This Month:
Vandy: The state of the LTCi union
Langdon: The Long Term Care Imperative
Catalano: A maturing industry looks to the future
Reed: Protecting your retirement income and legacy
NML: Cost of Long Term Care study
LTCI Association, LTCi Designation program co-sponsor annual event
2012 LTCi tax guides published
MetLife Mature Market Institute: LTCi costs up again
OneAmerica urges older Americans to consider asset-based LTCi
Sarci: LTCi- The power of preparation

February 2012: LTCi- The Protection of Dreams

The 2012 State of The [LTCi] Union

May you live in interesting times

By Robert M. Vandy, CLU, ChFC, LUTCF, CLTC
Mr.. Vandy is vice president, marketing at National Long Term Care Brokers. He can be reached at bvandy@nyltcb.com.

It's true. We do live in interesting times. We live in interesting times as they relate to the overall economy, the worldwide political environment and, yes, the long-term care planning (LTC) environment.
And when we look at the LTCi environment, a few questions come to mind: "Where have we been?," "Where are we now?" and "Where are we going?"
It's clear to most industry and many non-industry observers that the LTCi market is not what it once was. Have rates increased? Yes. Has underwriting become more restrictive? Yes. Have commissions, in some instances, been reduced? Yes. Have some carriers exited the market? Yes.
However, it is vitally import to identify what hasnt changed - THE NEED!
As such, we owe it to ourselves and to our clients to do two things:
- Continue to be diligent in sharing with our agency and carrier partners the experiences we are having when we bring up the topic of LTC planning & LTC Insurance so we can improve our product solutions whenever possible and
- Keep pointing out to our clients & prospects that, in spite of some of the aforementioned industry and product challenges, LTC Insurance remains the BEST solution to the planning problem!

To drive this point home, consider the recent demise of the CLASS Act (Community Living Assistive Services & Supports) under our health care reform legislation. As many of you know, the CLASS Act was to be a voluntary LTC insurance program administered by the federal government and paid for by individual employees via payroll deduction. It would have provided a very limited benefit ($50-75 per day) and was ostensibly intended to 'keep people home as long as possible.' Clearly, CLASS was never intended to be a primary funding source for facility-based care.
What took the two main industry actuarial associations about a month of study to figure out took the Department of Health & Human Services about a year and a half; namely, that CLASS wouldn't work, not as drafted. So the Secretary of HHS announced recently that they were suspending any further work on the project.
The CLASS Act demise is one of the best illustrations of the vital nature of LTC Insurance, regardless of some of the challenges we mentioned. As much as we may want to criticize the product, vilify the underwriting and just get generally angry about the less than attractive changes that have occurred, we must realize that LTCi remains the most comprehensive and cost effective solution for many of your prospects & clients.

Consider these factors that contributed, in part, to the demise of CLASS:
- It was a 'guaranteed issue' (take all comers) program - What would likely have happened is that the younger, healthier workers would have 'opted out' of the program and purchased private LTCi, as they may have been able to purchase a similarly comprehensive policy at more favorable rates. As those younger, healthier workers opted out, it would have left only the older, sicker workers (who likely would not have been able to purchase private LTCi), which would have led to a 'death spiral' from a pricing standpoint.
- Final pricing -we never did reach a point where we knew exactly what the premium and benefit levels were for CLASS. There was talk of a $50-75 per day benefit, and premiums of $150 - $200 per month (on average), but in the end the actuaries pricing the program realized that (in part because of the previous bullet) they couldn't make it work for anywhere near those premiums.
- 5-year vesting period - had the program rolled out, a participant would not have been able to make a claim until they were in the program for at least 5 years. Can you imagine a private insurance LTCi carrier trying to get away with that?

While this is just an overview, it underlines the fact that there are no other programs available.
Maybe you think Medicare or Medicaid will step in? Medicare, as most of us know, does not pay for true LTC costs (beyond some limited skilled coverage over 100 days at best). And, Medicaid, although it is certainly a hefty payer of LTC costs, requires a level of impoverishment to qualify. Yes, one can retain the services of a skilled elder law attorney to help navigate the system as much as possible. But, the fact remains that when one goes on Medicaid, it means being a ward of the state.
So, for all the saber rattling going on, private LTCi is still the best solution for those who have a reasonable level of assets and/or income, can qualify medically, and want to retain the decision making power over their care (through their wishes or expressed through a loved one) when they need it most.
There is good news.

LTCi Products
For all of its shortfalls, carriers have responded in recent years with more flexible products than ever seen before. In addition to the traditional products that have dominated the landscape over the last 20+ years, newer generation products have emerged as possible alternative solutions.
'Linked Benefit' products (those that combine, for example, life insurance or annuities with an LTC benefit) are more available than ever before. These products can often be purchased with a single lump sum or a periodic (i.e. annual) premium payment or may be in the form of an 'acceleration' of the life insurance policy’s death benefit. These products offer benefits to the client if they need LTC services before death, or benefits payable to their loved ones if they die without ever having used the policy for an LTC need. This is especially useful in situations where clients have resisted the purchase of traditional LTCi.

Medicaid
How many of our readers think Medicaid benefits for LTC services will become more available, rather than more limited, in the future? There is continuing pressure on these public programs to limit eligibility, increases premiums, co-pays, etc. and make the programs even more 'means tested' than before. What this clearly means is that our clients will not be able to rely on increased (or, arguably, similar) funding of their LTC costs and planning from public sources.

Demographics
Perhaps most important of all the indicators of where we may be going as an industry is the increasing force and importance of the baby boomer generation and its impact on the financing and care alternatives for our future LTC needs. Studies have shown that the boomers, more than any other past generation, have a strong preference to define their own retirement and maintain control over their care should the need arise. Given the strength of that preference, and the economic reality of care providers needing to generate revenue wherever possible, the future need for private financing alternatives remains bright. Medicaid, as we know, reimburses for care provided at a much lower rate than a private payer might pay for those same services. As such, those private payers will take on increased standing in the pecking order in a 'first come, first served' fashion when the boomers begin to require care in increasing numbers.

