ElderWeb

An April 2004 story in the AARP Bulletin reports that CNA recently increased premiums to long-time long term care insurance policyholders by 50%. As a result of the premium hikes, policyholders have to decide whether to retain the insurance and pay the higher premiums, reduce the level of coverage to keep the lower premiums, or walk away from the premiums they have paid and let the policy lapse. A story in Consumer Reports written in November 2003 says 50% premium hikes are being allowed by state insurance regulators, and warns consumers that long term care insurance may now be too risky and expensive to purchase.

I've been warning people for years that the quality of the insurance company they buy a policy from is critical, but that might not have kept someone from purchasing a policy from CNA. Nor is it enough to look for a company that has lots of long term care policies outstanding. Conseco is one of the largest long term care insurers around, but they have been in bankruptcy and have gotten permission for 40% premium rate hikes from regulators in the past.

There are several problems, all creating a "perfect storm" for many long term care insurance policyholders:

The cost of nursing home and other long term care is increasing, in some cases beyond amounts insurers had planned for when pricing their policies.

Investment returns are way down, and investment returns have traditionally helped offset claims payments for insurance companies.

The market is competitive and many companies underpriced their policies initially, forcing everyone to keep premiums unrealistically low and resulting in a later need to increase them.

There is a tremendous amount of consolidation and change in the market, so that policyholders may find that their policy ultimately ends up in the hands of a company that looks quite different from the company they initially purchased it from.

In spite of these disturbing stories, I am still hopeful that good companies will sell good policies and will be there to stand behind them when claims come due, but it is definitely a "buyer beware" marketplace out there. I still believe that anyone who wants to retain their ability to age in place should investigate long term care insurance, but they must be willing to do some homework to be sure they are getting the right product at the right price for the right reasons, and they must be sure they understand what can happen to rates in the future if the company is not pricing policies correctly. It is more important than ever to work with agents and companies who really understand this marketplace and its challenges.

The 2000 National Compensation Survey determined that 7% of all employees are eligible for long term care insurance as an employee benefit. Professional and technical employees, those who work in larger companies, and those who are represented by unions were much more likely to be eligible for this benefit.

Penn Treaty, a leading provider of long term care insurance, announced that its auditors have expressed doubts about the company's future based on its 2000 financial statement, and the company has hired two investment banks to help explore its strategic options. The company's auditors said they will include a going concern qualification on its 2000 financial statement because Penn Treaty's surplus to pay for insurance claims has fallen below the regulatory level. The company said they believe they have sufficient reserves, and are in the process of filing actuarial reports with state regulators to support their claim, but admit that it is possible they will be required by reglators to increase reserves. In that event, the company will need to find additional capital. In their annual report filed with the SEC they estimate that we may need to generate at least $40 million of additional capital in order to provide sufficient funding for their liquidity and statutory surplus needs during 2001.

Penn Treaty derives most of its revenue from the sale of long term care policies. About $355 million of the total $357 million premium revenue they reported in 2000 was from long term care policies. LifePlans, Inc. reports that Penn Treaty is the second largest writer of long-term care insurance in terms of new policies and among the five largest writers of individual long-term care insurance in terms of annualized premiums. Penn Treaty has been writing long term care insurance since 1972.

Massachusetts Mutual Life Insurance Company has signed a deal with the U.S. Chamber of Commerce to offer a tax-qualified long-term care insurance product to member businesses at a 15% discount. The Chamber reports that 2/3 of Chamber members surveyed said that they regard the high cost of long-term care as a major concern, and nearly half reported that they had taken time during the workweek to attend to the daily living needs of a relative or friend. Yet only one in eight respondents currently own long-term care insurance and three-fourths have not budgeted for the cost of long-term care.

Most business owners surveyed said they would be more likely to buy long-term care insurance if they could do so on a pre-tax basis, and just over half said they would be more likely to offer long-term care as an employee benefit if there were better tax incentives to do so.

