Is A Long Term Fund Coming to My State?
Several other states are now considering a similar bill, including Alaska, California, Colorado, Hawaii, Oregon, Illinois, Michigan, Minnesota, Missouri, New York, North Carolina, and Utah. If you live in one of these states, you'll need to secure your long term care insurance before the laws change to avoid paying these new taxes.
Here’s what we'll cover in this post:
Quick Article Guide
Here’s what we'll cover in this post:
What lessons will be learned from the Washington experience?
There are several items to consider:
- Low-income families can’t afford the new tax. In addition, they would likely qualify for LTC services under Medicaid and wouldn’t benefit from the program.
- Self-employed people are not required to participate but can opt in.
- Cognitive impairment is not treated as an individual qualifier for LTC benefits. However, Washington requires 3 of 10 impairments of Activities of Daily Living (ADL).
- Washington employees living out of state might pay taxes but get no benefits.
- Vesting requirements permanently leave out retired or nearly retired people.
- Poorly timed opt-out opportunities created chaos for private LTC insurance carriers.
- Recertification of privately purchased policies was not clear or nonexistent.
The last two items created concern for insurance carriers because they feared that consumers would cancel their long term care policies as soon as their opt out was certified. In addition, the new LTC tax bill did not explain if Washington residents would be required to provide periodic proof of their long term care insurance in order to continue avoiding the new payroll tax.
Fearing financial losses, some long term care insurance providers started imposing minimum purchase requirements while others began exiting the market in May 2021. As the flood of applications grew, the remaining long term care providers strained to process them. At the same time, more LTC carriers dropped out of the market creating further delays and bottlenecks for consumers.
By the end of August, all of the major long term care insurance providers had stopped offering their policies to residents of Washington. The last carrier suspended sales on September 9th, almost two months before the one time offer to opt out expired. This is why we recommend applying for LTC insurance before legislation changes.
Who Benefits From the State-Fund Program?
- Low-income employees who do not qualify for Medicaid.
- Uninsurable employees at older ages.
- People who are retiring in 10-15 years.
Who Does Not Benefit From the Program?
- People who have already retired or will retire in the next few years and are unable to vest.
- Non-working spouses.
- People who move or retire out of state, even if vested.
- People who never lived in Washington but were forced to pay the tax as a Washington state employee.
If you are in one of the states considering a state-funded program, it benefits you to consider your own plan now. Carriers may impose minimum policy requirements or suspend sales in the mad rush as the law goes into effect. Even if there is no opt-out provision in your state, having your own policy still gives you the protection that has a high likelihood of being used.
Who Should Consider Opting Out of a Future State-Fund Program?
- High-income earners.
- People who want control of their care choices.
- Young people with growing salaries who have been paying taxes for decades.
- Workers living out of state if the program is not portable.
By opting out of the state-fund program, individuals can customize their coverage to fit their needs with an individual plan that can guarantee premiums. Other benefits of private LTC insurance include:
- Plans are available that can still provide benefits even if LTC services are never needed.
- Individual plans are portable across states.
- Private insurance uses federal claims triggering events — 2 ADL impairments or Cognitive Impairment.
- Private insurance gives you more choice of your care providers.
- Private insurance increases your marketability as a patient.
It’s estimated that 70% of the people who reach age 65 will need assistance with the activities of daily living during the remaining years of their life, either at home or at an institution. Unfortunately, most Americans chose to ignore the need, so the pressure will grow to have states address the issue.
The Bottom Line
You want to avoid being in a situation where the government selects your long term care insurance plan. Better to get your policy now while you are younger, in good health, and have private options available.
Our independent life insurance agency can shop the market on your behalf to save you time and money. Get the best LTC insurance rates at JRC Insurance Group today! Give us a call toll-free at 855-247-9555 or click on the map below to get started.
Louis Lopes, CLU ChFC
Chartered Life Underwriter, Licensed Life and Health Agent
Louis has been in the insurance business for over 30 years. He specializes in “high risk” cases as well as more complex coverages for long term care, disability, and estate planning.