Conclusion
Despite some recent negative press reports, negative sentiment among some financial professionals and a general societal desire for a 'quick fix,' LTC Insurance will remain the most viable financing alternative for those who have the ability to 'read the tea leaves' and who are prepared to plan ahead.
The question for the advisopr to present to their clients is simple: if not LTCi, then what?
Take heart, fellow financial professionals. Long-term care insurance isn't going anywhere.

February 2012: LTCi- The Protection of Dreams

Significance of Market Expansion

The Long-Term Care Imperative

By Bryan Langdon
Mr. Langdon is relationship manager LTC and linked benefit solutions at Ash Brokerage Corporation. He can be reached at bryan.langdon@ashbrokerage.com

Late in the afternoon on Friday, October 14, 2011, the Department of Health and Human Services told everyone in the long-term care (LTC) industry what we already knew. "We won't be working further to implement the CLASS Act. We don't see a path forward to be able to do that," Assistant Health and Human Services Secretary for Aging Kathy Greenlee told reporters. With those few words, the onus of providing funding solutions for long-term term illness fell firmly back onto our shoulders. A viable private-funded LTC industry is now more important than ever.
What happened with CLASS? Well, the short answer is politics got in the way of common sense. I think most believe a practical LTC plan for all is a smart idea; however, a plan with a limited premium paying period and no limit to the number of years you could collect, that would allow individuals to pick when they would join, would be tough to create. And, as it turned out, it was.

Does this mean we can't create a plan in the future? No one knows the answer to that question, but what we do know is the private LTC industry to starting to regain the momentum it lost in 2007. Our industry has long known the combination of pricing, benefits, risk selection and anticipation of future claims is a learned science. Today we are dealing with low interest rates, a lower-than-average applicant age, better care delivery systems and many more changing dynamics, which has made it difficult for carriers to chart a consistent path to profitability … yet we continue to learn and adapt. Our sales are growing, the market gets bigger and our options to solve have never been greater.
For years we told advisors that the baby boomers were coming and their needs would be changing. Well, they have not only arrived but they are also learning firsthand the true cost, financially and emotionally, of a long-term care event. It is those experiences that are changing the buying decisions of our clients.

Recently, I met with an advisor and his clients to examine their prospective LTC insurance needs. They were looking at coverage that exceeded $8,000 a year in premium. When the big moment came, and the premium was presented, we experienced a long pause... and almost simultaneously, the couple spoke. The wife wanted to know what the next step was, while the husband wanted to know if there was anything cheaper. She turned to him and said, "We are paying $8,000 a month for mom in her facility and this is only $8,000 a year for both of us!" Ultimately, reality is a great marketing plan.
Cost is only one aspect of LTC that needs to be addressed. Often, we forget the emotional side of the equation. Without a plan in place how will we know which assets to liquidate? What level of care should our clients get? Who makes the decisions? In my experience, children are often spread out all over the United States and it seems the children living the farthest away tend to have the most to say about their parents' care. Having a proper plan in place will help reduce stress at a time when stress levels are high.
Cash Value life insurance plans taken out years earlier may be repositioned to cover a client's revised priorities. A linked-benefit life plan funded by a 1035 exchange will provide long-term care benefits without giving up existing life insurance coverage. Some linked-benefit plans allow payments to be made over 5 or 10 years. Clients with qualified plans, who are looking for LTC insurance coverage, could withdraw a small amount each year, pay taxes on the withdrawal and 10 pay a linked-benefit plan.
Examine the true cost/benefit of a linked-benefit solution, especially if your clients have money sitting on the sideline. In today's market many clients have funds in low-interest-bearing accounts. A rate of 1 percent on $100,000 will produce $1,000/$650 after taxes. However, with a linked-benefit solution, $650 a year can create more than $450,000 of LTC insurance coverage with a benefit of $6,200 a month. Additionally, the client will have $160,000 in life insurance coverage. Yes, that is correct, a client can create a $450,000 pool of money for just $650 a year.
Our clients may have the desire for LTC insurance but may lack the funds necessary to purchase coverage. How many of you have clients with non-qualified annuities coming due and your options are limited. Have you thought of exploring the leverage you can create with linked-benefit annuity/LTC insurance? Some plans will allow partial withdrawal to fund the coverage and most will create three times the deposit for your long-term care pool. You may be able to withdraw your gain to pay for long-term care coverage on a tax-advantaged basis. We need to think differently, utilize what they have and create what they need.
Are you aware that long-term care coverage is now available with traditional life insurance? Many carriers have created riders, which can accelerate the death benefit to cover LTC needs. If you have clients over the age of 55, you may wish to show them the two available options: with and without the rider.
These are four very different ways to approach LTC planning with your client. There is no right answer but, if we don't ask, there are many wrong ones. We help our clients protect the present and save for the future; yet, when their needs change, do we stay ahead of their plan? Do we counsel them about living a long life? This market is expanding like never before. More knowledge and tools are available to us, but none will matter if we are not addressing the issue with each and every one of our clients. It is not an obligation, it is an imperative.
Our industry is learning. With an increase in the number of lives covered and added years of claim history to study, the underwriting standards are changing for the better. For example, years ago we might have been able to find a carrier for someone with diabetes. Then the industry changed and, for a while, diabetics were out - no coverage was available. Today, carriers want to know: What is their A1C score? How many units of insulin are they taking? When were they first diagnosed?
A number of individuals battle depression, often brought on by a dramatic change in their life. Again, the questions become: How long have they had the condition? What medications are they taking? Is it well controlled? Diabetes and depression are just two of the many categories we are learning about. The last 10 years have been a difficult time for our industry. As we have learned about price risk, carriers have raised rates, exited the business and reduced benefit offerings. However, we are still here and the questions from our clients continue to get louder, longer and better. They see their parents aging and outliving their assets and look to us for answers. Embrace the new solutions and get creative in solving your clients LTC problem. Often the answer is in their file, you just have to find it.

