LTCI* – DEMOGRAPHICS Demographics continue to change Estimated 40 million Americans over 65 Over 10,000 turning age 65 daily 2011 – First baby-boomers reach age 65 Estimated 70 million seniors by 2030 *Long Term Care Insurance
LTCI – SOCIAL PROGRAMS Social Programs continue to falter Medicare and Social Security unfunded liabilities estimated at $106 trillion! Example: Reform cut about $500 billion Medicaid becoming one of state’s largest budget issues LTCI will be a critical social issue in the next decade
DEFICIT REDUCTION ACT OF 2005 Expanded look-back period Increased penalties Closed Medicaid loop-holes Partnership Plans
FILIAL LAWS Up to 1965, enforced under Old Age Assistance 1991 South Dakota Court Decision March 1994 Supreme Court ruling No enforcement, but triggers legislation 30 states passing new laws Pennsylvania announces enforcement Virginia enforcing – no documentation yet New Jersey enforcing – no documentation yet
“OWN YOUR FUTURE” February, 2010, Massachusetts is the 25th state in the country to kick off the campaign Financed by DRA, Federal pays, states admin this massive educational program encouraging people to plan for possible future long-term care needs As the United States population ages, and lives longer than ever, Medicaid spending on long-term care is growing, posing a threat to the financial stability of both states and the feds, since Medicaid is jointly funded by both
MEDICAID: MAJOR CHANGE IN 2011 2009 – federal share of Medicaid was expanded 67% from 57% More in states with high unemployment Scheduled to expire December, 2010, it was extended for 6 months $135 billion extra was poured into Medicaid June, 2011 - Reverted back to 57%
STATE MEDICAID MOVES: CALIFORNIA Cutting doctors and many other providers by 10% Co-pays for services Limit of 7 doctor visits a year Unless a doctor certifies a need for more
MEDICAID: WATCH RHODE ISLAND Changes recommended to Rhode Island's eligibility rules: Extend the look-back period from 5 years to 10 years (Germany) Reduce the home equity exemption from $500,000 to $40,000 (United Kingdom) Eliminate the use of trusts, annuities, promissory notes, "reverse half-a-loaf" strategy and other Medicaid planning techniques
MEDICAID: SUMMARY 46 states pass legislation either reducing benefits or tougher eligibility Health Care reform mandates increased beneficiaries in 2012/2013 If economic situation continues, tougher cuts on the way It’s not just people…
MEDICAID OUTLOOK BLEAK FOR PROVIDERS IN 2012 12/15/2011, MCKNIGHT'S LTC NEWS "The unreimbursed funds from Medicaid to nursing homes is [sic] projected to exceed $6.3 billion in 2011, which means an average per-patient shortfall of $19.55 per day, according to an annual study conducted by Eljay, LLC on behalf of the American Health Care Association. That's a jump from a $16.54 per day loss in 2009.... And while many providers have relied on Medicare to subsidize Medicaid patients, they will lose that patch in 2012. 'The combined shortfall of both Medicare and Medicaid is projected to exceed $20 billion…"
TIMING There will be three plans submitted to the Advisory Committee who will bring the Secretary their opinion by mid-2012 By October 1, 2012, the Secretary will publish the plan chosen for public comment It appears that the goal is to begin the plan in 2013 at the latest Without repeal, these deadlines are still in place!
ENROLLMENT Enrollment for the program will be handled by employers All employees will be enrolled unless they opt-out
DISENROLLMENT/ENROLLMENT There are penalties built into the law for employees who opt-out and later want to join the program Basically the penalty will be a percentage and the fact that they will have to pay the new premium based on re- enrollment date Once started there will be an annual disenrollment period There will be a biennial enrollment period
PREMIUMS The Secretary will set the plan premium starting the first year and every year thereafter based on a 75 year actuarially sound projection The goal is to have no premium increases for any enrollee during their lifetime This is the hang-up – can it be done?
PREMIUM INCREASES However, premiums can be increased based on certain guidelines for current enrollees: If current projections show the plan will become insolvent within 20 years However, premiums may not be increased for people over the age of 65, no longer working and if they have paid in for over 20 years This is area attacked most!