Submitted by Kim Purcell

Congresswoman Nancy Johnson (R-CT), Chairwoman of House Ways and Means Health Subcommittee, has introduced HR 831, a bill which would provide additional tax deductions and credits for long term care insurance and caregiving expenses. HR 831 has a number of interesting provisions. It would give higher deductions for long term care insurance premiums to people who have owned policies for a number of years. People under age 55 who have owned policies for 4 years or more would be able to get a full deduction of their premiums, and people aged 55 or over would get the full deduction if they've owned a policy for two years or more. The proposed legislation also would allow long term care insurance to be included in cafeteria plans and flexible spending arrangements.

In addition to the provisions for long term care insurance premiums, HR 831 provides for a $1,000 "caregiver" tax credit for each qualified person under the care of the taxpayer claiming the credit. There are a number of restrictions, including a requirement that the person receiving care be living in the same household as the taxpayer.

The bill is co-sponsored by Jim McCrey (R-LA), Karen Thurman (D-FL), and Earl Pomeroy (D-ND). Contact the sponsors or read the text of the legislation for more information.

The Center for Aging Research and Education (CARE) revealed early results from online Long Term Care survey. They found what they called "shocking" results. For instance, of respondents who considered themselves "financially knowledgeable", 78% do not own LTC insurance, 46% do not even understand it, and 16% believe that the government will cover any long term care needs that they have. On average, people overestimated the cost of LTC insurance by up to 400%. Respondents were also unclear about what LTC insurance covers, with most believing it covers only nursing home care. Adding to the perception that LTC insurance is unnecessary, nearly 50% are counting on their spouse to take care of their long term care needs.

Act No. 2000-795, HB170 was signed by the Governor and became effective August 1, 2000. The companion bill was S-187 (Butler). This bill amends the Alabama Medicare Supplement Policy Minimum Standards Act and adopts the Alabama Long-Term Care Insurance Policy Minimum Standards Act, so as to make Alabama law substantially similar to the uniform standards developed by the National Association of Insurance Commissioners and required by the Federal Health Care Financing Authority.

Tillinghast-Towers Perrin told members of the Health Insurance Association of America (HIAA) about results of a recent study they did about insurance products for seniors. They said that many organizations believe that LTC is a product that must have a bright future ? it just hasn?t been fully realized. Relatively high premiums combined with low perceived need is being addressed on several fronts. Insurers are seeking ways to penetrate the market by combining or integrating LTC benefits with other coverages. Many respondents felt that the above-the-line tax deduction the Congress is considering would dramatically increase the public?s appetite for LTC products. But respondents also noted that state-by-state regulations, a lack of perceived need or understanding, and difficulty with distribution channels all present significant barriers to LTC products taking hold. Many insurers indicated they are leaning towards developing integrated products that provide seamless care across settings and providers?and which can take coverage from middle age through end-of-life. The hope is that integrated products such as life insurance with LTC or health plus LTC will respond better to diversifying market demand than today?s siloed offerings.

The South Dakota Office of Adult Services and Aging and the Senior Health Information and Insurance Education Program (SHIINE) have published a new guide to long term care insurance for South Dakota citizens. The guide includes general information about long term care insurance, but also includes a comparison of the premiums and benefits for most policies licensed for sale in the state of South Dakota.

One out of three Americans above the age of 55 believe the single most important action government could take to help families meet their long-term care needs would be to offer tax relief for people who purchase private long-term care insurance, according to a new survey released today by the Health Insurance Association of America (HIAA). They found that more than three in four people who decided not to buy private long-term care insurance would be more interested in doing so if they could deduct the premiums from federal income taxes.

Other key findings of the new HIAA survey include:

• Most Americans do not believe that the government will pay for most long-term care services within the next 10 years.
• In 2000, 77% of long-term care insurance policies cover both nursing home and home health care, compared to 37% in 1990.
• Over the past five years, the average daily nursing home benefit has increased by 28% while average annual premiums have increased only 11%.
• One-third of all individual long-term care policies sold are purchased by people between the ages of 55 and 64.
• The median income of current buyers of individual long-term care insurance is $42,500.
• In 2000, 65% of buyers, and 55% of non-buyers of long-term care insurance believe that they have a greater than 50-50 chance of needing nursing home care. This compares to 26% of buyers, and 25% of non- buyers in 1995.