February 2012: LTCi- The Protection of Dreams

Long-Term Care Insurance:

A Maturing Industry Looks to the Future

By Joseph P. Catalano
Joseph Catalano is senior vice president, Distribution & Marketing, John Hancock Long-Term Care Insurance. He can be reached at jpcatalano@jhancock.com.

One of the most exciting things about a new business is imagining the possibilities. This was certainly true of the LTC insurance industry when it first began around 25 years ago. The optimism that surrounded the new product's potential was well-founded. First, there were the impressive demographics, with 78.2 million baby boomers nearing an age when the likelihood of needing care could quickly become reality. Then, there was the cost of care itself, which was out of reach for many and expected to increase. Finally, we knew that LTC insurance provided valuable protection against the financial risk of needing care that was not adequately addressed by existing coverages or by government programs.

The LTC Insurance Market Experiences Growing Pains
As a result, LTC insurance was viewed as a very attractive business by many of the traditional life carriers. They were able to offer comprehensive policies with all the bells and whistles, including lifetime coverage and guaranteed increases, at affordable premiums. This was possible, based on pricing assumptions that seemed reasonable, even conservative, at the time. Unfortunately, emerging experience has revealed lower mortality rates and longer claim durations. In addition, consumers clearly value the coverage, causing lower lapse rates than the original pricing anticipated.
Significant external factors have also come into play. A faltering economy and high unemployment have discouraged potential buyers, stalling sales growth at levels that are half of what they were during their $1 billion peak in 2002. The current low interest rate environment, with its negative impact on pricing, is also a concern since it is expected to continue for the foreseeable future. Consequently, many carriers have reassessed their commitment to this business. In fact, many of the carriers who once offered LTC insurance have exited the marketplace, with no new carriers jumping in to take their place.

The Need for LTC Insurance is Greater Than Ever
However, these developments do not signal the end of the LTC insurance industry. There are challenges to be sure, but the factors that led to the industry’s rise remain compelling. There should be little doubt that private LTC insurance still has a critical role to play. Consider these facts. The baby boomers have started turning 65. Many of them have seen their 401ks deteriorate and their home values decline, leaving them less able to pay out-of-pocket should they ever need care.
And, the costs for that care are significant. According to the 2011 John Hancock Cost of Care Survey, the average annual cost of nursing home care is approximately $85,000 and the average annual cost of care received at home is $20 an hour. If care is needed around the clock, home health care costs can quickly approach or even exceed those for nursing homes. Meeting these expenses could put a real strain on the income and assets of the average consumer.
Government programs are not the answer. Although Medicare and Medicaid do provide some benefits covering the cost of LTC, their requirements are stringent and their options are limited. Both programs are under scrutiny, as politicians try and come to grips with how to reduce the massive federal deficit. And, we all know the fate of the Community Living Assistance Services and Supports (CLASS) Act that was introduced with much fanfare, as a way to ease the burden on Medicaid and help the disabled remain in the community. That program, which spotlighted the importance of taking responsibility for potential LTC needs, was repealed because of future funding concerns.

Consumers Acknowledge the Need for LTC insurance
In making a case for the future of private LTC insurance, it is also heartening to know that consumers are more aware of the issues surrounding LTC and its value. Since 1996, my company has sponsored a periodic consumer survey to gauge consumer awareness of LTC, as well as their views on LTC insurance. The 2011 survey starts with a quiz that assesses basic knowledge, about such things as the cost of care, the lifetime chances of needing such care, and what government programs cover. Just over half (52%) were able to answer a majority of questions correctly, indicating a reasonable level of knowledge. However, a smaller percentage (41%) included LTC needs in their retirement plans, with only 22% having specific plans in place to finance potential LTC.
On the bright side, when further probed about the future, a large majority (82%) agreed that it is irresponsible not to plan for the cost of LTC needs. LTC insurance was cited as the best way to prepare for future LTC needs, by the greatest number of respondents (62%).

A New Approach to Sales
Unfortunately, that positive view has not translated into action. The fact that only 11% of respondents had an LTC policy means that the industry must redouble its efforts to educate consumers on the value of planning ahead for potential LTC needs. But education is not the only action that we should be taking. Fundamental changes are required before we are truly able to meet the needs of potential buyers. According to the same survey, approximately one-third of respondents said they are less likely to purchase because of the economy and 80% indicated that it was not an expense they could afford right now. Simply put, carriers cannot continue to sell LTC insurance the same old way.
For years, the industry emphasized the importance of covering the entire LTC risk, with products featuring guarantees in the form of 5% compound inflation, lifetime benefit periods, and paid-up policies. We know now that it was an unrealistic approach for a product with such a long tail, the result being across-the-board premium increases due to the factors discussed earlier. It also limited the product's appeal to all but the most affluent buyers.
Going forward, if the LTC industry hopes to expand its customer base, it needs to consider the affordability issue and look at how it can realistically meet the needs of more people. This may be accomplished by assessing how much of the LTC risk consumers are willing to undertake themselves and how much they are willing to cede to the carrier. It may mean selling more modest levels of traditional coverage, but this thinking also opens the door to the next generation of LTC products.

