The Future of Wellness Programs Offered by Long-Term Care Insurers

Companies are searching for solutions to the increasing demand for next-generation elder care solutions. As chronic conditions like Alzheimer’s Disease and other forms of dementia increase in the elder population, the necessity for in-home care rises. Insurers finding new ways to meet these needs face hurdles in state regulations on insurance rebating and the tax qualified status of wellness policies. The insurance community is keeping a close eye on potential overhaul of anti-rebating provisions and support for programs intended to allow those in need of long-term care to remain at home.

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Florida Bill Restricting Life Insurers’ Use of Genetic Information Signed by Governor DeSantis

Florida has enacted House Bill 1189, which prohibits life and long-term care insurers from canceling, limiting, or denying coverage or adjusting premium rates based on genetic information.

As we previously reported, the bill amends Florida Statute 627.4301, which currently prohibits health insurers’ use of genetic information for insurance purposes. As amended, the statute removes former carve-outs for life, disability, and long-term care insurers, but certain carve-outs remain, such as those for accident-only policies, hospital indemnity or fixed indemnity policies, dental policies, and vision policies.

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Recent Developments in LTC Rate Increase Litigation

A relatively consistent flow of premium rate increase litiga­tion has been filed against long-term care (LTC) carriers over the past several years. Following the plaintiffs’ bar having early success in a limited number of LTC rate increase class actions in the early 2000s, the tide turned definitively in favor of carriers in what we think of as the first generation of such litigation, where the plaintiffs’ bar focused primarily on an alleged duty to disclose possible rate increases and challenging the language of the contract itself. Despite the industry’s over­all success, premium rate increase litigation has attracted an increased level of sophistication from the plaintiffs’ bar, which shifted to more creative theories based on extra-contractual rep­resentations (e.g., marketing materials) in what we view as the second generation of premium rate increase litigation. While the industry remains mostly successful in warding off rate in­crease litigation, a new trend may be developing as recent cases focus on more nuanced contractual limitations and rate increase implementation issues.

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Responding and Managing the Impact of COVID-19

Assured Allies and Faegre Drinker have partnered to develop a playbook for the long-term care insurance industry. Responding and Managing the Impact of COVID-19 offers insights, guidance and ideas to manage the short- and medium-term impacts of the COVID-19 global pandemic and provides potential avenues for long-term care insurers to explore in the post-COVID-19 world that could change long-term care insurance forever.

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LTC Rate Increases: Exploring Alternatives

As issues surrounding the cost of long-term care for Americans becomes the focus of the industry, premium rate increases have historically been necessary to maintain the financial integrity of most blocks of stand-alone long-term care insurance (LTCI) business. In conjunction with those rate increases, insurers have offered (and regulators have approved) an evolving menu of rate increase mitigation options for policyholders who do not wish to or otherwise cannot afford to pay the increased rate. Recently, we have seen new and innovative alternatives proposed by industry participants. There is a growing recognition that insureds should be educated about the nature of their existing coverage and presented with a variety of options in the alternative to paying the approved rate increase amount. In the past few months alone, insurers are offering, and regulators are approving (and sometimes even requesting), an even wider variety of options, such as modifying existing coverage, reducing available benefit, or  taking a reduced paid-up policy, policy buyouts and even “hybrid” policy buyouts.

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Tax-Qualified Language: Litigation Risks Stemming from Common Policy Language

Many long-term-care (LTC) insurance policies in the market are “Tax-Qualified,” or “TQ,” meaning that they meet the federal standards for favorable tax treatment specified by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (or were grandfathered in to that definition). This is an attractive option for most insureds because under TQ policies, certain LTC insurance benefits qualify for favorable federal income tax treatment — if the policy pays only benefits that reimburse the insured for qualified LTC costs, the insured will not owe federal income tax on those benefits. Likewise, premiums are tax-deductible up to a maximum limit that increases with age. These benefits are not provided by policies that are “Non-Tax-Qualified,” or “NTQ.”

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