PREMIUM AMOUNTS In early stages, estimated premium would be about $60 per month However, with actuarial projections actually being debated, amount has been projected as high as $240 per month Range is now from $60 to $380
VESTING PERIOD There will be a five year vesting period for all enrollees This is why this is part of the health care reform bill It’s expected that this will build a budget surplus for this entire five year time frame which helps to cover the cost of reform This was reason It was passed – and it’s still around
BENEFIT ELIGIBILITY Appears that they will follow tax-qualified LTCi rules here The law does allow them to consider two or three ADL’s in determining eligibility I think the reasoning for this is that they might need it to keep the premium down to meet the 75 year soundness rule This is part of the reason premium range is so wide
BENEFITS The law stipulates that there be a minimum of two up to a maximum of six benefit levels The minimum benefit level is $50 per day adjusted by CPI Benefits will be paid weekly or monthly There is no lifetime maximum benefit This is the reason premiums could be high
BENEFIT PAYMENT a.The primary purpose of this law is to provide benefits for people to stay at home b.The Cash Benefit is placed into a Life Independence Account which shall be used to purchase nonmedical services and supports that the beneficiary needs to maintain his or her independence at home or in another residential setting of their choice in the community
SUMMARIZE Employer enrollment unless opt-out High penalties if need later Premiums estimated $160-240 monthly Can be increased in future Benefit average of at least $50 per day Five years before qualify for benefits Benefits increase at CPI (3.15% historical)
DIFFERENCES $1,500 a month PURE CASH Up to $6,000 a month HHC Up to $3,000 a month ALF/NH No five year waiting period 3.5% inflation versus CPI Partnership Protection Better insurance pool! Contractual, not government run
FURTHER PRIVATE INSURANCE COMPARISON Versus a Potential $480 Per Month?
LESS THAN HALF THE PRICE… $3,000 a month Pure Cash vs. $1,500 Up to $12,000 HHC versus $1,500 Partnership Protection up to $300,000 No five year waiting period Good insurable pool Contractual versus government-run Private insurance offers some distinct advantages
ADVANTAGE OF WORKSITE… Employees: Better coverage for employees concerned about LTC in future Dramatic savings to younger employees Who face major penalties if they opt-out now and try to get back in later! Class Act can insure those in bad health
ADVANTAGE OF WORKSITE… Employer: Chance for employer to be a hero by pre-empting government plan Avoid potential issues with employees overextending themselves Add a stable optional benefit to employees outside of annual enrollment time frame Benefit is stronger for employees/executives/owners that are “planners”
POTENTIAL PROBLEMS CLASS HAD Pool – compare to Federal Plan Potential spiraling effect May need to go to 3 of 5 ADL’s to keep premium reasonable Potential penalties to non-insured Americans since no excuse for no coverage after plan in force
CLASS ACT National voluntary LTCi plan Automatic employer enrollment Opt-out with substantial penalties Premium estimated at $240 per month – may change Benefit estimated at $50 per day Five year waiting period for benefits Opens door to future government moves CLASS Act was stopped Administration stopping repeal Issues: Bob Yee’s report Supreme court ruling est. June, 2012 But, something could be up…
CLASS ACT National voluntary LTCi plan Automatic employer enrollment Opt-out with substantial penalties Premium estimated at $240 per month – may change Benefit estimated at $50 per day Five year waiting period for benefits Opens door to future government moves Current Situation! The House of Representatives voted to repeal CLASS Senate did not go along CLASS is not formally repealed and DHHS Secretary Sebelius must present the benefit plan required in October – THIS MONTH If not, a court could find her in contempt Then, she may be compelled to implement CLASS Act after all!
YOUR ROLE WHAT SHOULD BE DONE? The problem hasn’t gone away – we still face a LTC crisis in America – coming to a head fast Fact Class was not repealed shows that it’s still considered a potential solution Potential problems if forced in – especially access to qualified benefit agents What’s the negatives in waiting What’s the negatives in being proactive
INFORMATION IS THE KEY! “I can’t predict future, I can only give you information on what’s happened and happening” Mark Randall Sponsored by GoldenCare USA America’s Home for Long-Term Care Insurance 800-842-7799