The Next Generation of LTC Insurance Products
It is clear that a one-size-fits-all product is not a sustainable model, if our goal is to widen LTC insurance's appeal. After all, different markets have different tastes and needs that only a variety of products can meet. The sooner we learn to embrace new concepts, the healthier the LTC insurance industry will be in the long run.
Our direction is clear. New products that are compatible with the low interest environment must be developed. Policies must evolve so that they are attractive to younger individuals who have limited discretionary income and a certain price sensitivity. These consumers may be willing to accept a portion of risk, in the form of a deductible or co-pay arrangement, in exchange for a reasonable premium.
There should also be coverage suitable for those buyers who may be able to fund a LTC event, but who just want a policy that will protect the bulk of their assets from an extended nursing home stay. Coverage that reflects the realistic needs of a broader audience will help LTC insurance move past its recent challenges and realize its true potential.
There is still every reason to be optimistic about the future of LTC insurance. The need for the product is even greater today than it was when the industry began. With the right mix of education and product diversity, the LTC insurance industry will flourish and that's good news for consumers, as well as those of us who have always believed in the product and the critical protection that it provides.

February 2012: LTCi- The Protection of Dreams

Protecting Your Retirement Income and Legacy

with Long-Term-Care Insurance

Longevity does not mean immunity

By Arthea J. S. Reed, Ph. D., CLTC
Ms Reed is a financial representative and long-term-care Insurance specialist in Asheville, NC. with Northwestern Mutual Financial Network and owner/president of Long-Term-Care Insurance Connection, Inc.

The time of our nation's baby boomers reaching retirement age is upon us. Talking with clients about the need for long-term-care insurance (LTCI) is critically important for any advisor doing retirement income/distribution and legacy planning. For many of our clients, this is a sensitive subject; no one wants to think about the possibility of being dependent on others to aid with basic daily tasks. Even in this day and age, when people are living longer and healthier lives, no one is immune to health issues that could result in reduced mental capacity or chronic illness. Denial of the potential need for care causes many people to fail to plan for what they want for their care and how to fund it until it's too late. As advisors it is important for us to review with our clients the wide array of LTCI options available, how much they cost and how best to fund them.

Need for Long-Term-Care Insurance
Helping clients assess whether they need LTCI is an important step when setting up a retirement plan. LTCI can provide the financial resources needed for quality care for individuals with physical needs or cognitive impairments over an extended period of time. Most of us take for granted daily activities such as walking, bathing and dressing. However, when we are no longer able to do these on our own, care becomes essential and LTCI can fund care at home, in assisted living facilities or in nursing homes. When I ask clients what they think of when I say 'long-term care,' they typically respond, 'nursing homes.' They are surprised to learn most people using the benefits provided by their LTCI policies receive their care at home. A much smaller percentage of claims are for nursing-home care. The benefits provided by LTCI policies allow many of my clients to remain at home and relatively independent for a much longer period of time. An additional benefit of owning LTCI is family members aren't burdened, or have to give up their work and personal lives in order to provide care. Many of my clients are grateful they are still able to leave a legacy to their children and grandchildren, because insurance is paying for their care.
Unfortunately, many of our clients have not included a funding source for long-term care (LTC) in their retirement plans. With the cost of care expected to double every 14 years, even a short chronic care need could deplete a couple's assets. As advisors, we need to illustrate for our clients what LTC could do to their retirement income and assets. We can't predict when LTC will be required, or how long the care need will last but we can plan for its eventuality.

Pre-Funding Long-Term Care as a Part of Retirement Planning
The cost of LTC can be a burden not only for the individual needing care, but for the entire family. Clients can fund this future need in one of two ways:
The first way is by creating a 'pool of money' out of their personal assets, which will grow at five percent compounded per annum after taxes. That pool of money must be totally dedicated to future care costs, and not be touched for anything else while the client is living. I tell clients the 'pool of money' needs to equal what care would cost today, and last for as long as they believe care will be needed. For example, if a client needs $8,000 a month, in today's dollars, to fund care, the cost will initially be $96,000 per year and will grow to $149,000 in 10 years. Hence, if they want to cover 10 years of care for significant risks such as; Alzheimer's, stroke, or Parkinson's disease, they need a dedicated 'pool of money' of more than $1.2 million for each person. I tell my clients, 'The good news is if there is any money left when you die that has not been used for your care, it becomes part of your legacy.'
Another option clients have is to let the insurance company assume the risk and pay for their care for as long as they need it. If they purchase LTCI over a 10-year period, taking their age into account, it could cost one person between $15,000 and $20,000 per year for an $8,000 monthly benefit, a lifetime benefit period and unlimited pool of money. Since I work primarily with high-net-worth clients, many of them are able to deduct the full premium they pay each year as a business expense. Benefits of course will come to them tax-free when they need care. Even if a tax deduction is not available, their net outlay for the LTCI may be considerably less than the 'lost opportunity cost' of a dedicated 'pool of money' of more than $1.2 million per person to fund the future cost of LTC.

Benefits of Long-Term-Care Insurance
One of the major advantages of purchasing a LTC policy is its lifetime coverage guarantee (not available from all companies). There is no way to create that guarantee with a dedicated 'pool of money' approach. If a care need were to occur 'sooner rather than later' - such as an accident, stroke or early-onset Alzheimer's, the policy could cover the full cost of care for many years. This product could fully protect an individual or couple from using their personal assets, reducing their retirement income or depleting their legacy to pay for the cost of care. For many, the LTC premium is tax-deductible, and even if the premiums have been deducted, the benefits are received 100 percent tax-free. Of course, taxes would have to be paid on any earnings in the dedicated 'pool of money' approach.