HIAA's survey of buyers and non-buyers of long-term care in the individual insurance market was conducted by LifePlans, Inc. of Waltham, MA.

The Office of the Assistant Secretary for Planning and Evaluation (ASPE) of the Department of Health and Human Services sponsored a survey of employer group long term care insurance plans. The study was done by the Lewin Group, and it identified some of the norms and trends in group long term care insurance. ASPE pointed out that the group market for long term care insurance offers benefits to everyone since it will reduce premiums and make insurance more broadly available. Putting LTC insurance in group plans hopefully will also increase the participation of younger people, which will decrease premiums overall. Selling plans in a group also reduces administrative costs, which should also decrease premiums.

Employer plans were closely split between "service models" which reimburse the beneficiaries for incurred costs (57% of the plans), and "disability models" which make a per diem payment regardless of actual costs (43%).

All plans covered nursing home costs, over 80% covered home health costs and another 14% made home health an optional benefit. Over 70% covered adult day care, with another 9% making that an optional benefit. About 65% covered assisted living, and another 10% made assisted living an optional benefit. Over half the plans include some coverage for respite care, personal care services, and homemaker/chore services. Very few offered reimbursement for a family caregiver or the cost of home modifications.

The average daily benefit amount for nursing home care was $100 a day, but ranged from $40 a day to $300 a day. The average daily benefit for home health care was 60%-100% of the nursing home benefit, and ranged from $20 a day to $200 a day. The average lifetime maximum was $200,000, but ranged from $24,000 to $1,000,000.

Almost all employers require the employee to pay the full premium. Premiums for a base plan with nursing home and home health benefits for a person age 50 ranged from $7.30 to $92.10 a month. The report included an example from one employer where an employee age 50 would pay anywhere from $31 a month to $132 a month, depending on how many optional benefits they chose.

Over 90% of the plans covered the employee, spouses, parents, and parents-in-law. Slightly over 50% included retired employees.

Most employers provided a 60-90 elimination period before benefits would become available. Most included inflation protection, about half as immediate inflation protection provided through a higher premium and the other half as an option for inflation protection in the future as a benefit upgrade. Just under half the employers offered a non- forfeiture benefit to provide protection if the individual stops paying premiums, most commonly as a "reduced paid up benefit" to provide reduced benefits over the original period of time, rather than the more beneficial "shortened benefit period." 44% of the plans included "return of premium at death" that would return a portion of the premiums to the insured's estate if not used by the time the insured dies.

The survey found that employee participation was greatest when only a few choices were offered. Participation rates varied from less than 2% to over 10%. They also found that employee education was critically important in getting employees to participate, but very difficult to do. The highest participation rates were seen in companies where senior management was actively involved.

In the future, they want to research several other issues, like whether employees are retaining their coverage or letting it lapse, and what features employees seek in LTC insurance and how badly they want it.

For more information, contact John Cutler

California SB2111 has been passed by the legislature. It will add agents and company representatives to the working group responsible for helping state insurance regulators come up with the content and format for the state's annual LTC rate stability guide. The bill would also allow insurers to focus consumers' attention on rate increases affecting California LTC policies, rather than on increases affecting policies sold throughout the United States.

Current law requires insurers to report and the consumer guide to include summaries of coverage of any policy sold in any state for the last ten years. The bill's author, Senator Joseph Dunn, believes this voluminous amount of information is of little use to California consumers since they can only purchase those policies which are sold in California. Dunn believes the bill makes it clear that the rate guide is intended to have two sections: a rate comparison section of all policies sold in any state in the last ten years, and a policy comparison section comparing policies available for purchase in California.

Senator Chuck Grassley, chairman of the Special Committee on Aging, is a proponent of long-term care insurance and is the sponsor of legislation to give people tax incentives to buy the policies. However, he feels a responsibility to protect consumers from unanticipated long-term care insurance premium increases, and is holding a hearing to discuss ways to protect consumers from unreasonable rate hikes.

