TQ/Partnership VS. Non TQ

[hardwork]

I know there are some advantages to the Partnership plans,once the client qualifies for care.
My concern are the multiple "hoops" the client has to jump threw to be able to collect on the TQ Plans.
Some times the Gov really doesn't have a clue!

 

[Mr_Ed]

Please clarify: other than the 90 day certification period, what "hoops" are in TQ policies that are not in NTQ policies?

 

[hardwork]

Please clarify: other than the 90 day certification period, what "hoops" are in TQ policies that are not in NTQ policies?

There are reasons Companies are paying less claims on TQ !
Non TQ premiums are about 3%-5% higher than TQ!

Here are some of the reasons:

1) 90 Day cert letter from Doctor (Doc must cert that the insured will need at least 90 days of continual care.) Short term care would be a potential issue! (minor stroke ,heart attack,accident)

2) The issue of "cognitive impairment" The client must be
diagnosed as having a "severe" or substantial cognitive impairment.With TQ

3) Non TQ allow one more ADL as a trigger- Ambulating (walking)

4) Medical Necessity trigger,lets say the client needs help with changing a catheter or administering a daily injection but is still able to preform all other ADLs....TQ... sorry

5) If I am 75, and only want a TQ policy that pays 100 per day for 24 months with no HHC, why can't I purchace that?

6) The tax deduction for premiums on TQs are a joke IMO
If the Gov really wanted to encourage participation they would give a more realistic deduction! Not 7.5% above AGI.
How many of your clients qualify for this?,and if they do it is a minimal deduction most of the time.

There are other issues. That being said, one still can not take the chance of owing taxes on there LTC Benefits!
I would be caucuses of replacing a Non TQ plan with a TQ.

 

[Mr_Ed]

There are reasons Companies are paying less claims on TQ !
Non TQ premiums are about 3%-5% higher than TQ!

Here are some of the reasons:

1) 90 Day cert letter from Doctor (Doc must cert that the insured will need at least 90 days of continual care.) Short term care would be a potential issue! (minor stroke ,heart attack,accident)

2) The issue of "cognitive impairment" The client must be
diagnosed as having a "severe" or substantial cognitive impairment.With TQ

3) Non TQ allow one more ADL as a trigger- Ambulating (walking)

4) Medical Necessity trigger,lets say the client needs help with changing a catheter or administering a daily injection but is still able to preform all other ADLs....TQ... sorry

5) If I am 75, and only want a TQ policy that pays 100 per day for 24 months with no HHC, why can't I purchace that?

6) The tax deduction for premiums on TQs are a joke IMO
If the Gov really wanted to encourage participation they would give a more realistic deduction! Not 7.5% above AGI.
How many of your clients qualify for this?,and if they do it is a minimal deduction most of the time.

There are other issues. That being said, one still can not take the chance of owing taxes on there LTC Benefits!
I would be caucuses of replacing a Non TQ plan with a TQ.

I'll respond below each point you make. My response will be in bold:

There are reasons Companies are paying less claims on TQ !
Non TQ premiums are about 3%-5% higher than TQ!

That is correct. NTQ policies will pay some claims that would not qualify under TQ policies. However, if the issues you raise were as significant as you suggest, the premium difference would probably be much greater than 3% to 5%. Wouldn't you agree?

Here are some of the reasons:

1) 90 Day cert letter from Doctor (Doc must cert that the insured will need at least 90 days of continual care.) Short term care would be a potential issue! (minor stroke ,heart attack,accident)

This is the primary difference between TQ policies and NTQ policies. You're absolutely correct that a NTQ policy can pay for a claim that is short-term in nature (expected to last less than 90 days.) A TQ policy CANNOT pay a claim if the care is expected to last less than 90 days.


2) The issue of "cognitive impairment" The client must be
diagnosed as having a "severe" or substantial cognitive impairment with TQ.


I disagree with you on this point. The language that is used in TQ policies like "severe cognitive impairment" or "substantial cognitive impairment" is used because that is the language that is used in the federal legislation: HIPAA. If you examine the policies and see how a "cognitive impairment" is defined in a NTQ policy, you'll find that it is the exact same language that is used to define a "severe cognitive impairment" in a TQ policy.

There's no difference between the actual definitions in the policies.



3) Non TQ allow one more ADL as a trigger- Ambulating (walking)


I am not aware of any NTQ policies that still use ambulating as an ADL. Every NTQ policy I'm aware of uses the same ADL's as TQ policies. The only state that used to require ambulating was CA. Most states never had ambulating in their ADL definition, even with their NTQ policies.


4) Medical Necessity trigger,lets say the client needs help with changing a catheter or administering a daily injection but is still able to preform all other ADLs....TQ... sorry

Changing a catheter or getting an injection are medical issues that would normally be paid under the home healthcare provisions of their medical insurance policy or Medicare Part B.



