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Long Term Care Insurance


Despite a popular misconception, the need for long-term care isn't restricted to the elderly.  In fact, many working age adults have disabling injuries and illnesses, including arthritis, heart disease and mental impairment, as well as stroke and trauma, that require ongoing care.

The number of individuals with severe disabilities between the ages of 17 and 44 has increased 400% over the past 25 years.

There are now more than 13 million Americans between the ages of 15 and 64 who need some type of daily assistance.

All told, eight out of ten families in the U.S. have a need for longer term care.  Unfortunately, many of these individuals may have to deplete their resources in order to pay for care in the U.S., and when it does, it covers only skilled or acute care.

State Medicaid programs, require recipients to spend down their assets to poverty levels to qualify for assistance.

The best solution is private long-term care insurance, particularly in light of recent federal health legislation that makes this coverage more tax favorable.

The financial impact of long-term care is significant, no matter where it is provided. Nursing home care now averages $ 35,000 a year. Today, more Americans are receiving home health care and hospice care as an alternative to nursing home care.   In fact, 80 percent of all long-term care is now provided at home by family members.  In 1994, there were 2 million people receiving home health or hospice care on any given day.

Favorable Treatment For Tax Qualified Long Term Care Insurance

The Health Insurance Portability & Accountability Act of 1996, otherwise known as the Kennedy-Kassebaum Bill provided favorable tax treatment of long term care insurance benefits and premiums.

Up to certain limits premiums paid for insurance are deductible, and the benefits (up to $190 per day in 2000) would be received tax free to the insured. Long term care insurance premiums can now be added along with eligible medical expenses on Schedule A, and to the extent they exceed 7.5% of the insured's adjusted gross income, they are deductible.

A long term care insurance premium, Medicare supplement premium and non-reimbursed medical expenses (prescription drugs) could make it possible to take advantage of the medical expense deduction.

Employer and Employee Tax Benefits

Many new long term care products are available to the small to mid-sized businesses, often with multi-life discounts. And the need for long term care coverage is growing as workers increasingly grapple with tending to aging parents.

Most business advisers assume the taxation of tax-qualified long term care insurance is similar to that for disability insurance. It is not. The Health Insurance Portability and Accountability Act of 1996 allows varying tax deductions of qualified long term care premiums by business type (C corporations, S corporations, etc.) and yet allows the benefits to be paid out tax-free. Furthermore, businesses can discriminate in providing benefits for classes of employees, such as owners and key executives, even directors.

In the case of a C corporation, for example, a business may deduct 100 percent of the premiums for tax-qualified long term care coverage, as long as all employees in the class receive the coverage. It is possible for a C corporation to carve out a select group of executives or owners and provide a selective benefit for them and their spouses that is 100 percent deductible to the business. Yet the benefits remain tax-free.

In the case of S Corporations, LLCs, LLPs, and sole propriertorships can also purchase coverage with a phased-in deductibility. The deductibility is phased-in by year - 60 percent of the premium in year 2001, 70 percent in year 2002 and 100 percent in year 2003 and thereafter. Spousal premium is also eligible for tax deductibility.

To check insurance company ratings, click Moody , Standard and Poors or A.M. Best.

If you have an interest in obtaining a long-term care quote for yourself, a friend or a family member, complete our long-term care quotation form. There are no hidden charges for this service and you will receive personalized attention. In fact, there is no reason not to call our office  to discuss your questions before requesting a quotation.  All information is confidential.

Long Term Care Links

MetLife Market Survey of Nursing Home and Home Care Costs 2004 http://www.metlife.com/WPSAssets/11704283601096047636V1F2004%20NH%20and%20HC%20Market%20Survey.pdf

Medicare http://www.medicare.gov/

California Partnership for Long Term Care http://www.dhs.cahwnet.gov/mcs/cpltc/cpltcindex.htm

California Department of Insurance http://www.insurance.ca.gov

American Association of Housing and Services for the Aged  http://www.aahsa.org


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Copyright 2001 Kaplan Management & Insurance Services
Last modified: June 13, 2012