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Long Term Care Insurance Enters Mix

By L.M. SIXEL Copyright 2010 Houston Chronicle
April 1, 2010
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When annual employee benefit time rolls around in 2011, you may have a new option: government-sponsored long-term care insurance.

The health care overhaul includes an insurance program that will provide a daily cash payment for later years when people may have trouble with the basics of life like eating, bathing and dressing.

The payment, which is expected to be about $50 a day and indexed to inflation, could be used to cover a wide variety of expenses ranging from in-home to nursing home care.

But key details are yet to be worked out. It’s not clear how much the policies will cost, how disabled someone must be to claim benefits, and whether self-employed people and nonworking spouses can participate in what’s designed as a payroll deduction plan.

The U.S. Department of Health and Human Services is writing the regulations and is working toward an October 2012 deadline, said Anthony Stratidis, senior vice president and long-term care planning consultant for Marsh’s private client life insurance services in Norwalk, Conn.

Then the rules will be open to public comment, another lengthy process.

Legacy of Kennedy
But nothing prevents the federal agency from rolling out the program sooner, he said. Known as CLASS — for Community Living Assistance Services and Supports — it is a legacy of the late Sen. Edward Kennedy, who long championed ways to help aging citizens stay in their own homes.

“By participating in the program, employees are empowered to take responsibility for their long-term financial planning and avoid self-imposed poverty to qualify for Medicaid if they need help,” said Larry Minnix, chief executive of the American Association of Homes and Services for the Aging. “CLASS has the potential to give millions of workers, both young and old, more choice and control over their lives.”

Other experts pointed out, however, that $50 a day doesn’t go far and suggested that the private insurance market can offer attractive benefits at a lower cost for healthy enrollees.

“Is that really meaningful?” asked Stratidis, whose company sells long-term insurance and is a sister company of Mercer, the human resource consulting firm.

But many people can’t get private long-term insurance because of poor health, making the new government program attractive because applicants won’t be rejected.

That raises concerns that the government insurance will be prohibitively expensive — or a taxpayer drain — if the only people who sign up are older, in bad health or aware of a long-term medical condition that eventually will require assisted living.

“If all the unhealthy 55- and 60-year-olds sign up, the first generation will reap the reward and will be paid for by next generation,” said Jesse Slome, executive director of the American Association for Long-Term Care Insurance, which represents 4,000 independent insurance agents and brokers.

Attracting the healthy
Policy questions aside, one of the hurdles facing actuaries is to price the premiums so they’re attractive to heathy workers as well as those in poorer shape.

Monthly premiums will probably range between $160 and $260, Stratidis said. Participants would also have to pay premiums for five years before they could start drawing benefits.

To boost participation, the new benefit contains an opt-out provision, meaning employees of companies that offer it will be enrolled automatically unless they specifically ask to be removed.

That may combat the historical lack of consumer enthusiasm for long-term care insurance. Slome estimated that only about 8 million U.S. residents carry such coverage.

May not cost employers
Damon Thompson, director of benefits for Houston-based G&A Partners, which manages human resources for its client companies, predicted that employers will offer the coverage because at this point it appears it won’t cost them anything.

But he’s not so sure it’s going to end up being a popular benefit.
“Employees aren’t really buying it now,” he said. “I’m not so sure they’ll buy it at work, either.”

Houston attorney Mitchell Katine, who specializes in employment and disability issues, is concerned that
many people won’t see the benefit of buying the insurance until it’s too late or think it’s beyond their financial means.

But he hopes the new government program may raise awareness of the importance of planning to care for disabilities later in life.

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