Senator Grassley states, "A federal tax break would stimulate long-term care insurance sales. It also would indicate to consumers that such policies are safe and government-endorsed. As the sponsor of that legislation, and as a strong believer that private long-term care insurance should be part of everyone's planning for retirement, I believe I have a special responsibility to ensure that consumers are protected when they buy a policy. A federal tax break amounts to a government seal of approval. An insurance policy should be worthy of that seal. Long-term care insurance is a great concept. It will help a lot of people. We have to make sure it's a great product."

"Today's testimony supports my instinct that we should protect long-term care insurance consumers from large, unexpected rate increases. When people are priced out of their policies, they lose the money they paid in premiums. And they have a terrible time getting insurance with another company. I want to prevent those hardships. As I mentioned at the outset, I'm the principal sponsor of legislation establishing a federal tax incentive for those who buy long-term care insurance. Therefore, I plan to amend my bill, S. 2225, the Long-Term Care and Retirement Security Act of 2000, to include a consumer protection provision. The amended bill will require that long-term care insurance plans billed as federally qualified plans include a provision that protects consumers of these policies from unexpected and extreme rate hikes."

The hearing features a representative from the National Association of Insurance Commissioners, which is working on a rate stabilization plan; a lawyer who has filed several class-action lawsuits on behalf of policyholders; and insurance industry representatives.

CNA LTC, the long-term care insurance unit of CNA Financial Corporation, is introducing a Limited Payment Option that allows clients to pay for their long-term care insurance while they are still in their peak earning years. CNA LTC's Limited Payment Option includes two payment plans. Clients who are age 18-84 years of age may qualify for the Ten-Pay plan, which allows them to make payments for 10 years. The "To Age 65" plan is for clients under age 55 and provides for premium payments made until the client reaches age 65. At that time the policyholder is covered without paying any additional premiums. Both plans have a five-year rate guarantee, subject to individual state approval. Existing CNA LTC clients who have just been issued a policy or who are in their first policy year will be able to take advantage of the Limited Pay Options.

CNA was a pioneer in writing personal insurance policies covering nursing home costs, starting back in 1965. CNA had been exploring a sale of its long term care business, but recently decided they will retain the individual life, long term care and retirement services businesses, although they will continue to consider the sale of the viatical settlements and life reinsurance businesses.

The California Legislature has enrolled AB 2107, which requires that all insurers, brokers, agents, and others engaged in the business of insurance owe a policyholder or a prospective policyholder a duty of honesty, and a duty of good faith and fair dealing.

The bill stipulates that if a life agent offers to sell to an elder any life insurance or annuity product, they must advise the client writing that the sale or liquidation of financial assets to fund the purchase of this product may have tax consequences, early withdrawal penalties, or other costs or penalties as a result of the sale or liquidation, and that the elder or elder's agent may wish to consult independent legal or financial advice before selling or liquidating any assets and prior to the purchase of any new products.

A life agent who offers for sale or sells a financial product to an elder on the basis of the product's treatment under the Medi-Cal program may not negligently misrepresent the treatment of any asset under the statutes and rules and regulations of the Medi-Cal program, as it pertains to the determination of the elder's eligibility for any program of public assistance. A life agent who offers for sale or sells any financial product on the basis of its treatment under the Medi-Cal program shall provide, in writing, a specified disclosure that indicates it is not necessary to expend all of their savings before applying for Medi-Cal, and outlines the financial eligibility rules for Medi-Cal.

The bill also clarifies that "Financial abuse" of an elder or dependent adult occurs when a person or entity takes, secretes, appropriates, or retains, or assists in taking, secreting, appropriating, or retaining real or personal property of an elder or dependent adult to a wrongful use or with intent to defraud.

This bill underwent substantial revisions in response to concerns expressed by the insurance industry and other professionals. The original version of this bill would have forbidden lawyers to sell annuities to their clients, or to receive compensation for referring clients to insurance agents or brokers, and would have restricted agents? ability to recommend that older customers sell assets to pay for LTC arrangements. If the original version had been enacted, agents would be allowed to make LTC recommendations involving asset sales only if they held Series 7 licenses from the National Association of Securities Dealers and were certified financial planners or certified financial analysts, according to the bill text.

