Jesse Slome, long term care insurance expert
Los Angeles, CA. – February 2, 2018 – Long-term care insurance planning has entered a new phase according to a presentation yesterday by the director of the American Association for Long-Term Care Insurance (AALTCI), a national trade organization.
“Welcome to long-term care insurance planning 3.0, a new evolution in how consumers approach planning for the very real risk associated with aging or long-term health conditions,” declared Jesse Slome, AALTCI’s director. Slome was discussing trends with a group of leading long-term care (LTC) insurance and financial professionals.
“Long-term care insurance planning and products continue to evolve to keep pace and satisfy consumer preferences as well as the changing marketplace,” Slome explained to the audience. “In the late 1980s, the first LTC insurance products only offered benefits for care in a skilled nursing home facility and typically were purchased by individuals in their late 60s and 70s.”
The second phase for the industry encompassed products that included tax-deductible premiums, tax-free benefits and included the option to receive care in one’s own home or in an assisted living community. “The LTC 2.0 products have provided millions of individuals and their families with enormous protection and benefits,” Slome noted. According to the recently released annual study by the Association, LTC insurers paid some $9.2 billion in benefits to over 295,000 claimants in 2017, an industry high.
“At the height of this time period, as many as 750,000 individuals purchased coverage yearly on an individual basis as well as through employer-sponsored plans,” Slome shared. He noted that sales of traditional, health-based LTC insurance policies in 2017 will likely be less than 70,000 policies.
Slome noted several factors account for the significant decline. “The sustained low interest rates over the past 10 years have made it very difficult for insurers to generate even modest returns on the LTC 2.0 products,” he said. “When a policy has benefits growing at five percent compounded annually at a time when the Fed’s (Federal Reserve’s) interest rates are near zero, something has to change.” That included insurers ceasing to sell new policies and premium rate increases on existing policies containing costly benefit provisions like unlimited or lifetime benefits and annual compounded benefit increases.
Enter LTC Planning 3.0
The need for consumers to plan has not diminished Slome advised the audience. “And, with a robust economy and record level stock market indices, today more consumers than ever have the interest and willingness to explore options.”
“LTC 3.0 planning entails linked-benefit or asset-based products,” Slome explains. “Hundreds of thousands of these policies are already purchased annually and this number will grow.” What’s especially promising, the expert forecasts, is the tax-advantaged opportunities approved by Congress under Section 1035 exchanges of existing annuity and life insurance policies.
“There is over $2.5 trillion of money held in annuities,” Slome shared. “It’s seniors’ “what if” money; what if I need long-term care?” The Pension Protection Act (PPA) that became law in 2010 allows individuals to exchange an existing annuity for one that can provide both greater benefits if long-term care is needed along with significant tax advantages. “Pull money from an existing annuity to pay for long-term care and you could be subject to taxes,” Slome explains. “Do a 1035 exchange to a PPA-qualified annuity and you retain all of the benefits but now all monies withdrawn for LTC are 100 tax-free.”
Slome concluded his presentation with advice for the insurance and financial advisers. “The world changes and it’s natural for people to be comfortable with the way things are, or were,” he advised. “If you recognize the changes and the opportunities, you’ll be helping others and yourself. Play offense.”
To learn more about long-term care insurance planning options call the American Association for Long-Term Care Insurance at 818-597-3227 or visit the organization’s website at www.aaltci.org to find LTC insurance professionals.
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