Risks of Long-Term Care
The high cost of a LTC need is one of the challenges faced by everyone who is approaching retirement. Without planning for a future LTC need, an advisor cannot predict with reliability, or assurance our client's assets will last for a lifetime or be able to fund the full cost of future care need. Fortunately, seniors are becoming increasingly aware of how LTC can deplete a lifetime's savings. When I do retirement planning for my clients I use a software program that allows me to illustrate what a LTC need is in the future, as well as what it will do to their retirement and legacy assets. In running such an illustration for a couple who were both retiring at age 65, with $4 million in assets they could devote to retirement income and legacy planning, I showed them the need for LTC for one of them beginning at age 80 and lasting to assumed life expectancy at 90. This couple asked me to illustrate an annual income for them of $200,000, and a LTC cost of $7,600, both in today's dollars. We also assumed a three percent inflation rate, LTC increase rate of five percent, a 30 percent effective income tax rate and a rate of return on investments of seven percent. If this LTC scenario were to occur this couple would deplete $4 million of assets by age 87. It is very beneficial to my clients to see an illustration of what the cost of care could do to their assets through the software program I use. The current economy has made retirees very fearful about whether their personal assets are going to provide the income they need for their lifetime and for the legacy they want to leave. If they want any reliability or assurance that their money will last until they die and that there will be some to leave as a legacy, they must plan for a long-term-care need.
Many people believe that 'long-term-care insurance is too expensive,' or they 'can self-fund the care.' Indeed, for some the cost of the insurance may be more than they can afford, and very few of us may be able to fund the care need from our personal wealth. However, it is every advisor's responsibility to educate their clients about what care is likely to cost in the future. As people are living longer, it is critically important we illustrate for them what a care need could do to the assets that most of them have worked a lifetime to accumulate.

New data on LTCi costs nationwide

Cost of care just keeps rising, underlining the need for LTCi

Northwestern Mutual's latest Cost of Long-Term Care study, released yesterday, reveals consistently high costs for home health care, assisted living and nursing home care across the nation, underscoring the critical need to address long-term care as part of financial security planning.

Further complicating the issue, America is getting older. According to the 2010 U.S. Census, there are now more Americans over the age of 65 than any other age group, and U.S. Department of Health & Human Services statistics show that people reaching age 65 have an average life expectancy of an additional 18.6 years (19.8 years for females and 17.1 years for males).

"What's interesting is that most people realize they will need care, and yet by their own admission they're not sure how they plan for it," said Steve Sperka, Northwestern Mutual vice president of long-term care. "The first step is very simple. Sit down with a trusted advisor to coordinate a financial plan that addresses this risk. By addressing these questions early on, you put yourself in the driver's seat when it comes to difficult decisions down the road."

While costs vary widely based on location and type of care, the study shows that the national average daily rate for a single occupancy, private nursing home room is $246.06 per day, or almost $90,000 for one year of care. According to the U.S. Department of Health & Human Services, the average length of stay in a nursing home is 2.4 years, which equates to more than $215,000 in care alone.

Other highlights from the 2011 Cost of Long-Term Care study include:

- Assisted Living Facilities
The National average monthly rate for a private, single occupancy room in an Assisted Living Facility in the U.S. is $3,372.41 per month. The National average monthly rate for a shared room in an Assisted Living Facility is $2,592.40 per month.

- Home Healthcare
The National average hourly rate for Home Health Aides provided by a certified Home Healthcare Agency is $20.65 per hour. The National average hourly rate for Home Health Aides provided by a non-certified Home Healthcare Agency is $23.98 per hour.

- Long term care costs vary considerably across the country
For example, the national average for the monthly rate for a private, single occupancy room in an Assisted Living Facility is $3,372.41 per month. Comparatively, in Washington, DC, Virginia and Maryland the cost for this same care is just over $6,600 per month and in Milwaukee, Wisconsin, an individual would pay just $1,200 per month.

"While costs vary greatly from region to region the need for long-term care planning does not," continued Sperka. "The data is sobering, and doesn't even include the added expenses of medical equipment, transportation, drugs and other hidden costs. Relative to other financial commitments in retirement, long-term care costs are disproportionately high and people need to think ahead to lessen the financial and emotional impact."

Former broadcast journalist Meryl Comer knows what it means to be a caregiver to her husband, who was diagnosed with early onset Alzheimer's 17 years ago. She shared her personal story with Northwestern Mutual in this video.

Resources for Long Term Planning
Northwestern Mutual has a range of resources to help individuals think about and plan for long-term care needs:

- Visit the Long-Term Care Cost Calculator to help you better understand the potential cost if you were to require long-term care services
- Visit the Lifespan Calculator to estimate out how many years you may live in retirement
- Learn more about the long-term care costs and options available to you

About the Research
From August through November 2011, the Long Term Care Group, Inc. conducted customized Cost of Care research on behalf of Northwestern Long Term Care Insurance Company of nearly 4,400 assisted living facilities, nursing homes and home health care providers in specific regions of the United States.

About Northwestern Mutual
The Northwestern Mutual Life Insurance Company – Milwaukee, WI (Northwestern Mutual) has helped clients achieve financial security for more than 150 years. As a mutual company with $1.2 trillion of life insurance protection in force, Northwestern Mutual shares, where possible, its gains with policyowners and delivers consistent and dependable value to clients over time. Northwestern Mutual and its subsidiaries offer a holistic approach to financial security solutions including: life insurance, long-term care insurance, disability insurance, annuities, investment products, and advisory products and services. Subsidiaries include Northwestern Mutual Investment Services, LLC, broker-dealer, registered investment advisor, member FINRA and SIPC; the Northwestern Mutual Wealth Management Company, limited purpose federal savings bank; and Northwestern Long Term Care Insurance Company; and Russell Investments. Further information can be found here.

LTC Insurance Association And Leading Designation Program

Co-Sponsor 2012 National Long-Term Care Insurance Producers Summit

A milestone for the LTCi industry

The American Association for Long-Term Care Insurance (AALTCI) and the Corporation for Long-Term Care Certification, Inc., providers of the "Certified in Long-Term Care" (CLTC) designation program have announced an agreement to co-sponsor the 2012 LTCi Producers Summit.

