On Wednesday, June 22, the Senate Finance Committee advanced the Enhancing American Retirement Now (EARN) Act, including an amendment containing retiring Sen. Pat Toomey’s Long-Term Care Affordability Act. The Amendment would allow people to use up to $2,000 per year in 401(k) assets to pay for their LTCi premiums. The Amendment aims to promote a more viable LTCi marketplace by increasing participation, as the use of 401(k) funds would expand the asset pool available to pay premiums. The bill would apply to “eligible retirement plans,” defined as a qualified retirement plan that is a defined contribution plan, a section 403(a) annuity plan, a section 403(b) plan, a governmental section 457(b) plan, or an IRA. The qualifying coverage may be for the individual or the individual’s spouse or dependent. Distributions for the purpose of LTCi premiums would be exempt from the additional 10% tax on the amount of the distribution.
A possible settlement agreement has fallen through in a suit between CalPERS and a group of policyholders over a 2013 proposed 85 percent rate hike. The agreement would have covered approximately 60,000 policyholders.
The suit was filed by California policyholders that elected to pay for inflation protection benefits in their long-term care insurance (LTCi) policies, ranging from policies purchased in the 1990s through 2004. The Plaintiffs alleged that CalPERS proposed rate hike violated their policy agreements. They contended that CalPERS marketing materials promised that the policies’ optional benefit would not increase their premiums, while CalPERS asserted that it had the authority to raise rates to keep plans funded.
As aging in place continues to be a focal point in the long-term care (LTC) industry, providers and insurers are exploring and developing cutting-edge wellness programs aimed at helping improve the health of insureds, keeping insureds home longer, and hopefully reducing the number, severity and duration of LTC insurance (LTCi) claims.
Faegre Drinker is proud to sponsor The Intercompany Long-Term Care Insurance Conference to be held March 20-23 at the Raleigh Convention Center. The conference is the largest multidisciplinary long-term care conference in the U.S. and will include dozens of educational sessions featuring industry thought leaders and LTCI community insiders.
Here is a brief look at the panels that will include members of our Team, with topics ranging from litigation, to aging in place, to rate increase innovations:
In a recent presentation hosted by the Long Term Care Discussion Group, retirement policy consultant Anna Rappaport and Barbara Hogg of Aon’s Retirement Practice discussed two recent surveys focusing on different aspects of retirement planning: the 2021 Retirement Risk Survey (focused on the different perceived retirement planning challenges between retirees and pre-retirees age 45 or older), and the Generations Survey (comparing financial management across generations across a broad range of financial issues, including financial fragility).
A common theme in both surveys was the COVID-19 pandemic’s dramatic effect on circumstances and perceptions about planning for and thriving in retirement. For example, the Retirement Risk Survey showed that 1 in 10 pre-retirees plan to retire later because of the pandemic, and more than 3 in 10 pre-retirees who experienced negative financial impacts from COVID-19 plan to retire either somewhat later or much later than they previously planned. Pre-retirees were also more likely than retirees to consider changing their lifestyle, working longer, and changing care arrangements for family. For those with a higher degree of financial fragility, the survey showed those individuals feel less financially secure as a result of the pandemic, prioritizing short-term goals over retirement planning. Fifty-eight percent of financially fragile individuals responded that the pandemic has created “major financial challenges” for them, compared to only 11% of low fragility individuals.
The cost of long-term care services increased across all provider types in 2021, according to a recently published 18th annual Cost of Care Survey* from Genworth. Specifically, the 2021 Cost of Care data shows the highest year-over-year increase in homecare services since Genworth began tracking the cost of care in 2004. Homecare services include homemaker services and home health aides. Individuals that provide homemaker services assist with “hands off” everyday tasks, such as cooking and cleaning. Home health aides assist with “hands on” tasks, such as bathing and dressing.
According to a recent survey from The American Association for Long-Term Care Insurance (AALTCI), the nation’s long-term care insurance companies paid out more than $12 billion in claims benefits in 2021. That represents a $700 million increase over 2020, and a $2 billion increase since 2018.
Senior Health Insurance Company of Pennsylvania (“SHIP”) was placed in rehabilitation in Pennsylvania in January 2020. On August 24, 2021, the Commonwealth Court of Pennsylvania approved the Rehabilitation Plan (the “Plan”), which includes a nationwide premium increase and several benefit modification options that will be presented to policyholders to avoid or mitigate the rate increase. The Plan includes an opt-out for state regulators who elect to review the proposed rate increase, but if an opt-out state does not approve the full rate increase the options available to policyholders of policies issued in that state would not include an option for the policyholder to retain the full benefit amounts set forth in their policy. Because of the novel strategy to pursue a rate increase/benefit modification through the rehabilitation court, the Plan has proven to be controversial. For example, the chief insurance regulators in Massachusetts, Maine and Washington have filed an appeal in the Supreme Court of Pennsylvania to challenge and block the Plan (and a group of 27 other state insurance regulators filed an amicus brief in support of this challenge). The Pennsylvania Supreme Court recently denied an application for a stay of the approval of the Plan while the appeal is pending.