Archive for July, 2013

Tax Tips: Long Term Care Insurance

Tax Tips: Long Term Care Insurance

You may be able to deduct all or part of the Long Term Care insurance premiums you pay for yourself, your spouse, or a dependent, but only if your policy meets the IRS criteria for a qualified policy. If you bought the policy before January 1, 1997, and it met the requirements of the state where it was issued, it is automatically considered a qualified policy. If you bought the policy later, it must satisfy several requirements to be considered qualified.

First of all, the policy must provide coverage only for qualified long term care services. These include necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, as well as maintenance or personal care services that are required by a chronically ill individual, in connection with a plan prescribed by a licensed health-care practitioner. Also, your policy must satisfy the following conditions:

• It must be guaranteed renewable, meaning that you can renew your policy as needed without undergoing additional medical exams
• It must not have a cash surrender value or any provision that allows you to cash in, pledge, assign, or borrow against the policy, or receive anything more than a refund of premiums paid if you cancel the policy
• It must provide that any refunds and dividends (other than refunds upon termination of the policy) can be used only to reduce future premiums or increase future benefits
• It must not pay for (or reimburse) expenses that are reimbursable under Medicare, unless Medicare is a secondary payer, or unless the policy pays a specified amount per day regardless of actual expenses
• It must meet certain consumer protection requirements set out in the Internal Revenue Code
If your Long Term Care policy meets the conditions listed above, or if it was issued before January 1st, 1997, at the least part of your premium may be tax deductible as a medical expense. To qualify for a medical expense deduction, your unreimbursed medical expenses (including Long Term Care premiums) must exceed 7.5% of your adjusted gross income. Also, you must itemize your deductions.

Note: Starting in 2013, the threshold to deduct medical expenses will be raised from 7.5% of adjusted gross income to 10% the threshold increase will be delayed until 2017 for those age 65 or older.

The maximum amount of Long Term Care insurance premiums that you can deduct in a year depends on your age at the end of the year. In 2012, deduction limits (which are indexed each year for inflation) are as follows:

Age Limit on Deduction
40 or younger $350
41 to 50 $660
51 to 60 $1,310
61 to 70 $3,500
71 or older $4,370

A qualified Long Term Care insurance contract is treated as an accident and health insurance contract, and the benefits are typically treated as tax free. However, if your contract pays a set dollar amount per day (per diem), the tax-free treatment is subject to a certain limit, indexed annually for inflation. Benefits over and above this limit are generally considered taxable income.

Under this limit, the amount of your Long Term Care insurance benefits that is excluded from taxation in a given period is figured by subtracting any reimbursement received (through insurance or otherwise) for the cost of qualified long-term care services during the period from the larger of the following amounts:

• The actual cost of qualified Long Term Care services during the period
• The dollar amount for the period ($310 per day for any period in 2012)

Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
Email: AG@AbeGlickman.com

“It is better to create a plan 10 years too soon than one day too late.”

Questions or Comments? Give me a call!


Long Term Care Is A Women’s Issue…Or Is It?

Long Term Care Is A Women’s Issue…Or Is It?

Lately, the notion that Long Term Care is a women’s issue has been generating a lot of buzz, but the truth is, our industry has been tugging at this thread for years. In my possession are studies, statistics, articles and agent presentations dating back to 2007 and I’m certain I could dig deeper.

Statistics

Statics are the scaffolding upon which out Long Term Care house was built. I could choose from literally hundreds, but let’s cite just a few so we speak a common tongue:

• A healthy 65-year-old woman has a 67% chance of living to 90 and a 38% chance of living to 95. In general, women live about five years longer than men, and have 10 times the chance of reaching 85.
• 80% of Nursing Home admissions are women
• The average age at admission for these women is 82.
• At that age, most of these women are single. Women older than 75 are much less likely to be married than men (38%-74%).
• Women are confined 50% longer than men.
• 65% of all claims are paid to women.
• Women are more likely to suffer from Alzheimer’s (which is the claims leader in frequency, length and dollars).
• Women provide 60% to 75% of all informal (unpaid) care, which leads to depression, illness and loss of lifetime earnings and future Social Security benefits.

