Washington, D.C. (Nov. 14, 2007) — The American Council of Life Insurers (ACLI) applauds the introduction of the “Long-Term Care Affordability and Security Act” (S. 2337) legislation that will make long-term care insurance more accessible for Americans planning for their retirement needs and update consumer protections.
Introduced by Sens. Charles Grassley (R-IA), Blanche Lincoln (D-AR), Olympia Snowe (R-ME), Debbie Stabenow (D-MI) and Gordon Smith (R-OR) the bill would permit long-term care insurance to be included in employer-sponsored cafeteria plans and flexible spending accounts, enabling people to pay long-term care insurance premiums using pre-tax dollars. The legislation also requires new consumer protections that are consistent with the most recent National Association of Insurance Commissioners’ Long Term Care Insurance Model Act and Regulation.
Companion legislation was introduced in the House on Aug. 3, by Reps. Earl Pomeroy (D-ND), Jim Ramstad (R-MN), Allyson Schwartz (D-PA), and Kenny Hulshof (R-MO).
“The high and rising cost of long-term care represents a looming threat to Americans’ financial and retirement security,” said ACLI President and CEO Frank Keating. “Today, the average cost for a one-year stay in a nursing home is $75,000. By 2030, that cost is estimated to rise to nearly $140,000, well out of range of what most Americans could possibly save to pay for these services. Long-term care insurance can cover the costs of long-term care services and protect hard-earned savings.
“The pending retirement of 78 million baby boomers means more Americans will run the risk of depleting their savings to pay for long-term care services. By allowing long-term care insurance plans to be offered through employers’ cafeteria and FSA plans, the ‘Long-Term Care Affordability and Security Act” will help Americans protect their savings and secure their retirements,’ Keating said.
Cafeteria plans allow employees to pay for benefits such as life insurance, disability insurance and other voluntary benefits by reducing their pay, pre-tax, by the premium amount.
In FSA plans, employees set aside predetermined amounts in an account to cover eligible out-of-pocket expenses most often related to health, dental and dependent day care. Dollars are deducted from an employee’s payroll on a pre-tax basis. As needed, the employee receives reimbursement from the account, also tax free, for eligible expenses throughout the year.
Current law excludes long-term care insurance from being included in cafeteria plans and FSAs.
“Millions of Americans have used cafeteria plans and FSAs to help protect their families and provide important financial protection. Including long-term care insurance will add an important piece to Americans’ financial security puzzle,” said Keating.
The “Long-Term Care Affordability and Security Act” would provide significant public policy benefits, too. Medicaid dollars account for 45 percent of nursing home payments and the total annual cost is expected to reach $118 billion by 2030. If three-quarters of individuals between the ages of 40 and 65 who can afford long-term care insurance were to purchase and maintain policies throughout their senior years, by 2030 the annual savings in Medicaid nursing home and out-of-pocket expenses would total $36.6 billion.
“The ‘Long-Term Care Affordability and Security Act’ makes sense for Americans’ retirement security and our nation’s public policy. We urge Congress to pass this important legislation,” Keating said.
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The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association whose 373 member companies account for 93 percent of the life insurance industry’s total assets in the United States, 91 percent of life insurance premiums and 95 percent of annuity considerations. In addition to life insurance and annuities, ACLI member companies offer pensions, including 401(k)s, long-term care insurance, disability income insurance and other retirement and financial protection products, as well as reinsurance. ACLI's public Web site can be accessed at www.acli.com.