"It is a milestone for the industry and truly a benefit for all that two leading national organizations are cooperating to put on the three-day conference," said Jesse Slome, AALTCI executive director. "The Summit is the nation's largest industry event specifically focused on the marketing and sale of long-term care insurance products."

The 2012 Summit will take place November 10-12 at the Tropicana Hotel in Las Vegas, Nevada and marks the 10th national event organized by the Association.

"We look forward to presenting three days of ideas that will show producers the most effective ways to create new markets," explains Harley Gordon, President of the Corporation for Long-Term Care Certification, Inc. "CLTC's top trainers will be organizing a special daylong advanced program for the over 10,000 insurance professionals who have earned the CLTC designation."

The 2012 Summit program will contain some 25 different workshops focused on selling and marketing long-term care insurance including multi-life and asset-based products. "The program is designed to be of value to the producer just starting out as well as the highly seasoned specialist," Slome states.

Information on the Summit can be obtained by calling the Association offices at (8187) 597-3227.

2012 Long Term Care Insurance Tax Guides Published

'Special Rules' for deductibility still a well-kept secret

Two new guides detailing the 2012 tax deductible limits and regulations pertaining to long-term care insurance protection have been published by the American Association for Long-Term Care Insurance. Over 1.2 million copies of the annually-produced guides have been used by insurance and financial professionals.

"The special rules that make long-term care insurance fully tax deductible for owners of small and mid-sized businesses, are still a well kept secret," explains Jesse Slome, executive director of the Association. The Guide To Tax-Qualified Long-Term Care Protection explains that in 2012 individuals may each be able to deduct as much as $4,370 of the cost of long-term care insurance premiums.

The Association has also published the 2012 edition of the Long-Term Care Insurance Guide For Accountants And CPAs designed to give detailed explanations of how the tax rules handle premiums for individuals, self-employed, Limited Liability Companies and C-Corporations. "Many tax professionals welcome a single, current source of information and this is an excellent way for insurance professionals to create strategic alliances and generate ongoing prospect referrals," Slome adds.

Information regarding the guides can be obtained on the Association's website. To view copies go here or call the organization for information at 818-597-3227.

Founded in 1998, the American Association for Long-Term Care Insurance is the national trade organization established to educate both consumers and financial professionals. The organization's online Consumer Information Center has been nationally recognized as the nation's most comprehensive resource for current information on the topic.

Long Term Care costs rise again in the U.S., continuing a trend

Nursing Home, Assisted Living and Adult Day Services All Increased 4.4% or More

(Westport, CT - Costs continue to rise for those requiring long-term care in the U.S. According to the newly released 2011 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs, conducted by the MetLife Mature Market Institute, national average rates for a private nursing home room increased 4.4% to $239 daily or $87,235 annually, in 2011. Assisted living base rates rose by 5.6% to $3,477 monthly or $41,724 annually. Adult day services went up by 4.5% to $70 per day. Home health aides and homemaker/companion service rates were unchanged at $21 and $19 per hour, respectively.

The highest average daily rates for nursing homes continue to be in Alaska, where rates decreased slightly to $655 for a private room compared to $687 in 2010. Costs were lowest in Louisiana, outside the Baton Rouge and Shreveport Metropolitan Statistical Areas (MSA), at an average of $141 per day for a private room. For assisted living, the Washington, D.C. area had the highest average monthly base rate at $5,757, a 10% increase from last year. Arkansas, outside of the Little Rock MSA, had the lowest average monthly rate of $2,156, also an increase.

"This year's increases are greater than previous years. The state of the economy, combined with rising health care and energy costs, are having a significant impact on long-term care rates. In fact, long-term care rates continue to outpace the medical inflation rate," said Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute. "The result is dramatic protracted inflation that will impact consumers. As the cost of care continues to rise, Americans need to discuss long-term care planning with their families now, to ensure they receive the kind of care they want in the future. This is especially critical at a time when retirement savings rates are low."

The MetLife Market Survey and accompanying report provide a good deal of additional information regarding various types of long-term care available in the U.S. and a detailed breakdown of costs by region.

Nursing Homes
- According to the U.S. Census Bureau, in 2010, 66% of nursing home residents were women. The median age of residents was 82.7 years.
Fifteen percent of nursing homes surveyed have an associated assisted living unit or wing; 11% are part of a continuing care retirement community (CCRC).
- A small percentage (10%) of nursing homes surveyed provide adult day services.
- The majority (87%) of nursing homes surveyed provide Alzheimer's or dementia care; of those, 80% charge the same rate for care.

Assisted Living
- Current estimates from the American Seniors Housing Association indicate that the average age of an assisted living resident is 86.9 years old, and the median length of stay in assisted living is 25.6 months.
- Oversight of assisted living communities rests primarily with state governments rather than federal regulation. In 2007, several states strengthened existing standards or implemented new standards for communities with residents with Alzheimer's disease or other forms of dementia.
- Almost three-quarters (72%) of assisted living communities surveyed provide Alzheimer's and dementia care, 50% of which charge an additional fee for the service.

Home Health Care
- The majority (79%) of the home health care agencies surveyed provide Alzheimer's training to their employees, and almost all (99%) agencies surveyed do not charge an additional fee for patients with Alzheimer's.
- While most home care agencies surveyed provide an hourly rate, 81% of the agencies require a minimum number of hours per day ranging from 30 minutes to eight hours with three hours being the average. Small percentages (3%) provide a daily rate. About 32% of those surveyed have a 24-hour or live-in rate. The average daily live-in rate for a home health aide is $258 and $255 for a homemaker/companion.

