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What's The Commotion About In The LTC Debate?


I've been following with great fascination the debate over Tax Qualified vs. Non-Tax Qualified long-term care policies in your letters section. I've read statistics about Nursing Home stays, Home Health Care delivery period, Medicare DRG's—the whole gamut. 

Frankly I can't understand what all the commotion is about. There seems to be a few fairly cut-and-dried issues with obvious answers. 

The first and most obvious issue is: Is it easier to access benefits from a NTQ plan than it is from a TQ plan? The answer appears to be "Yes." NTQ plans are not restricted to the 2 ADL limit, can include medical necessity as a trigger, and don't require a 90-day certification. Surely anyone can figure out that when you take away benefit triggers, policy benefits are harder to access. But those insurers who sell only TQ plans would have us believe that this is not true, lending credence to the statement "If you tell a lie enough times and get enough people to believe you, it becomes the truth." 

The second issue is: Long-term care insurance is for "long-term" claims—not for short-term claims. My response would be "Says who?" If that is true, then the insurers should quit offering 1-, 20-, 30-, 60-day elimination periods. However, if consumers are purchasing the shorter elimination periods, then it's obvious that there is a need for coverage for the "short term." If selling 20-day elimination periods is going to bankrupt companies, then they should do one of two things: Not offer the 20-day EP, or price it right from the start. Anything else is tantamount to admitting that they have no idea if their policies are priced correctly and are just hoping for the best. 

The third issue is taxability of benefits. This is an area where a producer must make up his/her own mind. If you believe that benefits from NTQ plans will someday be taxed as income, then you should be selling TQ plans. If you believe (as I do) that benefits from NTQ plans will never be taxed (or if they were, such an outcry would be heard that such a ruling would quickly be reversed), then sell NTQ. And let's think about this: If you're an agent and your carrier has convinced you that you might be sued by clients because their LTC benefits are taxable (should that ever happen), then you should also be worried that you might be sued when your clients can't access the benefits from their TQ plan. 

I agree with Phyllis Shelton that the TQ plan is very good for the insurer—what I disagree with is her reason. I think the insurers are very happy selling TQ plans for their own reasons—fewer claims paid out mean less reserves. If I were the CEO of a large insurance company and the federal government handed me a way to pay out fewer claims while increasing my sales, you can bet I'd be 150 percent behind whatever that program happened to be. 

The more responsible companies have taken a very neutral position—they offer the client both TQ and NTQ and the ability to switch should there be any new legislation passed, all the while maintaining neutrality on the issue of which policy is better. In effect, they're letting the market decide. Isn't this the way it should be? 

If anything kills the NTQ industry, it will be when Congress grants an "above the line" deduction only for TQ policies. And you can bet that's coming. Why? Because we are not fighting back. Do you think your congressman/woman knows anything about LTC? Do you think he/she understands the differences between a TQ and a NTQ plan? Do you think he/she is even aware that such an animal as a NTQ policy exists? I can tell you first-hand the answer to all of those questions is a resounding "No!" They have no clue. And when they vote on the "above the line" deduction issue, they will be thinking they're doing the right thing—with devastating results to the thousands of NTQ policy owners. 

As an industry, we should be pounding down their doors. We should be appalled that there is even a question as to whether or not these benefits would be considered taxable as income. We should be out there fighting for the right of our clients. We should be providing our clients with the best possible policy (which is one that pays benefits when you need them). What we should not be doing is buying into the malarkey that we're being spoon-fed—that by denying claims, an insurer has a better chance of remaining solvent and that's a good thing for everyone. 

Take away the tax issues and look at the policy itself. Is there anyone out there who can truly say that a TQ plan is better for the insured than a NTQ plan? Pricing the policies correctly and staying solvent is the insurance company's problem, not mine. Getting the best policy, from the best insurer at the best price for my client is my problem. I just want to make sure that I retain the option to choose and that those choices are not made for me by a few self-serving organizations. 

Again, let the market decide. 

National Marketing
Director—Long-Term Care
Centrelink Insurance
And Financial Services, Inc.
Woodland Hills, Calif 

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