Long-Term Care Insurance

To date, more than 9 million Americans have purchased long-term care insurance (LTCI) policies and coverage continues to expand each year. Nonetheless, the general lack of knowledge about long-term care (LTC) leaves many Americans confused, frustrated, and ultimately unprepared to plan for their long term care needs. The lack of a clearly articulated government role in LTC financing compounds the challenge. The result is that too many individuals put off planning for LTC until care is actually needed, at which point they face severely constrained financing options. America's Health Insurance Plans recommends that the government increase efforts to ensure effective public education concerning LTC and LTC financing.

Public expenditures for long-term care remain extremely high and will continue to consume larger portions of federal and state budgets. If left unchecked, our nation will face an even bigger dilemma on how to pay for these costs as the population ages and as health care costs increase. Considering that long-term care insurance could provide a viable solution to our nation's long-term care problems, AHIP supports legislative and regulatory actions to promote long-term care insurance.

The provision of tax incentives for the purchase of long-term care insurance coverage would help ensure that millions of Americans can maintain their independence and protect themselves from devastating long-term care costs. More importantly, this would demonstrate the government's commitment to private coverage as an alternative for Americans to use for funding their own future LTC needs, lessen reliance on scarce public dollars and help promote individual responsibility. Private insurance, through the lower average cost of risk sharing, gives more people the opportunity to use their own resources to pay for their own care. Such federal incentives might include:

• Establishing a 100% above-the-line federal income tax deduction for LTC premiums;
• Permitting the tax-free use of IRA and 401(k) funds for purchases of LTCI; and
• Permitting LTCI premiums to be paid through cafeteria plans, HSAs and flexible spending accounts.
  
  

AHIP also supports similar tax incentives at the state level to help Americans purchase coverage.

AHIP realizes it is important to maintain the viability of the long-term care insurance marketplace. We recognize that consumer protections are necessary for those who purchase this type of coverage if the LTCI market is to reach its full potential. AHIP shares the objectives of policymakers and consumers alike and believes that strong consumer protection laws, and their full enforcement, are integral to the development of LTCI. The National Association of Insurance Commissioners (NAIC) has developed model regulations on LTCI that states may use when drafting their own LTC regulations. AHIP supports the provisions of the most current version (October 2000) of the NAIC Model Act and Regulation.