can sell off the long-term care insurance if they aren't getting the profit they want. Companies that have done a huge amount of long-term care insurance have more at stake and are looking to stay in. Examples:

  • MedAmerica Insurance Company (the company that has the State of TN plan, the State of New York plan and Blue Cross and Blue Shield of Tennessee has it on their own employees plus offers through BCBST health insurance agents) is a wholly-owned subsidiary of the Blue Cross plan in Rochester, NY (Excellus Health Plan). LTC insurance is all MedAmerica does since 1987, so they're totally committed.
  • John Hancock announced a few weeks ago they plan to implement an average rate increase of 40% on 80% of their long-term care insurance business subject to each state's insurance department approval, and left the large group market. But the good news is they didn't leave. John Hancock is heavily invested in long-term care insurance with the 2nd largest block of policies in the nation.
  • Genworth is the oldest company selling LTCI (since the mid-70s) and have the largest block of LTCI policies in the nation. Obviously they are fully committed and recently went into the large group market
  • Bankers Life - another company that has sold LTCI second longest and has 3rd largest block
  • Prudential has sold since 1987 and continues to hang in both the large group and individual market when most carriers have left the large group market
  • Unum has the largest presence in the smaller group market
  • Mutual of Omaha/United of Omaha just introduced a new product series and is obviously in the LTCI market for the long haul.

There are many other carriers that are totally committed and haven't had a rate increase ever…Berkshire Life (Guardian), Country Life, Massachusetts Mutual, Northwestern Mutual, and New York Life are great examples. State Farm has had one rate increase but remains committed.

But yes, the LTCI industry will survive this, and the carriers who stay and are committed will just do better as they will get the business that would have gone to MetLife.

You're also probably wondering about rate increases, but the big picture is, LTCI carriers have had one or maybe two rate increases over a 20 year period. Can any other product say that? Medicare supplement goes up every year. Car insurance, auto insurance, and certainly health insurance! The only people having real problems are the agents who weren't clear about the ability of carriers to have a class rate increase, and now is when that comes back to haunt them.

The industry is responding to the rate increase situation.

United of Omaha has a new product that allows one to buy a plan that is paid up in 10 years and a 10 year rate guarantee, so it's guaranteed premium.

State Life Insurance Company (owned by OneAmerica) has plans that combine long-term care insurance with either life insurance or a deferred annuity that allow the applicant to extend the benefits beyond when the death benefit is exhausted (for life insurance) and when the account value is paid out (for an annuity). Benefits can be extended all the way up to unlimited and have 5% compound inflation. The premium for the entire thing is guaranteed on both types of policies. There are other combo products as well with various guarantees built in.

Thanks for contacting me. I hope you will take advantage of some of the wonderful materials I have to help you sell more LTCI FAST and have a wonderful 2011...the newest is the little ABC's of Long-Term Care Insurance which can be customized inexpensively with your name on it to give to prospects - check it out! http://www.ltcconsultants.com/onlinestore/products/21-the-abcs-of-long-term-care-insurance.aspx

103: Question:
My sister is trying to get LTC for her and her husband in New York State. She is being told that she can go anywhere in the US and use the nursing home benefits, but would have to return to NY 90 days prior to the policy ending in order to continue with Medicaid help. This doesn’t sound right to me because Medicaid is a national program. Does this make any sense to you. M. F. Nashville

She is looking at the NY Partnership plan. If she wants the asset protection that a partnership plan provides, she has to use her benefits in New York. NY is not reciprocal and neither is California. The post-DRA states are reciprocal except for Wisconsin and it plans to become reciprocal. She can use NY policy anywhere in the country and apply for Medicaid if she is living in another state...she just won't get the asset protection if she has to apply for Medicaid.

102: Question:
I have clients who are in their late 60’s and are extremely interested in LTC.  They had one question I hadn’t heard before and frankly had no idea where to start.  They are planning on retiring near a university that specializes in the study ageing and elder care.  The clients are investigating the possibility to purchase property in a long term care community.  How would and LTC plan supplement that?  Apparently there are no care costs, you buy into the property and everything else is taken care of. Can an LTC policy accommodate something like this?  Can their total pool be liquidated to purchase this type of program? M.S., New York

This is a life care center, but it's rare to find one today that writes a blank check on the cost of care.  There may be several different plans and the upfront deposit will vary based on how much care the place will provide.  I've seen them provide as little as 365 days in their nursing home section and no home care.  It's common that there is a nursing home benefit but if the person wants care in their own residential unit, they have to pay out of pocket, so the insurance would really help there.  And the insurance could supplement the nursing home benefit as well. And if they ever wanted to leave, it would be a problem to get their money back.  At any rate, they need to see in writing exactly what the long-term care provision is, then decide if they need long-term care insurance to supplement what the community will provide.

101: Question:
Where can I find a national list of home care providers? B.R. Nashville

Easy! You can go to www.medicare.gov and there's a Home Health Compare on that site that not only works as a national directory but compares services. There is also a national directory of nursing homes under Nursing Home Compare. Check with your company as well as they likely have a list of home care providers nationally that they've negotiated discounts with.

100: Question:
Can you tell me how to find out more about Miller Trusts? I live in Oklahoma.