CNA, the nation's second largest commercial insurer, said that the process of exploring a sale of its life insurance businesses has been completed, and that they have decided to retain their individual life, long term care and retirement services businesses. They stated that they "decided not to sell these businesses for less than they are worth to CNA. We believe that it is in the best interests of CNA shareholders to retain these businesses." CNA will continue to explore the separate sale of its viatical settlements and life reinsurance businesses.

HR 4040, Long Term Care Security Act, has been passed by both houses of Congress and now goes to the President for his signature. This bill would provide long term care insurance as a part of the benefits package for all Federal employees, members of the uniformed services, civilian and military retirees, and their qualified relatives. The bill allows the government to competively bid with one or more carriers, with the insured individuals responsible for 100% of the premium costs, and also allows individuals to have premiums withheld from their pay.

Papers were presented at the 14th Private Long Term Care Insurance Conference, sponsored by the Long Term Care Insurance Educational Foundation. The conference provides a non-partisan forum for educating attendees about the evolving long term care insurance market, discussing the impact of state and federal legislative policies on the marketplace; and fostering the development of public-private partnerships to finance the nation?s long term care bill. One paper provides arguments about whether or not tax incentives for LTC insurance would encourage the public to purchase it.

The Health Insurance Association of America (HIAA) released results of a survey of state legislative initiatives on health care matters, including long term care insurance.

They report that 16 states are considering legislation on long term care insurance. HIAA expects to continue its active involvement in the industry effort to oppose California legislation that would require long-term care insurance policies to be noncancelable, among other things. Virginia enacted legislation that requires insurers to refund the unearned premium when a policy is terminated. A long-term care shoppers guide was defeated in Missouri.

Tax incentive legislation has been introduced in 26 states, including deductions or credits for the purchase of long-term care insurance or individual insurance costs. Last year, 12 states enacted legislation, with 10 applicable to long-term care insurance premiums and two to self-employed individuals. Thus far this year, West Virginia has enacted clean up legislation for its long-term care insurance tax incentive bill that passed in 1999, and Maryland passed a tax credit for individuals who purchase long-term care insurance. Sixteen states have adjourned without acting on various tax incentive bills.

SB 171, The Income Tax Credit for Long-Term Care Insurance Premiums, was signed by the Governor on May 11. This bill will allow for a credit against the State income tax for 100% of long-term care insurance premiums paid by the individual for the individual or the individual's spouse, parent, stepparent, child, or stepchild if the insured is a Maryland resident. The credit is limited to $500 for each insured and to one taxable year for each insured, and only applies to policies purchased July 1, 2000 or later.

The bill is not as comprehensive as some proponents had hoped it would be, but does allow a credit to first-time buyers of long term care insurance.

Conseco, the second largest provider of long term care insurance in the U.S., indicated in their latest SEC filing that they are increasing premiums on long term care policies. The 10Q filed May 15, 2000 states, "The loss ratios for long-term care products increased in the first quarter of 2000, reflecting unfavorable claims experience and the effects of the asset accumulation phase of these products...In order to improve the profitability of the long-term care product line, we are currently selling products with higher margins and we have continued to apply for appropriate rate increases on older blocks of business."

Conseco?s CEO stepped down earlier this month. Stephen Hilbert left his post after receiving $72.5 million in severance pay and a bonus of $3.4 million. The company's CFO, Rollin M. Dick, has also stepped down. He will receive his salary of $250,000 per year through December 31, 2001, and he also received a bonus of $187,500.

In the meantime, class action lawsuits were filed in the United States District Court for the Southern District of Indiana on behalf all persons who purchased securities or put options for Conseco between April 28, 1999, and April 5, 2000. Another class action lawsuit was filed on behalf of all persons who purchased Conseco Financing Trust VII, 9.44% Trust Originated Preferred Securities between August 27, 1999 and March 31, 2000. These are in addition to a long list of other lawsuits reflected in the company's SEC filings.

