Long-Term Care Insurance Needed to Protect America's Financial Recovery
(written for Agent Sales Journal, November 2010 issue)
By Phyllis Shelton, President, LTC Consultants and LTCiTraining.com
America has a choice to make. There’s no way that public dollars alone can pay the long-term care for the baby boomers, 95% of whom have no coverage for long-term care, in addition to the 16 million younger adults being added to the Medicaid rolls by health care reform, beginning January 1, 2014. Taking that route means families need to know they will pay higher property tax, higher sales tax and higher tuition and there may not be scholarship money for their children…in order to pay for Medicaid.
Here’s the real kicker -- after surviving the mortgage crisis, families can still lose their homes to estate recovery because they didn’t plan ahead for long-term care.
There is a two-part solution:
1) sell as many Partnership plans in the worksite as possible over the next 5-10 years. Why Partnership plans? Because it’s a national solution. About 40 states have participated and almost all have reciprocity. The Partnership gives employees the confidence to buy what they can afford and know that Medicaid is there as a safety net. Partnership Plans allows the private sector to pay for long-term care first and makes Medicaid the payer of last resort, without making people spend most of their money to access Medicaid.
This solution definitely works. In the four states that have piloted this program since the early 1990s, fewer than 500 people out of more than 325,000 have had to rely on Medicaid to fund their long-term care.
2) sell as many combo plans as possible to older Americans… the two prospective groups are those who haven’t been able to qualify for traditional LTCI may be able to get a combo annuity/LTC. The second group is those who have said they will self-insure, as the combo plans leverage the money they are going to self-insure with 2-3 times while removing the use it or lose it objection.
But the key to making this work fast enough is for Partnership plans to be offered in the workplace, and it’s simple to do by using individual products with underwriting concessions and premium discounts. By getting employees of all ages involved, we will build a huge body of private sector dollars that will pay for long-term care later on or sooner if it's needed. A 25-year-old can get a Partnership LTC plan with inflation coverage for less than a latte a day. Because it’s insurance and not a savings plan, the 25-year-old could pay one premium of $60, be in a motorcycle accident and receive $100,000 in tax-free benefits that his health insurance would not have provided.
Medicaid is destroying state budgets like a computer virus. Selling a two-three year Partnership plan to most employees and selling combo products to as many older people as possible would be enough to rescue the state budgets and free up state dollars to pay for education and save jobs, and all the other vital services states provide.
My outlook on this industry? With CLASS on one side, the Medicaid Tsunami on the other side and the rate increase Sword of Damocles hanging over us, if most producers don’t extend their LTCI sales to worksite and combo over the next five years, I don’t think we will have a long-term care insurance market. That’s a strong statement. I’ve been in insurance 34 years and long-term care insurance 22 years. So far my predictions about LTCI have been 100% true. I hope I’m wrong on this one.
Phyllis Shelton is the author of three books and has been featured in the Wall Street Journal, Newsweek, CNNfn, National Public Radio and a PBS documentary on care giving. She is currently on a seven-city tour training financial professionals how to help employers offer these plans.