Miller Trusts - also called a Qualified Income Trust....My book explains what they are in Chapter 5 for the "cap" states, which of course Oklahoma falls in that category. So I'm assuming you want to know how to set one up. Legal Aid would handle them and so would any elder law attorney who knows Medicaid. If you don't know one right off the bat, try www.naela.org and put in your zip code and bring them up that way for your area. That's the National Academy of Elder Law Attorneys. I would further advise you to look for an attorney who believes in long-term care insurance and only does Medicaid planning as a last resort. That attorney would be great to do joint seminars with - a very powerful combination - you and the elder law attorney!

99: Question:
Where can I find a list of the top 10 LTC insurers? I am interested in premium dollars as well as number of policies sold.

NAIC publishes the Long-Term Care Insurance Experience Report that lists both items you are requesting. www.naic.org. It's Product # LTC-LR on the NAIC website and sells for $100. It's the most comprehensive source of information on companies that I'm aware of and also shows the claims loss ratios.

98: Question:
Phyllis- I read your article in Senior Market Advisor. I am confused about the recovery of income streams from annuities. Could you please help me out? Suppose Spouse A goes to a nursing home and Spouse B stays home. If all financial assets are put into a Single Premium Immediate Annuity that pays out over the life expectancy of Spouse B according to the government mortality tables, how can the state recover that annuity income stream? Further, assume Spouse B deceases and Spouse B nominated two children in another state as contingent beneficiaries (period certain) of the annuity income stream, how can the state attach that money? Finally, Spouse A deceases in the nursing home after a long (5-year) stay. Spouse B takes her unspent annuity payments (that have accumulated in the bank) and places those assets into a Flexible Premium Deferred Annuity. Spouse B becomes ill and annuitizes the FPDA naming the two children as contingent beneficiaries (period certain). In addition, Spouse B applies for a reverse mortgage and stips out about 65% of the equity in the home. Spouse B then places the stripped out equity into a Single Premium Immediate Annuity with the two children as contingent beneficiaries. How will the state recover anything more than the remaining equity (35%) in the home? Please assume that Spouse A and B live in Tennessee.

In Georgia, your article implied that a hardship provision could not be applied for if the Medicaid recipient tried to circumvent the system. If the above example were to happen in Georgia, the state stiil could not recover more than the 35% of the non-stripped equity in the home. Is that not correct?

In the example above, would the same not hold true in North Carolina?

I can understand why Medicare and Medicaid would expose reverse mortgages to pay for long-term care. The question becomes, how is the senior going to pay for it? I have long thought long-term care to be an interesting product. Those who can afford by and large have enough assets to pay for care out-of-pocket. Those who can't afford to pay out-of-pocket costs, typically don't have enough to pay for premiums, either. Worse, suppose a senior pays for a policy and doesn't ever use it? A large and significant chunk of that senior citizen's fixed income went for piece of mind only. If the senior citizen opts for the reverse mortgage, do you recommend the "cash value" type of policy (like the Asset Care product from Golden Rule) or the "health care" type of policy (GE, UNUM, John Hancock, etc.) J.M., with a TN bank.

First, you can still do annuity planning in TN - my reference about not being able to use annuities as effectively was regarding states that have required the state to be the beneficiary.  A few states have done that and I have every reason to believe that more will follow suit.

Second, anyone can apply for a hardship provision - I was just making a point that states are even looking at what caused the "hardship" and if they see a trail of someone deliberately trying to circumvent the system, the state can still deny the claim. The question is how much time will the state spending in looking for that trail?

I didn't really follow your logic on reverse mortgages when you say "Medicare and Medicaid would expose reverse mortgages to pay for LTC" - Medicare, for example, has nothing to do with any of this as it is definitely an entitlement program, not a means-tested program, so there is no recovery feature in Medicare.  I would like to challenge your thinking on a few issues you bring up after that:

1) How is the "senior" going to pay for LTCI?
Ans.  They should get it before they are "seniors".  I think much of the reason my training business has been so successful is that I was selling people in their 40's when I was a fulltime agent in Chattanooga in the late 80s and early 90s.  I saw immediately that it is much easier to sell to pre-retirement ages due to health, finances and also because I could avoid the emotion of a 70 year old who is in tremendous denial that life may be drawing to a close.  The premiums are extremely affordable at that age.  A 40-year-old Couple, for example, can still get annual premium of about $1,700 for $140 day, 90 day waiting period, 3 year benefit period, 100% home care and 5% compound inflation for life.  A 50 year old couple is $2,000 and a 60 year old couple $3200.  Obviously these rates can be lowered by choosing perhaps a $120 daily benefit, which in your area would be fine as most of your clientele can easily afford to pay a third or so of the charges. Some people prefer the $120 DB and a five year benefit period, for example.  (A 5 year benefit period takes care of 85% of the people who use LTCI, based on current claims experience.)