Adult Day Services Centers
- More than three-quarters of adult day services centers surveyed are open Monday through Friday; 6% are also open Saturdays and 13% are open seven days per week. For those open 24 hours, 67% provide full adult day services for all 24 hours. Seven in ten centers provide transportation services to and from the center. Of these, 47% do not charge a fee for these services. Of those that charge for transportation, the average one-way fee is about $8.
- Almost all (98%) of the centers surveyed provide services for those with Alzheimer's disease, with 2% of these charging an additional fee.

Download the MetLife 2011 market survey of LTCi costs here.

OneAmerica urges older Americans

to consider asset-based long-term care products

As the CLASS Act fizzles,

life insurance and annuity products with long-term care benefits could be viable option;

Recent federal law provides tax advantages

Indianapolis - (Nov. 21, 2011) With the potential repeal by Congress of the Community Living Assistance Supports and Services act (CLASS act) - a federal law designed to provide long-term care coverage - The State Life Insurance Company, a OneAmerica company, is urging consumers and financial professionals to consider asset-based long-term care products.

"Unfortunately, the issues surrounding the CLASS act coupled with the challenges found in the traditional long term care insurance market might lead people to believe there are no viable options," said Chris Coudret, executive vice president for State Life. "In fact, there are more solutions available now that benefit consumers, through guaranteed premiums and benefits payable even if long-term care services aren't required."

Part of the recent federal health reform legislation, the CLASS act was to create a voluntary public insurance program to pay for long-term care expenses, but last month the Obama administration announced it would not push forward with the program due to cost and sustainability concerns.

Meanwhile, some life insurance companies like State Life have found success offering a suite of asset-based long-term care products that use the structure of life insurance or annuities but provide long-term care benefits as needed. According to the insurance industry research organization LIMRA, these products - known as 'hybrid' or 'combo' products - saw sales growth across the U.S. of 62 percent in 2010.

"With the CLASS Act option likely being removed from the discussion, the onus is back on private insurance to provide quality long-term care protection," said Bruce Moon, vice president of individual products for the OneAmerica companies. "Consumers need to know these options are available across the country, and that the federal government has provided tax advantages to make these products more attractive and beneficial to consumers."

The market for annuities with long-term care benefits significantly expanded after a provision of the Pension Protection Act took effect in 2010, allowing the growth in cash value to be used for qualifying long-term care expenses without being subject to federal income tax.

In addition, other approaches to funding long-term care use the structure of cash value life insurance, payable with a lump sum (single premium) or annually. While guaranteed premiums make these options attractive, consumers also benefit because money is available to heirs even if long-term care ends up not being necessary. Asset-based long-term care products are available from ages 20 to 85.

"Asset-based long-term care products can address the triple-threat our nation faces when it comes to long-term care," said Coudret. "One, an aging baby boomer population means more long-term care will be needed. Two, medical achievements are allowing people to live longer, which increases the need for long-term care. And three, health care cost trends are outpacing inflation. The time for consumers to seek protection is now, and asset-based long-term care should be front-and-center in that discussion."

About State Life
The State Life Insurance Company, a OneAmerica company, is focused on providing asset-based long-term care solutions. State Life is a recognized leader in providing these solutions, which utilize life insurance, fixed-interest deferred and immediate annuities. The company's extensive Care Solutions portfolio of products helps consumers prepare for future long-term care needs by helping to protect their assets.

About OneAmerica
OneAmerica Financial Partners, Inc., is headquartered in Indianapolis, Ind. The companies of OneAmerica can trace their solid foundations back more than 130 years in the insurance and financial services marketplace. OneAmerica's nationwide network of companies offers a variety of products to serve the financial needs of their policyholders and other clients. These products include retirement plan products and services; individual life insurance, annuities, long-term care solutions and employee benefit plan products. The goal of OneAmerica is to blend the strengths of each company to achieve greater collective result

Long-Term Care Costs in the U.S. Rise Again, Continuing a Trend

Nursing Home, Assisted Living and Adult Day Services All Increased 4.4% or More

WESTPORT, Conn. - Costs continue to rise for those requiring long-term care in the U.S. According to the newly released 2011 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs, conducted by the MetLife Mature Market Institute, national average rates for a private nursing home room increased 4.4% to $239 daily or $87,235 annually, in 2011. Assisted living base rates rose by 5.6% to $3,477 monthly or $41,724 annually. Adult day services went up by 4.5% to $70 per day. Home health aides and homemaker/companion service rates were unchanged at $21 and $19 per hour, respectively.

"This year's increases are greater than previous years. The state of the economy, combined with rising health care and energy costs, are having a significant impact on long-term care rates. In fact, long-term care rates continue to outpace the medical inflation rate"

The highest average daily rates for nursing homes continue to be in Alaska, where rates decreased slightly to $655 for a private room compared to $687 in 2010. Costs were lowest in Louisiana, outside the Baton Rouge and Shreveport Metropolitan Statistical Areas (MSA), at an average of $141 per day for a private room.

For assisted living, the Washington, D.C. area had the highest average monthly base rate at $5,757, a 10% increase from last year. Arkansas, outside of the Little Rock MSA, had the lowest average monthly rate of $2,156, also an increase.

"This year's increases are greater than previous years. The state of the economy, combined with rising health care and energy costs, are having a significant impact on long-term care rates. In fact, long-term care rates continue to outpace the medical inflation rate," said Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute. "The result is dramatic protracted inflation that will impact consumers. As the cost of care continues to rise, Americans need to discuss long-term care planning with their families now, to ensure they receive the kind of care they want in the future. This is especially critical at a time when retirement savings rates are low."

The MetLife Market Survey and accompanying report provide a good deal of additional information regarding various types of long-term care available in the U.S. and a detailed breakdown of costs by region.