It’s an extremely challenging portrait, is it not? One LIMRA article suggests that women lag behind men in retirement planning for any number of reasons, including choice of more flexible career roles and lack of financial literacy (sigh) – as if financially literate men are knocking down doors for Long Term Care insurance.

Gender-Based Rates

Never have innocuous powder-blue and bubblegum-pink data points had such dire consequences as when plotting “gender-distinct pricing.” But the trends had become too obvious to ignore. Besides, as one actuary put it, “We’ve always had gender-based rates: We just blended them here in the home office before the ratebook reached the field.”

In other words, men have been subsidizing women for a long time. The companies depended on receiving and issuing a certain ratio of male-to-female applicants, and all was right with the world. But what if this decade-long “LTC is a women’s issue” campaign really took off? What if one company received an extraordinarily high number of female applicants? They are costlier claimants who don’t pay the premiums they should. Without enough men to balance them out, it could topple the ship.

Enter gender-based rates: men pay what men cost, and women pay that women cost. No longer does it matter how many men or women apple (and are issued). Neither can upset the balance of the ship. For this reason, gender-distinct pricing is said to provide greater protection against the need for potential rate increase.

It’s A Family Issue

In the end, of course, I’m not an actuary. It’s easy for me to read pop-culture articles and throw pot shots from the gallery. However, statistics only take us so far. I’d like to go beyond the numbers, or “beyond dollars” to use the expression Genworth coins in their landmark report.

I’d like to re-visit and enrich the original premise: Is Long Term Care a women’s issue?” Respectfully, I would suggest it is much more.

First, our language should evolve from that of the 1970’s. Rather than varying between “compartmentalized” and “holistic” psychobabble, we could speak directly by choosing language appealing to “primary earners” versus “caregivers” (regardless of sex). The former is concerned with keeping his or her financial commitments into retirement, while the latter relies on the income of the former to provide for the day-to-day needs of the family.

In both cases, a sales is impossible if love for others is not present.

Just as importantly, if you’ve ever provided care, then you know that Mom’s extended care is not her “issue” alone. It cuts a swath through the family like a tornado cutting through a small town. It sweeps to Dad. It becomes Daughter’s issue and Son’s issue. Siblings who don’t actively participate in the caregiving or the funding still participates by stirring up resentment that lingers for years and helps to rip the family apart. Caregivers miss time with their own families – spouses and children of any age. (“Beyond Dollars” identifies them as secondary and tertiary caregivers).

So you see, our premise falls to live up to the hype. Long Term Care is not a women’s issue – it’s an everybody issue. Extended care impacts everyone. Not only has this been true in the past, but it will become more pronounced as longevity between the genders equalizes. Our messaging must reflect this reality or risk alienating significant markets.

Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
Email: AG@AbeGlickman.com

“It is better to create a plan 10 years too soon than one day too late.”

Questions or Comments? Give me a call!


Dementia: The Journey Ahead

Dementia: The Journey Ahead

This is a very moving story; but sadly in life we lose some of those we love, not from Dementia, or Alzheimer’s, but issues of non-importance. I think this man has it right. Five years is a very long time as we older and his commitment to knowing her says it all.

It was a busy morning, about 8:30am, when an elderly gentleman in his 80’s arrived at the hospital to have stiches removed from his thumb. He said he was in a hurry as he had an appointment at 9:00am. The nurse took his vital signs and had him take a seat, knowing it would be over an hour before someone would be able to see him.

I saw him looking at his watch and decided, since I was not busy with another patient, I would evaluate his wound. On exam, it was well healed. I spoke to one of the other doctors, got the needed supplies to remove his sutures, and redress his wound.

While taking care of his wound, I asked him if he had another doctor’s appointment this morning as he was in such a hurry. The gentleman told me no, that he needed to go to the nursing home to breakfast with his wife. As I inquired as to her health, he told me that she had been there for a while and that she was a victim of Alzheimer’s Disease.

As we talked, I asked if she would be upset if he was a bit late. He replied that she no longer knew who he was, that she had not recognized him in five years now. I was surprised, and asked him, “And you still go every morning…even though she doesn’t know who you are?” He smiled as he patted my hand and said, “She doesn’t know me, but I still know who she is.”

Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
Email: AG@AbeGlickman.com

“It is better to create a plan 10 years too soon than one day too late.”

Questions or Comments? Give me a call!


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