2) "Those who can afford by and large have enough assets to pay for care out-of-pocket"....First, I would ask you when is the last time your affluent client paid full price for anything...boats, real estate, art, jewelry?  You get the picture...isn't it almost an insult that we have to tell them to pay full price for LTC?  Many of them pay $1,200 a year for a Medicare supplement, which pays an average of $869 a year in benefits and an average of $10-$20,000 in a lifetime.  LTCI can pay hundreds of thousands of dollars, based on the inflation coverage and the benefit period you buy.  I also wonder if people who think they can self-insure are aware of what they are committing to.  LTCI costs are growing at around 6% a year - see the most recent cost survey by MetLife at www.maturemarketinstitute.com and previous ones for a pattern.  I've used a 5.8% factor since the GAO used that in 1991 and now the CMMS is using it.  That means tripling in 20 years.  We have a wonderful software that compares the cost of self-paying and losing investment return on that money to buying insurance.  A couple in their mid-50s can look at a 30 year planning period.  If one of them has a 5 year claim at age 75, for example, the impact on the estate over that 30 years is $1.4 million, using a 6% lost investment opportunity.  Having insurance by contrast, is an impact of $186,000, and that includes paying the premiums and losing the 6% investment opportunity on that. IT also includes paying a 30 day deductible at future costs and losing the 6% investment on that.  Most truly affluent clients will want 24 hour care, which doubles the impact to almost $3 million.  I think people need to know these numbers before making a quick decision to self-insure, and I believe it is a financial professional's responsibility to share that information so clients can make an informed decision.  I've seen extremely wealthy people buy insurance because they want their money going to their family, their university, a charity, or a host of other places.

I'm also not sure why you are linking a reverse mortgage to a cash product.  The homeowner can take monthly payments and buy a traditional LTCI policy as well. Chapter 6 of my book discusses the cash policies. You have to be extremely careful about the inflation coverage to be sure it is built in from the first day of purchase.

Two other points I would share with you. By doing Medicaid planning and putting your clients on a system that is struggling to survive financially as we speak, you are putting them in a nursing home - the last place they want to be, and sometimes in a room with three other people as we now have Medicaid patients four to a room in some facilities. I have a family member in that situation, so I know. This will get worse as the budget deteriorates further with an aging population. I know they're trying to pay home care - TN is the last of all the states in that department - but the money just isn't there to pay extended home care like 10-12 hrs per day like a private LTCI policy will.  Medicaid must pay for the people who must be in a facility - and then means very little money left over for home and community care, such as assisted living and adult day care.  In contrast, you can get cash policies now that allow the person to use any kind of caregiver or use it for medicine, equipment, or whatever the need is.

And in TN, you can't get into a private-pay facility that doesn't accept Medicaid and if you are in one, you have to leave when your money runs out and you applyh for Medicaid.  Finally, most states never allow Medicaid money to pay for the beautiful assisted living facilities that most people would rather be in if they have to leave home for a facility.

And what about never using it?  It's the old little mistake, big mistake - they can buy a policy and never need the care - a little mistake.  They can not buy a policy and need the care, then a big mistake.  30 years from now, the 50 year old of today will be facing about $320,000 a year for one person for LTC.  That's $60,000 at a 5.8% growth rate, roughly. Don't forget if you look at facilites, it's room and board PLUS drugs and supplies.  And private room costs more, of course.  Home care average $18 an hour unless you can find informal caregivers for less.

I'm wondering how many of your clients lie awake and worry they haven't had enough house fires to justify their homeowners policy...or enough car accidents to justify their car insurance premium.  I hope people don't use their LTCI policies but I happen to know that the odds of using that is much, much higher than the risks of losing a house or car.

The average caregiving time for Alzheimers' is about 8 years.

Finally, from the bank's standpoint, if people spend down and use Medicaid, aren't they still transferring money out of your bank in many cases?  That can't be good for business.  Why not give them LTCI so they can be private-pay patients and leave most of their money in the bank?

Hope I've at least given you some things to think about. You're welcome to take my web-based training course (below) - it's only $169 plus $35 if you elect the optional CE credits.  It has the info I've been doing in my live training classes.  And my book is on AMAZON, B&N, etc.  It's "Long-Term Care: Your Financial Planning Guide", Kensington Books, NYC, 2003.

97: Question:
I was with a client yesterday talking about LTC and she said she was concerned with an article from Consumer Reports, an article as "twisted" as any I have read for a long time.
I have read two rebuttal articles but did not keep a copy. As I have your book, "Long Term Care - Your Financial Planning Guide" which I use as my "bible" I thought I would ask you if you wrote an article. If not, do you know who did? I would really appreciate any assistance in obtaining this rebuttal article. R.M.

Of course. To see and print off my article, just go to the home page of my website under LTCI Scene at the top of the page - scroll down to my response to this article - what a disservice it was!

96: Question:
Are cash values in a permanent life insurance policy includable as an asset/income for the Medicaid calculations?

Yes, the cash value is included as an asset in the Medicaid calculation for any policy with a face value above $1,500. The $1,500 varies a little by state so you can check that out with your state Medicaid website, accessible through my website on this page: http://www.ltcconsultants.com/consumer/wyslyk/index.shtml

You might want to take our web-based training as there is a entire lesson on Medicaid and exactly how it works or you can also see this info in the Medicaid chapter in my book, "Long-Term Care: Your Financial Planning Guide", Kensington Books, 2003.

95: Question:
I read with interest your April 2004 Life Insurance Selling article on new Medicare Drug bill. Specifically, with regard to the ability to pay for LTCI with pre-tax dollars. This I think would be a great benefit option offered by employers. However, how would I go about finding out what needs to be done for them to be able to get this benefit. For example, would employers have to adopt new HSA accounts for their employees, and if so this should benefit the employer with lower health care costs, because of higher deductibles, whereby the employee benefits with the purchase of LTCI - could this then be offered in a cafeteria plan and still have the benefits non-taxable because they're paid for by the employee? And how to find out which insurance companies offer HSAs, so this can be implemented? Isn't this key?

it is a great idea, isn't it? Just go to www.google.com and type Health Savings Accounts and several vendors come up, like American Health Value plan. I would check out Golden Rule as well. A vendor like that can guide you through all the steps. Both of those vendors did Medical Savings Accounts, which had the same allowance for LTCI as an HSA so they are very familiar with how it all works.
I know several Blue Cross plans are also developing high deductible health plans that will be compatible with an HSA, so you can check with your local BCBS plan on that as well.

