How to position Long Term Care Insurance with small businesss by Clarke Alderman, RHU Brokerage Manager, Financial Services Small Business Insurance Agency, Inc.
Clarke Alderman, RHU Brokerage Manager, Financial Services Small Business Insurance Agency, Inc. For financial professional use only. Not for use with the public. Individual long-term care insurance is underwritten by John Hancock Life Insurance Company, Boston, MA 02117 and in New York by John Hancock Life & Health Insurance Company, Boston, MA 02117. Group long-term care insurance is underwritten by John Hancock Life & Health Insurance Company, Boston, MA 02117. LTC-7176 11/09 Planning for Long-Term Care
Transcript
Clarke Alderman, RHUBrokerage Manager, Financial ServicesSmall Business Insurance Agency, Inc.
For financial professional use only. Not for use with the public. Individual long-term care insurance is underwritten by John Hancock Life Insurance Company, Boston, MA 02117 and in New York by John Hancock Life & Health Insurance Company, Boston, MA 02117. Group long-term care insurance is underwritten by John Hancock Life & Health Insurance Company, Boston, MA 02117. LTC-7176 11/09
Planning for Long-Term Care
Survey of 502 small businesses (10-1,000 employers) conducted by John Hancock and Mathew Greenwald & Associates in May ‘09
Objectives:• Learn why small businesses do or do not offer LTCI in
their benefits packages• Find out what motivates businesses to offer LTCI
Employers recognize employee anxiety about long-term care
• 54% think employees are concerned about needing long-term care for themselves/spouses
• Perceived employee concern about the affordability of long-term care was 72%
But…employers lack in-depth knowledge of LTCI benefits
• Only 48% felt knowledgeable about LTCI worksite coverage
• Awareness levels are low for features such as portability (40%) and carve-out options (33%)
• About half (52%) were aware of the tax deductibility of premiums
Tax-qualified LTCI premiums are considered medical expenses. For an individual who itemizes income tax deductions, medical expenses are deductible to the extent that they exceed 7.5% of the individual’s Adjusted Gross Income (AGI). The amount of the LTCI premium treated as a medical expense is limited to the eligible LTCI premiums, as defined by Internal Revenue Code section 213(d), based on the age of the insured individual. That portion of the LTCI premium that exceeds the eligible premiums is not includable as a medical expense.
Tax-qualified LTCI premiums
Allowable deductions for 2010:
In addition, the 2010 per diem limitation under IRC section 7702B(d)(4), regarding periodic payments received under a qualified LTCI contract, is $290.
Employers need information about LTCI implementation and cost
Decision-makers are not as well-informed about:• the ease of offering coverage• low cost of implementing a plan
Key reasons to offer LTCI
Over four in ten say each of the following reasons were important in adding LTCI as a benefit:
• attraction and retention of key employees (47%)• tax advantages to the business or business owner (43%)• employee demand (43%)• exposure to first-hand experiences dealing with long-term care
issues (42%)
*Estimates based on data from the following sources: US Census Bureau (add the year); LIMRA year-end data, 2006; U.S. Small Business Administration, Small Business Profile in the United States, 2006; HIAA Employer's Guide to LTCI, 2003 and "What's Hot and What's Not in Voluntary Benefits," Aon Consulting, January, 2006.
There are over 5.7 million businesses in the United States.
Small Business — LTCI Market*
Size of Business(Employees) 1-500 501-
1,0001,001- 5,000 5,001+ TOTAL
Total Number of Businesses in the
United States5,750,200 8,341 6,745 1,814 5,767,100
• 57% of companies have never been approached about offering LTC insurance
• 5.7 million companies just waiting to be approached• Businesses say they would turn to their benefits broker
or agent for information• Consumers like to purchase coverage at the worksite because
they trust the due diligence of their employer
Small Business Opportunity — It’s Huge
Part Two: Planning for Long-Term Care
Not a Deposit Or Other Obligation Of Bank Not FDIC Insured Not Insured By Any Federal Government Agency Not Issued, Guaranteed Or Underwritten By Bank Or FDIC Not A Condition To The Provision Or Term Of Any Banking Service Or Activity Policy Is An Obligation Of The Issuing Insurance Company
Planning for Longevity
• Family• Occupation• Recreation
What is your current lifestyle?
What would you do
if you needed long-term care?