The ratings agencies have reduced ratings on Conseco debt to junk status. Standard and Poor?s stated, ?The ratings downgrade on Conseco Finance reflects the deteriorating financial condition of its parent, Conseco, the support of which is critical to the finance subsidiary?s ability to continue to fund itself.?

The International Longevity Center-USA (ILC-USA) has published research reports about the development of mandatory national long term care insurance programs in Japan and German. These reports describe the types of long term care problems these countries were facing, and the evolution the national long term care insurance programs that were developed to deal with these problems.

A number of interesting and unexpected problems emerged during the process. For instance, Germany created a long term care insurance program which was to be partially funded by employers. To get the support of employers needed for the passage of the program, one national holiday had to be eliminated so that employers could redirect the money they had been spending on holiday pay to the new long term care benefit for their employees.

- submitted by Bill Comfort and Kim Purnell

The long term care insurance marketplace is undergoing some big changes as the top two insurers swallow up some of their smaller competitors and face other financial challenges.

A newly-announced acquisition of Travelers will give GE 30% of the $2.9 billion market and make them the largest provider of long term care insurance in the United States. Consenco is in second place with about 23% of the market, and CNA is in third place, with about 10% of the total market. Trailing the top three insurers are Aegon, John Hancock, and Penn-Treaty American.

GE Financial Assurance, a division of General Electric, purchased 90% of the long term care insurance business of Travelers, a division of CitiGroup. This purchase will add 150,000 Travelers' policyholders to the 500,000 LTC policyholders they already have. GE also announced they will use the distribution networks of both CitiGroup and Travelers to market long term care insurance in the future. Travelers Life & Annuity became part of Citigroup in a merger in late 1998.

Second-place Conseco, Inc. announced it has signed an agreement to acquire a long term care agency from Fortis, which previously had sold its U.S. individual LTC insurance business to John Hancock. Conseco is facing financial problems, though. Their 1999 annual report shows that two large creditors have demanded early repayment of their loans, and experts believe that will deepen investors' fears that Conseco's cash flow is dwindling.

California Assembly Bill AB 2107 was introduced on February 22, and has been referred to the Insurance Committee. The bill would only permit a licensed life agent who has a National Association of Securities Dealers Series 7 license and who is either a certified financial planner or certified financial analyst to advise an elder or his or her agent to purchase long-term care planning with the proceeds from the sale of assets. The bill would only permit those life agents to sell or offer for sale to an elder or his or her agent any financial product on the basis of the product's treatment under Medi-Cal. It would also prohibit a lawyer from selling an annuity to an elder with whom the lawyer has or has had an attorney-client relationship.

- submitted by Kim Purnell

The Long-Term Care Working Group of the National Association of Insurance Commissioners is discussing further revisions to the draft Model LTC Insurance Regulations. The changes they are currently proposing would require disclosure to the consumer of a 10 year history of premium increases on the same or similar policies. This change is a response to problems experienced by some beneficiaries when they were subjected to extremely large premium increases after they purchased long term care insurance. The draft model regulations are intended to be a model for states to adopt to ensure consistency in the regulation of long term care insurance across the country.

LIMRA International reported the results of their 10 year survey into LTC insurance sales. Their survey showed that group LTC insurance sales rose in 1999. The number of employer groups increased by 56% and the number of participants increased by 126% over 1998. By way of comparison, the prior year's results showed an increase of only 36% in employer groups, and a 24% increase in participants.

In 1998, the average annual premium for a policy with a $100 per day nursing home care/ $50 per day home care benefit, four years of coverage, and a 20-day elimination period was:

• $274 at age 40
• $385 at age 50
• $1,007 at age 65
• $4,100 at age 79

With a 5 percent inflation protection feature, policies had an average annual premium of:

• $595 at age 40
• $888 at age 50
• $1,850 at age 65
• $5,880 at age 79

- submitted by John Cutler

The House Civil Service subcommittee approved HR 4040, The Long-Term Care Security Act. This bill would make competitively-bid private long term care insurance available as an optional benefit for federal employees. The bill has bipartisan backing, along with the support of President Clinton, and most groups representing federal and postal workers, retirees and military personnel. The program is viewed as a possible model for corporate long term care insurance benefits outside the federal government.