And yes, the way I see it, if they set the HSA up through a Section 125, it's allowed for the employee to spend money from that account for the age-based LTCI premium amount. Best wishes and glad you enjoyed the article!

94: Question:
I have a client that has been on SSA, SSI, Medi-Cal and Disability for over 20 years due to chronic arthritis. She will receive an inheritance and does not want to lose her benefits from these programs. If she receives the inheritance from probate, and then we immediately shelter the inheritance through an actuarially-sound annuity, will this dis-allow her from any of the benefit programs named above? Permanantly or Temporarily?
Are there other options?

Your question has a very simple answer. The inheritance you mention needs to be directed to a special needs trust set up for your client, and then it passes to her with no impact on her government benefits.  Any elder law attorney can do that for her and her family.  If you don't have one, you can visit www.naela.org <http://www.naela.org/>  to find a list in your area.

93: Question:  
Dear Mrs. Shelton, I’ve been writing LTCi exclusively for more than 5 years. Your book was part of my initial training. I’m writing to ask whether you have any idea what an actual self-insured dollar costs when spent on long term care. I’m thinking of both loss of investment income as well as the tax hit to Mr. & Mrs. Smith’s portfolio from such an emergency. I estimate @ $1.35 - $1.25 real cost per each dollar spent.

I want you to know about a software that does exactly what you are talking about, very FAST. It is "LTCI Economic Impact Planning Model" and it is on our website at: http://www.ltcconsultants.com/mm.htm
Ralph Leisle, its creator, supports the product. A more complete description is on his website at www.ltcia.com. It is truly awesome which is why I agreed to market it for him. You can enter the lost investment percentage as well as the capital gains tax - anything like that - to get the TRUE cost of LTC on an estate. I love it and use it in all my agent training. But yes, your assessment of more like $1.31 would be close if you use a 6% lost investment opportunity and the rest for 20% capital gains tax. Ralph could be very helpful to you as well. His email is RLeisle@aol.com.

92: Question:  
Just read your article in Life Insurance Selling. Congratulations on telling agents that LTC premiums paid out of an HSA are subject to the limits found in HIPAA.  Too many 'experts' forget that minor detail leaving the agents with the impression that LTC premiums (with no limits) can be paid out of an HSA.  I have pointed this out to a few
'authors' hoping that they would correct the incorrect information.........BG

I called the IRS about it when the law first came out and actually got a live person.  She thanked me because they hadn't thought about it and she agreed it needs to be clarified.  Hope they do that in whatever they bring out in June.

91: Question:
I read in your FAQ's that you are opposed to Medicaid Annuities and I would agree. However, I have a client who is looking at this for his father who was just admitted to a N.H. (approx. $200k in cash). I'm having a hard time understanding how this can be legal? Also, when would this be an appropriate situation?  There is no living spouse. Thanks.

What your client is talking about for his father who is already in a nursing home is to use the $200,000 to buy an immediate annuity and convert the asset into income in order to preserve the money and qualify for Medicaid.  The beneficiary will be probably be his son, your client. They have to be sure three things happen:

  1. The annuity has to be "actuarially sound", which means the projected payout can't exceed the dad's life expectancy; and

  2. the income from the annuity can't raise the dad's total income above the cost of the care; otherwise he won't qualify for Medicaid as the state will say he can pay privately;

  3. he will have to make sure the state doesn't require the state to be the beneficiary, not anyone else

He should consult an elder law attorney to be sure it is done correctly - Dale Krause in Wisconsin does this kind of thing only for people who won't qualify for long-term care insurance. He can be contacted at 888-605-4222 (dalekrause@new.rr.com).

Then of course, the dad will be a Medicaid patient and lose his choices, including no private room.  Golden Rule sells an underwritten annuity that provides a higher income than a regular annuity because it is based on actual life expectancy, and the sicker the person is, the better.  I explain this in chapter 6 of my book, if you have it. If you don't, it's on the home page of my website at www.ltcconsultants.com .  If that annuity would give him enough income with what he already has to pay privately, he would be better off as he would retain his choices, and the son can be listed as the beneficiary, no problem.

I am certainly against any type of Medicaid planning including Medicaid annuities for people who can qualify for long-term care insurance, and it is definitely in the patient's best interest to pay privately and enjoy maximum choice and care options.

90: Question:
In the September 2000 issue of LTC Consultants Gazette there was an article about gifting LTCI out of asset-heavy estates per IRC Sec 2503(e).  I am encountering a different take on this since the law states specifically states "medical expenses" without reference to insurance and since the IRS does not always deem benefits like food and lodging (even though provided in an assisted living facility) as medical expenses.  Do you have knowledge of anyone actually doing this?  Do you have an opinion or opinions from tax attorneys relative to the whole gifting issue?  I have a prospective client for whom this is an important matter.  Her attorney is waffling on it.
Thank you very much.