• The care required when you are no longer able to care for yourself independently
• Assistance with Activities of Daily Living:DressingToiletingBathingEatingContinenceTransferring (moving into or out of a bed, chair or wheelchair)
• Supervision required due to a severe cognitive impairment, such as Alzheimer’s disease
What is long-term care?
• At home• In various facilities that assist people with long-term care needs –
for example, assisted living facilities, residential care facilities and residential care facilities for the elderly
• In community settings, such as adult day care centers• In hospice home-care programs or facilities• In nursing homes/nursing facilities
Where are long-term care services provided?
Care for Custodial (Personal) Needs:• Care provided to assist with Activities of Daily Living or to meet
personal needs. For example, assistance with bathing, dressing, eating or getting in or out of bed
Care for Skilled Needs:• Care provided by a licensed health care professional such as an
RN, LPN, physical therapist or speech therapist. This care must be ordered by a physician
What types of long-term care services are there?
Have you ever known someone
who needed long-term care services, either at home or elsewhere?
Could it happen to you?
• Nearly 40% of people needing long-term care services are working age adults1
• People age 65 face at least a 40% lifetime risk of entering a nursing home/nursing facility2
• The average nursing home/nursing facility stay is 2.4 years3 and 10% of residents will stay five years or longer2
1Georgetown University Long-Term Care Financial Project, “Who Needs Long-Term Care?” 2003.2America’s Health Insurance Plans (AHIP), formerly Health Insurance Association of America (“HIAA”), “Guide to Long-Term Care Insurance, 2002. 3National Center for Health Statistics, U.S. Department of Health and Human Services, “The National Nursing Home Survey,” June, 2002.
4MetLife Mature Market Institute, “The MetLife Market Survey of Adult Day Services and Home Care Costs,” September, 2008. (Home Health Care costs based on home health aide at 5 hours/day x 5 days/week. Home Health Care hours and days can vary based on specific circumstances.5MetLife Mature Market Institute, “The MetLife Market Survey of Nursing Home and Assisted Living Costs, ” October 2008. (Nursing Home/Facility costs based on semi-private room, 7 days/week)
City,State
At Home4
5 hours/day x 5
days/week
Assisted Living/Residential Care
Facility5
7 days/week
Nursing Home/Facility5
7 days/week
Boston, MA $33,800 $49,716 $102,930
Denver, CO $32,500 $30,156 $65,335
Miami, FL $20,800 $35,232 $72,635
New York, NY $22,100 $49752 $129,575
Seattle, WA $29,900 $35,580 $88,695
NationalAverage $26,000 $36,372 $69,715
What is the average cost of care?
6Kaiser Commission on Medicaid and the Uninsured, “Medicare and Long-Term Care,” July, 2006.
National Spending on Nursing Home Care, 2004
Total = $115.2 billion
Other Public3%
Other Private4%
Medicaid43%
Out-of-Pocket28%
Medicare14%
Private Insurance8%
What about Medical or Disability Income Insurance?
• Medical Insurance was not designed to pay for long-term care services and does not generally pay for care for custodial (personal) needs care
• Disability Income Insurance is designed to help replace a portion of the disabled person’s income, in order to pay for expenses such as mortgage, utilities and food. Disability Income Insurance was not designed to pay for long-term care services
Does Medicare pay?
• Medicare covers only 14% of long-term care costs on a national basis
• Medicare does not pay for help with Activities of Daily Living
Does Medicaid pay?
• Medicaid is government funding intended for those who meet certain income and asset criteria
• Medicaid requires “spending down” of personal assets• You may be temporarily ineligible for benefits if you transfer
your assets
What other risks have you insured against?
Chances are, you pay premiums to ensure that your car or belongings will be repaired or replaced if they are damaged. Doesn’t it make sense to make a similar commitment to your own well-being by purchasing Long-Term Care Insurance?
Why do people purchase Long-Term Care Insurance?
• To help avoid depending on family or friends• To help maintain options as to how and where to receive care• To help preserve their future independence• To help avoid using retirement savings or personal assets to pay
for long-term care services
How do people pay for long-term care services?
Often, people turn to their • retirement savings, or• personal assets
Can you afford to pay for long-term care services using your retirement savings?
If so, for how long?• Paying for long-term care services with retirement savings or
personal assets can deplete your resources and jeopardize your enjoyment of your retirement
• Long-Term Care Insurance can help you plan for future possibilities, and may help you extend your retirement savings
Clarke Alderman, RHUBrokerage Manager, Financial ServicesSmall Business Insurance Agency, Inc.
