Legislation

The Federal Government and several state governments provide tax advantages for those who purchase long term care insurance (LTCI).  Please note however, that regulations and laws change frequently and it is best to speak with a licensed tax consultant for expert advice on tax matters.

Brief Overview of Health Insurance Portability and Accountability Act of 1996 (HIPAA):

In 1996, Congress passed the HIPAA, which provides, in part, the criteria for establishing Tax-Qualified Long Term Care Insurance Policies (TQLTCIP).  Basically, HIPAA provides that benefits paid under a long term care insurance policy will not be taxable if the LTCI policy meets minimum eligibility requirements.  As a result of HIPAA, it is easy to tell which LTCI policies are tax-qualified.  There will be an indentifying paragraph on the front page of the policy or contract.

HIPAA may provide a tax incentive for individuals to take financial responsibility for their LTC needs.

• Both the employees and the employer can make premium contributions.  There are no limits on the amont an employer may contribute in the form of LTC insurance premiums.  These premium contributions are treated as medical expenses and may be tax deductible to the employer.
• Premiums paid by the employer on behalf of an employee generally may be excluded from the employee's gross income. 
• Benefits paid to an employee through a tax-qualified LTC policy could be excluded from their gross income.
• Premium contributions made by an employee may be deductible for individuals if itemized medical expenses exceed 7.5% of their adjusted gross income.
• Premiums for LTC can be an acceptable expenditure for the new medical savings accounts that are available to self-employed and small businesses with fewer than 50 employees.
• Premium contributions for LTC insurance may be tax deductible by a self-employed individual, subject to the limits on deductions for health insurance by the self-employed.

Q.  Won't Medicare pay my long term care costs?

Medicare wasn't designed to pay for long term care.  Strict criteria must be met to qualify for Medicare coverage for this type of care.  Even when you meet Medicare's criteria, the coverage it provides is for a limited length of time (approximately three months in a nursing home).  Those who believe Medicare will pay their long term care expenses may end up unexpectedly spending their life savings on long term care costs. 

Q. Will Medicaid help me?

Medicaid is the government program that helps with medical expenses for the poor.  Prior to even being considered for assistance under the Medicaid program, the patient is first required to spend down nearly all financial assets.  Once the financial assets have been depleted, the state may require the sale of personal assets to pay the continuing costs of nursing home care.  Personal assets include vehicles, property, business assets, and even the patient's house if the stay in the nursing home lasts more than six months, and the spouse or a dependent child is not living at home.

Q.  Why did the State of Indiana create the Indiana Long Term Care Insurance Program?

More and more Hoosiers are getting older and living longer.  "...individuals ages 85 and older will be the fastest-growing segment of the elderly population, increasing 143% between 1990 and 2030." Who will Pay for the Baby Boomer's Long Term Care Needs?  American Council of Life Insurance, 1998

The state cannot afford to pay for the long term care of every Hoosier, so it developed the Indiana Long Term Care Insurance Program.  This program is a partnership between state government and private insurance companies.  Policies approved under the program are known as "Partnership Policies".  As of May 1993, Hoosiers have a choice between traditional long term care policies or Indiana Partnership policies.  Indiana is only one of four states (along with California, Connecticut, and New York), to offer this.

"Long term care will be THE burning health care issue of the 21st century, as Baby Boomers struggle to prepare for their own needs and to take care of parents as well.  We must begin to prepare for these challenges."

Representative Pete Stark (D-GA) upon introducing the Omnibus LTC Act of 1999