5) If I am 75, and only want a TQ policy that pays 100 per day for 24 months with no HHC, why can't I purchace that?

I don't understand your point here. You can purchase a TQ, facility-only policy with a 2 year benefit period. That type of policy is available in nearly every state. There are a few states that don't allow facility-only policies.



6) The tax deduction for premiums on TQs are a joke IMO
If the Gov really wanted to encourage participation they would give a more realistic deduction! Not 7.5% above AGI.
How many of your clients qualify for this?,and if they do it is a minimal deduction most of the time.


There are 9 different ways to pay for TQ LTCi premiums on a tax-favored basis. You've pointed out the least favorable way. Here are the 9 ways:

1) Self-employed health insurance deduction: TQ LTCi premiums can be paid by self-employed persons and taken as an "above the line deduction" on front of form 1040. The deduction applies to the self-employed person and his/her spouse. The self-employment doesn't have to be a full-time gig.
2) Owners of closely held corporations (S or C) can take advantage of the tax deductibility of TQ LTCi premiums as a business expense--using pre-tax business income to protect personal assets/income.
3) Owners of Health Savings Accounts can use the pre-tax dollars in the HSA to pay TQ LTCi premiums.
4) Owners of Medicare Savings Accounts can use the pre-tax dollars in the MSA to pay TQ LTCi premiums.
5) Retired public safety workers can have their TQ LTCi premiums paid by their 403(b) account and not have to pay any tax on the transfer.
6) Owners of non-qualified Annuities can have tax-favored transfers to TQ LTCi policies, without having to pay income tax that year on the money transferred to pay the TQ LTCi premium.
7) Most states allow TQ LTCi premiums to be deducted on the state income tax forms. These tax deductions are much more favorable and easier to qualify for than the federal deduction on schedule A.
8) Many states have income tax credits for TQ LTCi premiums. The tax credits can be very large. In NY the tax credit is equal to 20% of the premium.
9) Last you can pay for TQ LTCi with tax-favored dollars if you are able to itemize your medical expenses on Schedule A of form 1040.



There are other issues. That being said, one still can not take the chance of owing taxes on there LTC Benefits!
I would be cautious of replacing a Non TQ plan with a TQ.


I disagree and agree here. I disagree that NTQ benefits can be taxed. There is nothing in the tax code to suggest that. I do agree with you that I would be cautious about replacing a NTQ policy.

 

[hardwork]

Never-a-dull-moment,
I respect your expertise in the LTC field!

Your response to my post has prompted a dialog with the head claims examiner with one of my carriers here in Pa.They have TQ and NTQ products.
The difference in Premium is 3%-5%.
They can expect to pay 5% more claims on NTQ. (1 in 20) would not collect on a TQ when thy would have on a NTQ! That is to much IMO.

The word "Severe" Cognitive impairment is not used in a NTQ .
I find this significant because of the required MMSE'S to qualify for care under either plan.(Mini Mental Status Exams) We all know that there are many different levels of impairment.

The Trigger Bench Mark is higher on TQ

The 9 different tax favored strategies you have pointed out,
I will agree that 2010 will present new opportunities.Most of the others strategies represent a very small percent of the senior population (65+) Example: I have never met any one with a "Medicare savings Acct plan" Do you have any clients that have this plan?

Question for you ? We would both agree that one is 1099ed for the benefits on TQ & NTQ.
What would stop the IRS in the future from taxing older policies?(NTQ)
Lets say estates that are above 500,000 only.This may sound a bit far fetched to you, but not me!

 

[Mr_Ed]

Never-a-dull-moment,
I respect your expertise in the LTC field!

Your response to my post has prompted a dialog with the head claims examiner with one of my carriers here in Pa.They have TQ and NTQ products.
The difference in Premium is 3%-5%.
They can expect to pay 5% more claims on NTQ. (1 in 20) would not collect on a TQ when thy would have on a NTQ! That is to much IMO.

The word "Severe" Cognitive impairment is not used in a NTQ .
I find this significant because of the required MMSE'S to qualify for care under either plan.(Mini Mental Status Exams) We all know that there are many different levels of impairment.

The Trigger Bench Mark is higher on TQ

The 9 different tax favored strategies you have pointed out,
I will agree that 2010 will present new opportunities.Most of the others strategies represent a very small percent of the senior population (65+) Example: I have never met any one with a "Medicare savings Acct plan" Do you have any clients that have this plan?

Question for you ? We would both agree that one is 1099ed for the benefits on TQ & NTQ.
What would stop the IRS in the future from taxing older policies?(NTQ)
Lets say estates that are above 500,000 only.This may sound a bit far fetched to you, but not me!

I'll respond below each of your statements in bold: I will answer in a slightly different order. I'll first respond to your point about "severe cognitive impairment".