I cover this in my 2003 legislation CD which is available if you call our office at 800-844-4893.  But in a nutshell - it says medical expenses as defined in Section 213(d), and when you read that, it defines long-term care insurance as the HIPAA table in section 10. So the only thing you can gift is the HIPAA table amounts, not the entire premium. I keep a copy of the IRS code, not Tax Facts, because Tax Facts makes it look like it's the whole premium. When I put out that issue of the Gazette, I was relying on Tax Facts and I had to clear it up once I read the IRS code itself.  So sorry for the confusion!

89: Question:
A doctor client operates under a PC form of incorporation and employs her spouse as office manager. Can she write off both LTCI premiums against the company without having them show up as compensation on their individual returns?

YES, as long as the owners didn't request the PC to be set up as an S-Corporation, and most do not. If the PC is treated as a C-Corporation, an owner-employee is a true employee and is not treated as a self-employed individual. Therefore, LTCI premiums paid by the PC for the benefit of an owner-employee should be fully deductible by the PC and non-taxable to the owner-employee.

88: Question:
What happens if a person does not buy enough benefit in an LTCI policy and the person wants to increase the benefits after the policy has been in effect for a few years. Let's say they want to add the inflation rider or increase the daily benefit. How do most companies administer these requests? JoLynn

Benefit increases require new health questions and premium for the benefit increase will be based on new age. I usually tell people to buy the highest benefit they think they might want as they can always come down and premium will be based on issue age. However if they decide they want to increase at a later date, just the increased amount is priced at their new age and they have to answer health questions. You also want to be very careful about increasing benefits on policies issues prior to 1/1/97. These are "grandfathered" policies and increasing the benefits will cause them to no longer be tax-qualified. You can always add an additional policy to what they already have instead of increasing benefits on their old policy. Feel free to check out my web-based course, LTCUniversity - it answers tons of questions like this!

87: Question:
Question: What is your opinion of the 10 pay option? My company does not offer this option and I have had several sales lost from not having it available. Brenda

I think it is a good option as long as a company doesn't go overboard on it. My sources tell me that limited pay policies make up only about 6% of total policies sold and that's manageable from a rate stability viewpoint. Sounds like you might be a captive agent. If you are, just tell your company that you are losing sales and ask when they plan to offer a limited pay option. My guess is it's on their drawing board already since a number of companies offer them. And if not, you can always say to your clients that your company is concerned about future rate stability and think it's too early to offer limited pay plans. Actually, some states believe that as well and won't approve them - therefore they aren't available in all states yet. Hope that helps.

86: Question:
A greater than 2 % S-Corp owner buys a policy on himself and his wife ( ages 51 and 52). I understand he can deduct $940 for his coverage and $940 for the policy on his wife even if she is not an employee. Is that correct?

John Hancock has an LTC plan called Family Care with some unique benefits. It is one policy issued on one spouse with additional insureds that can include the other spouse and even the kids if they want to. Being that both spouses are covered under this Family Care Plan, do they still qualify for the $940 times 2 deduction or just one deduction of $940 on the main insured spouse? C.L. 8-1-03

The owner and spouse each get the $940 deduction whether or not their policies are written in the JH Family Care policy. This is on the first page of Form 1040 in the self-employed health insurance box. If the business pays the premium, the entire premium is added to the employee's income and it is indirectly deductible as salary. It does not go on Schedule C as a business deduction. Hope that helps!

85: Question:
Long and short, it sounds like C Corps work but pass through entities do not (S Corps and LLC) for allowing the company to have the expense deduction, no imputed income to Employee and tax free benefits when paid. I understand that the spouse as employee does not work either. A bit discouraging since there are so many S and LLC companies. Much of the educational literature in the market seems to promote the S corp. spouse solution.

Yes, I learned the hard way about the spousal attribution. It was called to my attention by a tax expert from American General, and it turned out to be correct when my accountant researched it. On the S-Corp and LLCs, the owners and spouses get to deduct 100% of the age-based requirement on the front page of Form 1040 along with the self-employed health insurance deduction, but if the company pays the premium, it is added to their income and deductible indirectly as salary, but not as a business expense on Schedule C. Benefits are tax-free up to $220 in 2003 whether or not the company pays the premium, and larger amounts are tax-free as long as the benefit doesn't exceed the charge. I'm don't think this is always explained in company literature so you're smart to dig it out.

84: Question:
The parents of the owner of a "S-Corp" work as full time employees. The parents do not have any ownership in the business. Can the business take a tax deduction on the parent's LTC policy? I think as a result of the "family attribution rules" they can not. Am I right?

There is no ownership attribution to parents in this case. As long as the parents are bona fide employees, the company can buy their LTCI policy and deduct the premiums; the amount is excluded from the parents income under IRC section 105.

I am working with a client currently and he would like to learn more about the history of LTC costs. That is he would like to know how the prices of ltc have been affected by inflation in the last 10+ years or so. This will be one of the factors that will determine the current daily benefit amount that he will purchase. I would appreciate any assistance that you could provide. Jon

Hello, Jon - Home care and nursing home care combined averaged 6.69% from 1990 - 2000, but thanks to managed care in the long-term care arena, the projection is that costs will grow at 5.8%, which is equivalent to tripling in 20 years. I usually recommend younger people buy a little more to compensate for the 5.8 vs. the 5% compound inflation factor in most LTCI policies. The source for this information is: Heffler, Stephen, et al, "Health Spending Projections For 2001-2011: The Latest Outlook", Office of the Actuary, Centers for Medicare and Medicaid Services, Health Affairs, March/April 2002, p. 208 (5.8% projected growth rate for home health and nursing home care 2001-2011).

