AHIP Backs Four Options for Long Term Care Reform
AHIP says a national awareness campaign, tax-incentives, pre-long-term care coverage, and the modification of inflation protections could lead to long-term care reform.
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- America’s Health Insurance Plans (AHIP) published its letter to the Federal Interagency Task Force on Long-Term Care Insurance (Task Force) agreeing with their decision to address long-term care insurance (LTCI) and offering suggestions on federal policy options related to LTCI.
“Millions of Americans’ financial and retirement security are at risk from exposure to unfunded LTC events,” AHIP’s letter, written in conjunction with the American Council of Life Insurers (ACLI), began. “Access to additional options to meet and finance the need for long term services and supports (LTSS) will enable consumers to address those needs without eroding other assets or imposing on family and friends.”
The Task Force’s federal policy options presented to Congress in 2017, leading to a nationwide conversation about the federal government’s role in supporting LTCI.
The Task Force, created by the Department of Treasury, held a July public meeting to discuss the future of long-term care and the need for its expansion socially, including the individual private long-term care insurance market, products, state and federal regulations, and financing options.
AHIP lauded the Task Force’s mission in a letter responding to request for public comment.
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The payer organization then laid out four LTCI reforms from the 2017 federal policy options that the organization believes the Task Force should pursue.
First, AHIP recommended initiating a national campaign to raise awareness about long term care. AHIP says that such a program would serve to expand the understanding of all Americans—particularly the middle class—of the potential need for long-term supports and services (LTSS) that grows with age and the options available. The payer organization believes that by investing in this public health education, the population will be more inclined to plan ahead with an LTCI and explore LTCI options.
Specifically, AHIP recommended revitalizing the “Own Your Future” Awareness Campaign and the National Clearinghouse for LTC Information website, which demonstrated the capacity to pique public interest in LTCI.
Second, AHIP suggested offering tax incentives through four avenues.
One tax-incentive option would be creating “cafeteria plan” LTCI options and flexible spending arrangements (FSA) for LTCI, obtained through employer-sponsored insurance. This may further enable employees to afford LTCI coverage. AHIP said that employees would likely switch their cafeteria plan or FSA resources from one benefit, such as adoption support or dependent care assistance, to the new LTCI benefit. Thus, adding LTCI as a benefit would not increase or decrease employees’ taxes significantly.
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Another tax-incentive option would be to contribute 401(k), 403(b), IRA, and other retirement payments to go to LTCI premiums instead, tax-free. The payment would be considered a distribution from one retirement plan to another.
Alternatively, payments could be considered “within plan investments.” This would allow employees to contribute retirement funds directly toward a qualified long-term care insurance. In this model, the money would be shifted from one investment to another, making it non-taxable. Benefits would be accessible to the member as a plan distribution from the retirement plan.
The benefits, however, would have to be taxed because they are equivalent to an income. The tax burden would not be high with the current retirement tax regulations, AHIP said.
The last tax-incentive option AHIP suggested was to raise the limit for contributions to health savings accounts (HSAs) to accommodate qualified long-term care insurance (QLTCI) premiums. In this format, employees can also cover their spouse.
Third, AHIP suggested allowing members to use LTCI to cover certain preventive measures that take place before long term care is needed. Benefits could cover fall risk assessments of the member’s home, ramps installation or other mobility assistance products, and caregiver training.
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“LTCI policies can help policyholders and their families delay the need for more substantial levels of facility care and keep them in their homes,” AHIP explained. “Since facilities tend to be more expensive, this would be a benefit to care recipients, their families, and ultimately to private and public payers.”
Finally, AHIP said that the inflation protection on LTCI needs to be modified or removed. The payer organization suggested eliminating the five percent inflation coverage requirement on HIPAA and instead allow payers to decide inflation coverage based on the applicant’s needs. Another option would be to take away the inflation coverage age tier requirement on Deficit Reduction Act (DRA) Medicaid Partnerships.
Since the Task Force was created in 2017, the topic of long-term care insurance has been an ongoing conversation. With the public comments collected, the Task Force can now develop a strategy to uphold long term care at the federal level.