The word "Severe" Cognitive impairment is not used in a NTQ .
I find this significant because of the required MMSE'S to qualify for care under either plan.(Mini Mental Status Exams) We all know that there are many different levels of impairment.

The Trigger Bench Mark is higher on TQ.


As I mentioned in my previous post, all of the TQ policies I've read (along with their NTQ counterparts) have had identical definitions of "cognitive impairment". The only difference was that the word "severe" was added in the TQ policies because that word is used in HIPAA's definition of a "federally qualified" policy.

The MMSE which you refer to is usually a 10 question quiz. It sounds like you're saying that with this particular insurer, if someone fails "X" questions on the quiz, they can trigger the benefits under the TQ policy. However, with an NTQ policy, they only have to fail "Y" questions on the quiz to trigger the benefits. And "Y" is less than "X".

I sincerely doubt this. I've read scores of sample policies from the leading long term care insurers. When comparing an NTQ policy from one insurer with the TQ counterpart, there was never any difference between the cognitive impairment triggers.

I will gladly stand corrected if you'd be so kind as to email me the sample policies for this carriers TQ and NTQ policies. I'll review the cognitive impairment triggers from each sample policy and I will post the correction on this forum (if indeed the NTQ policy has a lower threshold for triggering benefits for a cognitive impairment.)




Your response to my post has prompted a dialog with the head claims examiner with one of my carriers here in Pa.They have TQ and NTQ products.
The difference in Premium is 3%-5%.
They can expect to pay 5% more claims on NTQ. (1 in 20) would not collect on a TQ when thy would have on a NTQ! That is to much IMO.

It's not as simple as saying "1 in 20". In fact, using your logic, a 3% difference in premium would be "1 in 33". A 4% difference would be "1 in 25". So, is it "1 in 20" or "1 in 25" or "1 in 33"? It could be "1 in 10" or even "1 in 5" or it could be "1 in 50". The reality is, it's none of these.

TQ policies will pay the same claims that NTQ policies pay--the only claims that TQ policies won't pay that might qualify under NTQ policies, are the short-term claims (claims that are expected to and do last less than 90 days.)

The insurer has to reserve the same amount of money (for TQ and NTQ policies) for claims that last beyond 90 days. The health condition that lasts beyond 90 days is going to pay the same amount of benefits regardless of whether the policy is TQ or NTQ. So, in reality, the extra 5% is their cushion to help pay for the short-term claims that they'll have to pay under NTQ policies (claims which they would not pay under TQ policies).

The extra 5% of premium simply means that some short-term claims will be paid on NTQ policies--claims which would not have been paid by TQ policies.

Your statement that "1 in 20 are denied" and "is too high IMO" would be correct IF the triggers were different. But, the triggers are not different. The triggers between most NTQ policies and their TQ counterparts are exactly the same. The only significant difference is the 90-day certification period requirement. And it is that requirement which is the cause for the additional "3% to 5%" in premium.


Also, keep in mind, if it's very important for your clients to have a policy that will pay for short-term periods of care, then they need to purchase a NTQ policy AND they need to buy a zero day Elimination Period (or one that is as short as possible). Without the zero day Elimination Period (especially for home healthcare, there is little or no value to having the NTQ policy.

Buying a 90 day Elimination Period with a NTQ policy nullifies the primary advantage of a NTQ policy.






The 9 different tax favored strategies you have pointed out,
I will agree that 2010 will present new opportunities.Most of the others strategies represent a very small percent of the senior population (65+) Example: I have never met any one with a "Medicare savings Acct plan" Do you have any clients that have this plan?


I don't sell Medicare Advantage policies, but I've been told that there are about 10 million people who participate in Medicare Advantage. I believe that the MSA is available to all or most of them.

Regardless, everyone can pay for TQ LTCi premiums with tax-favored dollars. I listed the 9 ways before.

The one sure-fire way that will work for EVERYONE is if they use the earnings from a NQ deferred annuity to pay for their TQ LTCi premium. Even if they are only in the 15% federal tax bracket, this method alone is like a 15% discount on their LTCi policy. If they are in a 25% federal tax bracket, then this method is like a 25% discount on their LTCi premium.

If they don't pay federal income tax, then they shouldn't own LTCi because they could probably qualify for Medicaid very easily.



Question for you ? We would both agree that one is 1099ed for the benefits on TQ & NTQ.

That is correct. The IRS requires that all LTCi claims beneficiaries receive a 1099-LTC showing how much they received in LTCi benefits that year.


What would stop the IRS in the future from taxing older policies?(NTQ)
Lets say estates that are above 500,000 only.This may sound a bit far fetched to you, but not me!