Also bear in mind that most reimbursement products do not pay for drugs and supplies, and those charges can average an additional 20% above room and board. With an indemnity policy (which is optional with Mass Mutual, as you know) you can build in extra daily benefit to help with those costs if the client has no drug coverage. If some form of drug coverage does pass with Medicare, that will help alleviate this dilemma for our clients.

Do you have any information about the new credit against the reverse mortgage insurance premium for individuals who obtain a reverse mortgage specifically to pay long-term care insurance premium? Val 7-8-03

To my knowledge it has not. I just don't think HUD has a sense of urgency about it, unfortunately. The National Reverse Mortgage Lenders Association (www.reversemortage.org ) is a great place to look for updates.

81: Question:
You may have already begun to reply to my e-mail from yesterday, but if not, then you may ignore it. I found your article at your website on TQ vs NTQ and it was exactly what I needed. I have directed our client there and also to your bio. I graciously appreciate your perspective and I appreciate your having shared it through this report. Thank you for backing those of us who strive so diligently to do the right thing for our clients.

Hi, Jeff - you are so welcome! And thanks for taking the time to look for the article on my website - yes, that's what it's there for. Also, 92% of policies sold in 2002 were TQ per LIMRA and sales for NTQ dropped 35%. Take care and best wishes from me!

80: Question:
In your book Long Term Care Your Financial Planning Guide you had said on page 99 companies that have min. underwriting small as 10 apps. I am trying to get started in the LTCI work sight marketing in my area ther are companies with 30-99 employes put to get my feet wet I would like to stay small. I am a one band show. Thanks for any help you could offer. After I get some $$ in I will see you at a seminar. thank you

The information you are seeking is found in my policy comparison in the Rates/Underwriting category. This policy comparison is the very hardest thing I do, as you can imagine. It's only $99 for the hard copy and $129 for hard copy and cdrom. The cd allows you to sort by category so you could look at just that one category if you like. You can order it from the online store on our website, or call us at 800-844-4893. Thanks, and glad you're enjoying the book!

79: Question:
I have just written my first large single premium LTCI policy for a very wealthy man and his wife, separately to maximize premium and to have the refund come at each death rather than waiting to the last to die.

We want to make a trust the owner to pass the refund and any accumulated claims to the trust with no estate or income tax liability. The trust will be drafted with no rights for either insured. The insureds will pay for any long term care while the trust will receive claimed indemnity benefits from the insurance company. The insurance company tells me they will issue a 1099 with each payment, but that their indemnity payments from their tax-qualified policy will not be taxable because it is TQ.

The CPA son of the couple feels that the single premium payment needs to be The insurance company won't comment on this issue, referring us to our tax advisors. Problem is that the son is "our" CPA.

How can I assure him it need not be reported as a gift? That it is simply an insurance purchase to protect against the cost of LTC.


The 2503(e) legislation that says LTCI premium is exempt from gift tax also limits the amounts to the age-based premiums in the HIPAA table. It does that by defining LTC insurance according to the definition in Section 213(d) of the Internal Revenue Code. If you read Section 213(d) it plainly says in item 10 that LTCI premium is limited to the HIPAA table. Here is the language from our training class:

Since HIPAA clarifies that LTC insurance is treated as health insurance, the premium is included in qualifying medical expenses for the annual gift tax exclusion per IRC Sec. 2503(e), as long as the premium is paid directly to the insurance company. The policy must be a QUALIFIED (based on the HIPAA definition) LTC policy, and IRC Sec 2503(e)(2)(B) specifies medical care as defined in Section 213(d).

Section 213(d) says: ìIn the case of a qualified long-term care insurance contract (as defined in section 7702B(b), only eligible long-term care premiums (as defined in paragraph (10)) shall be taken into account.î Paragraph (10) sets the age-based premium limitations above. Therefore, the amount of the premium that qualifies for the gift tax exclusion is equal to the HIPAA allowed amounts based on age. Qualifying expenses also include QUALIFIED LTC services as long as payments go directly to the provider of care and not to the family member.

You can always seek a third party CPA's opinion, Barry. I know agents have purchased single premium policies for the purpose of moving large amounts out of an estate for estate planning purposes, and I thought it was permissible until I read the Internal Revenue Code in detail. You can't just look at Tax Facts, because that says LTCI is an acceptable medical expense for the gift tax exclusion. You have to read the actual code to get down to that item 10 that defines the premium as the age-based amounts. I encourage you to research it for yourself so you'll have solid information.

78: Question:
Sorry to bother you. I am still fairly new in the LTC arena and I have come across a situation I could use your help. When a prospect is married do you meet with them if their spouse is not available or reschedule until both can make it?

What I have found selling life insurance is if the prospect is married and you don't meet with both husband and wife together you generally wind up just educating the prospect and in the end he needs to talk it over with his/her spouse which leads to procrastination or no action at all.

I don't want to blow possible sales, but don't want to waste my time either. Any suggestions as how to handle this.