Under the proposed bill, active and retired federal workers and military personnel would be eligible for coverage, along with their spouses and children. The parents and parents-in-law of active federal workers and military personnel would be eligible for coverage, but not the parents and parents-in-law of retirees. Coverage would not be guaranteed to all eligible individuals, and nor would it be available to persons who are in immediate need of care. The insured parties would be responsible for the whole amount of the premium, but they would get preferential group rates, and they would also be able to pay the premiums using payroll deductions. The plan would also offer "portability", so that beneficiaries could continue the coverage if they leave federal employment before qualifying for retiree benefits.

Sen. Chuck Grassley (R-IA), chairman of the Special Committee on Aging, Sen. Bob Graham (D-FL), and others announced a consensus on legislation to help individuals pay for nursing home expenses and other long-term care needs. The consensus bill, S35: The Long-Term Care and Retirement Security Act of 2000, has won the support of two major groups following long-term care legislationthe Health Insurance Association of America (HIAA) and the American Association of Retired Persons (AARP).

The consensus bill merges several proposals, including the Grassley-Graham plan to allow a deduction for long-term expenses; a comprehensive long-term care expenses bill from Rep. Nancy Johnson (R-CT) and Rep. Karen Thurman (D-FL); and President Clinton's proposal to establish a $3,000 tax credit for long-term care. It is the most comprehensive legislation to date designed to increase the number of Americans with long-term care insurance.

"We all agree on helping people with their long-term care expenses," Grassley said. "We just differ in our approach. It makes sense to take everything we agree on and merge it into one comprehensive bill. The prospects for success are the strongest if we have a united front."

Source: Sen. Chuck Grassley

The Health Insurance Association of America (HIAA) and AARP called upon Congress to approve tax relief to encourage people to buy coverage to protect themselves against the catastrophic cost of long-term care by providing a full federal deductibility for long term care insurance premiums with an above-the-line tax deduction. They also expressed support for the $3,000 caregiver tax credit proposed by President Clinton. They released a report showing that a 100 percent above-the-line tax deduction for consumers purchasing private long-term care insurance would provide annual Medicaid savings of $3.5 billion to $3.8 billion. An above-the-line tax deduction would be extremely beneficial to taxpayers, since the current deduction is categorized as a medical expense, which is only available to taxpayers who itemize their deductions, and even then is only deductible when medical expenses exceed 7.5% of adjusted gross income.

Source: Health Insurance Association of America (HIAA)

- submitted by Bill Comfort, Jr.

CNA insurance announced it is selling its individual life and long term care insurance in order to focus on commercial insurance products. They emphasized that the long term care division is healthy, but it is not the market they want to focus on. There have been other recent changes in the long term care insurance market, including Fortis's recent sale to John Hancock of their long term care insurance, and Travelers' announcement last December that they may sell off their long term care insurance division. CNA, Fortis, and Travelers have been some of the larger underwriters of long term care insurance.

The House Banking Committee is reviewing HR 1776 - The American Homeownership and Economic Opportunity Act, which would eliminate the up-front 2% fee now required for federally-insured reverse mortgages if the proceeds are used to purchase long term care insurance. The House Banking Committee may also consider the elimination of the fee for proceeds used to make home repairs required by the lender, or for debt refinancing and health care costs.

National Underwriter reports that sales of long term care insurance to people under age 60 is increasing at some companies. Up to this point, most sales have been in the over-60 group, but the younger age of buyers is something the insurers welcome. Some insiders speculate that the increase in younger buyers is tied to the drop in the age at which people expect to retire. Since many people now try to retire in their 50's, they may be starting to think about post-retirement issues, like long term care insurance, at a younger age. Many insurers are trying to develop better programs to educate and market to this younger marketplace.