The IRS and the federal gov't can do whatever they decide to do. But, there is nothing in the tax code right now that says that NTQ benefits can be taxed. The only mention in the IRC of taxing LTCi benefits refers to taxing TQ benefits (if it's an indemnity policy and the per diem payments exceeded the actual cost of care AND the per diem benefits was over a certain amount per day.)



Summation:

You are correct that most NTQ LTCi policies cost about 5% more than their TQ counterparts. However, that is just the premiums. There are additional costs. For example:

In order to get the full benefits of the NTQ policy, the insured must purchase a very short elimination period. That alone can add another 20% or more onto the cost of the policy.

The NTQ policyowner loses out on tax credits, tax deductions, and tax-favored methods of paying for the premium. That alone can account for another 15% to 33% (or more) in hidden costs.

Lastly, a NTQ policy CANNOT qualify for special asset protection under any state's LTC Partnership program. If they were to buy a TQ policy they could qualify for special asset protection under the LTC Partnership program. But, if they buy an NTQ policy and run out of the benefits, they can't protect their assets from Medicaid spend-down. The only way around this predicament would be for you to have all your NTQ clients buy a Lifetime/Unlimited Benefit Period. I like Lifetime/Unlimited Benefit Periods, but I usually only recommend them for my clients who have substantial assets and sustainable six-figure incomes throughout retirement. In order for you to avoid the problems of your NTQ clients missing out on the asset protection features of a TQ/Partnership policy, you need to have ALL of them buying Lifetime/Unlimited Benefit Periods. That can cost another 20% or more in premium.

Between the shorter elimination period (20%), the lost tax advantages (15% to 33%) and the necessity of having a longer benefit period (20% +), your NTQ recommendation is now costing your clients about 60% to 100% more in premium than a comparable TQ policy.

They would be better off keeping that extra premium, buy a cheaper TQ policy, and using the premium they saved to pay for any short-term claims that they might have in the future.

- - - - - - - - - - - - - - - - - -
Hardwork,

The problem with your arguments is that they are all based on a false premise.

You are basing all your arguments on the assumption that NTQ LTCi policies have easier benefit triggers than TQ LTCi policies.

I believe that if you take a close look at the sample policies and read the definitions of the benefit triggers, you'll see that there is no difference between the definitions of "cognitive impairment" (NTQ) and "severe cognitive impairment" (TQ). Nor is there any difference between "assistance" (NTQ) and "substantial assistance" (TQ).

The only difference is the 90 day certification period.

If you have a sample policies that prove otherwise, please post them on the forum or email me a copy.

Thanks.

Scott

 

[Graham]

Just a clarification on the MSA issue. they are Medical Savings Accounts not Medicare Savings accounts. MSA's were pretty much the precurser to HSA accounts and had some similar rules. After December 31, 2007, you cannot be treated as an eligible individual for Archer MSA purposes unless:

1. You were an active participant for any tax year ending before January 1, 2008, or
2. You became an active participant for a tax year ending after December 31, 2007, by reason of coverage under a high deductible health plan (HDHP) of an Archer MSA participating employer.

A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is eligible for Medicare.

 

[Mr_Ed]

Just a clarification on the MSA issue. they are Medical Savings Accounts not Medicare Savings accounts. MSA's were pretty much the precurser to HSA accounts and had some similar rules. After December 31, 2007, you cannot be treated as an eligible individual for Archer MSA purposes unless:

1. You were an active participant for any tax year ending before January 1, 2008, or
2. You became an active participant for a tax year ending after December 31, 2007, by reason of coverage under a high deductible health plan (HDHP) of an Archer MSA participating employer.

A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is eligible for Medicare.

I stand corrected about the terminology. It's not a "Medicare Savings Account" but a "Medicare Advantage MSA".


Do you agree that a Medicare Advantage MSA can be used to pay LTCi premiums on a tax-favored basis?

 

[yankee466]

I stand corrected about the terminology. It's not a "Medicare Savings Account" but a "Medicare Advantage MSA".


Do you agree that a Medicare Advantage MSA can be used to pay LTCi premiums on a tax-favored basis?

I sold Medicare Advantage MSA plans last year, and one of the selling features was the ability to use the money that Medicare handed you (average of $1300) to pay your LTC premiums if you did not need the money for anything else. So the answer is YES, but it is only the $1300 that you can use to pay the LTC premiums...these are not like HSA plans where you put in your own money. Its typically a zero premium MA plan, where the government writes you a check for $1300...and says "use our money for Medicare approved medical expenses, or IRS approved if you prefer....but if you spend all the money, you have a $1700 additional out of pocket risk at Medicare rates for Medicare approved expenses." (Rx not included BTW) Sweet deal for healthy people turning 65 who want to use if for LTC premiums.

The problem is, I am unaware of anyone selling these plans any more, and Obama wants to kill Medicare Advantage. I sold of ton of them to healthy people who "got it".