First, you're not bothering me. Second, you need my training! I have an Empower Sales Library that gives you all kinds of sales tips, including this one. Always meet with both spouses - if one doesn't show, reschedule. Go to my online store - if you're new, you either need the Premier Sales and Training Kit - it gives you training plus your sales presentation along with an audiotape of me doing the sales presentation and handling objections and closing techniques and lots of sales tips. There's even a legislation audiotape so you know the tax incentives. You'll also get my new 2003 book, which just came out a month ago. OR, you could take my web-based training (www.ltcuniversity.com) and then order the Premier Sales & Training Kit at the special discounted price for LTCU graduates. Then you just get the sales presentation materials instead of the training tapes. Good luck!

77: Question:
Do you know of a LTC company that has a 5 pay option?

All that information is in my policy comparison in the "Rates/Underwriting" category and I don't have it memorized off the top of my head. Do you have the comparison? It's in hard copy and cd-rom, and you can do a search by category to see all the companies for a particular category.-- that way you could see all the limited pay information at one time. Check our website under Product Catalogue in the Agent side and it tells you all about it -- it is the very hardest thing I do, as you can imagine!

76: Question:
Have many of your LTC slides from previous years and what I need now is about a 20 minute presentation for civic clubs, churches and businesses. Number of HR managers have contacted me for such a presentation to their employees. Since my stroke I have had to give up active selling, but I can still s spread the word!!! SHIIP, NC dept. of Insurance, for whom I volunteer does not have such a presentation. Thanks for your help.

There are two scripts in the Instruction Manual that you got with your slides, so you will want to use the shorter version. If you need it even shorter, just do the need part of the presentation then focus on the five benefit decisions that determine the premium. The PowerPoint version allow you to suppress slides if you have that and of course the 35mm slides you can select the ones you want.

We also have a great marketing system now for selling to employers and there is a wonderful benefit manager presentation in that along with a brochure just for HR people. Check it out on our website to see all the pieces - it's a $299 system with a lot of stuff. A lot of benefit managers love reading my book, Long-Term Care: Your Financial Planning Guide, since it has a specific chapter on LTCI as an employee benefit, and the 2003 book is on my website and in major book stores. Any mention is appreciated as you talk with HR people.

75: Question:
Last year I attended your seminar twice, June and October. Will you please
explain the following?

  1. Does GE offer any LTC policies in California with a written guarantee of NO INCREASE in premium?
  2. Are premiums guaranteed to stop after 10 years of claims-free activity on any "singe" policy?
  3. If spouses, or any two policies which have two-person discounts, how does it work?

Your questions are quite detailed and many companies have these kinds of arrangements. The answers are all on my policy comparison so if you had one, you could answer everything. I can quickly answer "no" to your GE question, but several other companies meet 2 and 3 of your questions. The policy comparison is the hardest thing I do, so I do sell that information, and I'm sure you understand that. The October 2002 is the most current and can be ordered by calling our office at 800-844-4893 or on our website in
our online store - here's the link if you don't want to search for it:

74. Question:
How do you address the issue when a couple is interested in Long-Term Care Insurance, but one is uninsurable? What options are there?

There are underwritten annuities to maximize money for the care of the uninsurable spouse (see chapter 6 in my book "Alternatives to LTCI" - 2003 version just came out) and I'm sure CLTC taught you to refer them to an elder law attorney as well (www.naela.org). But also a reverse mortgage could be a backup to provide an income stream to pay for care for the uninsurable spouse - I updated that section as well in chapter 6. Mainly, they especially need the insurance on the healthy one so that one is taken care of.

If a bank pays a LTC premium for the benefit of a director, is the premium paid subject to taxation for the director as a non-employee and if so, what tax is it subject to federal, state, social security, Medicare?

The premium paid by a bank for a director would be treated as income and will show on the 1099 the bank gives the director, so it would be subject to normal taxation as any other income. The bank could at its discretion, include enough for the director to pay the premium and have enough left to pay the tax as well.

The 100% amount for 2003 still goes through the table, example 53 for 2003 is $940 or have I missed something?

You have not missed a thing. It is 100% of the age-based amount on the HIPAA table, so for a 53 year old, it would be $940 for 2003.

71. Question:
What do you think about policies that say incidental Homemaker Services must be provided during the same visit and by the same individual providing care with the Activities of Daily Living or because of a Cognitive Impairment?

A plan is more flexible if it doesn't require the homemaker services to be provided by the same person who does the personal care. You'll see on my policy comparison that more than one company does it that way.  I make a point to point that out in the home health care category for companies that do that because I want to be sure agents know that's the way it works. Better to have a weekly or monthly max so it doesn't matter if more than one person is involved in delivering care.

I am using all of your sales materials in selling LTC insurance. I just passed the CLTC course as well. The oldest client I have sold is 66. A prospect I met with yesterday is 57 and he inquired about purchasing LTC insurance for his parents who are 77 and 78. I will run the proposals, however, I need some positive advice on selling to these types of people. Is it being sold to people at that age and if so, how?

Yes, by all means people are buying LTCI in their 7's - if affordability is a factor, you can do a facility only for the upper 70's, you could look at selling a greater benefit - maybe what the cost will grow to in your area in 10 years - but ask about longevity in their family. Do people live to be in their 90's? If so, maybe a simple inflation should be considered. Of course, look at their income and see how much they can contribute to the
cost of care in determining a daily benefit. And make sure you advise them if they have low assets that Medicaid is an option. I realize your client wants to buy it on his parents, which is wonderful, you just want to be truthful about their options.

I am interested in selling LTC insurance but I have not selected a provider.
Can you recommend the top 2 or 3 companies? Do any LTC insurance providers
offer your training courses?

I am a third party trainer so I cannot recommend one company over another. What I teach you in our classes is to make those decisions for yourself by telling you what to look for and I publish a policy comparison so you have the information to use.

I have Phyllis' Long-Term Care: Your Financial Planning Guide but it is only updated through 2002. I had some tax questions for 2003. I'm updating some of my sales material and want to make sure I‚m passing out correct information.

The 2003 of Phyllis Shelton‚s Lont-Term Care: Your Financial Planning Guide is now available on our website by going to the online store. Also, you can find the 2003 figures on the homepage of the website as well.

I am enjoying your sales flip chart selling LTCi. I understand the selling agenda...educate, create the situation, build emotional personal interaction etc.  However, I have several referrals out of state. How can I have an effective sales interview ( flip chart) to educate the prospects long distance, before we discuss the custom designing of their needs?

I have earned the CLTC designation, and will be getting my CSA designation here in Atlanta on May 14-17th.

I am enjoying the LTCi marketplace, however, I need to step up the production to make it profitable. Any ideas on both subjects please.

I am working on putting the sales presentation with my voice as audio on a website that agents can send customers to. We are working out the security features, etc. I'll make sure you are on our email database so we can notify you quickly as soon as it is available.

I am using your Long-Term Care University program. In one section you talk about reimbursement policies NOT paying for prescription drugs. Then you say to combat this one option is to buy a higher daily benefit amount. I am confused, if it doesn't pay for drugs why would I buy a higher daily benefit? It wouldn't pay for it anyway. Thanks for your assistance.

I know this can be a little confusing. Here's why it is important. If a person says he can pay 20% out of his own pocket and you are showing a reimbursement plan, then you should probably show him a daily benefit that will pay the full cost of room and board for your area, because he can expect to have another 20% in drugs and supplies. Many agents would show a benefit that pays 80% of the room and board, which means not only would he have to pay the other 20% of room and board out of pocket, but also the extra amount for drugs and supplies. The exception here could be for an older person who has a drug plan as part of his or her retiree health insurance. Then the drugs aren't such a concern. Or, if a drug benefit is passed as part of Medicare, that will alleviate much of the drug concern. But in today's environment, it pays to be cautious about the extra charges.

I have been to three of your LTC schools and you have taught me a great deal. Today I received a call from an insured who said her attorney stated that assets moved into an Irrevocable Trust had a new 2 year look-back provision. I was not aware of any changes in the time periods of 3 years to an individual and 5 years to a trust. Can you clarify please?

That is incorrect information. Ask your client to get that information from her attorney in writing along with a copy of this "new law."

What is your opinion of Medicaid-Friendly Annuities?

I am thoroughly against any strategy to transfer assets to qualify for Medicaid. Not only does it rob the patient of choice and dignity, but it is killing our economy. Maybe in a last minute crisis, but these annuities are being used rampantly to qualify people for Medicaid who could otherwise buy long-term care insurance. They're being used from what I see much more frequently than trusts and some of the other Medicaid planning strategies. LTC insurance is such a win-win: dignity for the patient, tax savings for all of us taxpayers, private-pay dollars for the providers so they can provide better care and hire more people. Transferring assets to qualify for Medicaid is a lose-lose all the way around because it defeats all three of those goals. Thanks for the inquiry.

I have a big case I am about ready to close and they are an "S" Corp. They want to know if they can deduct premiums for a 1099 employee or a consultant they use. He is not an owner. I know they can deduct 100% for a regular employee, but I am not sure about a 1099 employee.

It has to be an employer/employee relationship so I don't know how they could since this person isn't an employee - ask them if they deduct health insurance premiums for that person - it's treated the same way.

Question: If an S-Corp. purchases a long-term care policy for one of the owners and his spouse, both age 55, The premium is deductible to the corporation. I know the premium is included in the owner’s gross income and is 100% deductible up to amount that counts as a medical expense. My question is that if both husband and wife purchase the long term care policy, is the deductible limit $1880 (2X$940)? Also, have the limits been released yet for beyond the year 2003? If not, what might a good percent trend rate be for projecting these limits forward?

It's a better deal that you described below for the owner of the S-Corp and his spouse. They get the age-based amount ($940 for 2003 x 2) as a first-dollar deduction on the first page of the tax return as part of the self-employed health insurance deduction. In 2002, 70% of that amount was a first-dollar deduction and the remaining 30% counted as a medical expense toward the 7 1/2% threshold. Since for 2003 it is 100% of that amount, there is nothing left over to count as a medical expense toward the 71/2% threshold. The numbers are released annually, and 2004 will be out probably in late November.

I sell LTCI for State Farm and am in the process of writing a research paper on buying motives for this product for a college course I'm taking. One of the things I'd like to include in the paper are some statistics on how many LTCI policies were sold in the U.S. in either 2001 or 2002. Along with this, it would be great to know how many were sold to single men, single women and couples. Would you have any ideas on where I can find this information?

I think you'll find everything you need in the HIAA's new report " Long-Term Care Insurance in 2000-2001", January 2002...www.hiaa.org. Good Luck!

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