Nursing Homes
- According to the U.S. Census Bureau, in 2010, 66% of nursing home residents were women. The median age of residents was 82.7 years.
Fifteen percent of nursing homes surveyed have an associated assisted living unit or wing; 11% are part of a continuing care retirement community (CCRC).
- A small percentage (10%) of nursing homes surveyed provide adult day services.
- The majority (87%) of nursing homes surveyed provide Alzheimerâ€™s or dementia care; of those, 80% charge the same rate for care.

Home Health Care
- The majority (79%) of the home health care agencies surveyed provide Alzheimer's training to their employees, and almost all (99%) agencies surveyed do not charge an additional fee for patients with Alzheimer's.
- While most home care agencies surveyed provide an hourly rate, 81% of the agencies require a minimum number of hours per day ranging from 30 minutes to eight hours with three hours being the average. Small percentages (3%) provide a daily rate. About 32% of those surveyed have a 24-hour or live-in rate. The average daily live-in rate for a home health aide is $258 and $255 for a homemaker/companion.

Adult Day Services Centers
- More than three-quarters of adult day services centers surveyed are open Monday through Friday; 6% are also open Saturdays and 13% are open seven days per week. For those open 24 hours, 67% provide full adult day services for all 24 hours. Seven in ten centers provide transportation services to and from the center. Of these, 47% do not charge a fee for these services. Of those that charge for transportation, the average one-way fee is about $8.
- Almost all (98%) of the centers surveyed provide services for those with Alzheimer's disease, with 2% of these charging an additional fee.

2011 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs can be downloaded from www.MatureMarketInstitute.com. The publication can also be ordered through Contact Us on the MetLife Mature Market Institute Web site, by writing to: MetLife Mature Market Institute, 57 Greens Farms Road, Westport, CT 06880 or by e-mailing MatureMarketInstitute@metlife.com.

IRS announces increased 2012 deductability limits for LTCi

Product is one of the 'few remaining significant tax-savings benefits'

October 24, 2012- The Internal Revenue Service (IRS) announced increased deductibility levels for long-term care insurance policies purchased in 2012. "For taxable years beginning in 2012, the limitations have been increased," explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI), the industry's trade association. "Tax advantaged long-term care insurance remains one of the few remaining significant tax-savings benefits especially meaningful for small business owners."

The deductible limits under Section 213(d)(10) for eligible long-term care premiums includable in the term ‘medical care’ are as follows:
Attained Age Before Close of Taxable Year     2012 Deductible Limits          2011 Deductible Limits
40 or less                                                            $350                                         $340
More than 40 but not more than 50                    $660                                        $640
More than 50 but not more than 60                    $1,310                                     $1,270
More than 60 but not more than 70                    $3,500                                     $3,390
More than 70                                                      $4,370                                     $4,240
Source: IRS Revenue Procedure 2011-52 (2012 limits) and 2010-40 (2011 limits)

The American Association for Long-Term Care Insurance is the national association serving insurance and financial professionals who provide long-term care financing solutions. A complete explanation of tax deductible rules for individuals and business owners can be found here.

National Consumer Ad Campaign Focuses On

New Perspectives In Long-Term Care Planning

Highlighting Kiplinger's Fresh Perspectives on Long Term Care Planning

Westlake Village, CA and Washington, DC (October 13, 2011) – The American Association for Long-Term Care Insurance (AALTCI), the nation's leading professional organization dedicated solely to promoting the importance of planning for long-term care needs, announced today it will publish in the December issue of Kiplinger's Personal Finance magazine, its third consumer-focused advertorial section, entitled Fresh Perspectives on Long-Term Care Planning.

Fresh Perspectives will focus on practical long-term care planning strategies in the midst of a challenging economy. According to Jesse Slome, AALTCI's executive director: "Long-term care insurance policies have undergone significant enhancements during the past few years to attract younger, more budget-conscious consumers. To heighten awareness of these new planning options, the new supplement will deliver information many consumers are not aware of including reasons to start their planning early. The 'Fresh Perspectives' approach is intended to also generate interest among those who may have previously chosen not to purchase insurance coverage."

"This marks the third special long-term care planning cooperative effort between Kiplinger's and the Association," said Alex McKenna, publisher of Kiplinger's Personal Finance. "The most recent educational supplement from the AALTCI, which ran in our May 2011 issue, scored incredibly well in a survey of our readers. Specifically, fifty percent (50%) of those who read it said that it either changed their thinking about long-term care or they took some kind of action as a result of reading it. We expect the December supplement to have the same – if not greater – impact. We are committed to educating consumers about this important issue and look forward to growing this effort with the AALTCI in 2012."

Full-page advertisements from John Hancock Life Insurance Company (U.S.A.) and The Prudential Insurance Company of America are running as part of the supplement, which will be included in the December issue of the publication. The December issue will reach more than 2.5 million readers and will be available on newsstands on November 8.

In addition, Kiplinger's will promote long-term care awareness on the publication's website, www.kiplinger.com. The American Association for Long-Term Care Insurance has posted the two prior guides focusing on long term care insurance costs on the organization's website (www.aaltci.org).

The Power of Preparation

Long Term Care Planning

By Maria Sarci
Ms. Sarci is manager of the linked-benefit team at Ash Brokerage, Eatontown, NJ. She can be reached at maria.sarci@ashbrokerage.com

Empower your clients
Help your clients make the right planning decision about long-term care protection. A key motivator behind care planning is the peace of mind it brings. It is a means for clients to maintain independence and receive care someday on their terms.

More people are aware of the need to plan and protect against a care risk than ever before. In the early 1990's I recall conversations with clients that would often begin with 'it won't happen to me.' Today there is a shift in that belief. It seems that consumers are more in tune with the reality that a long-term care risk is a possibility.

There is no better time than now to encourage discussion of long-term care planning among families. Make it a positive! Help transform the mindset of dreary settings and change of lifestyle when thinking about long-term care. While we cannot predict the future state of our health, we can take steps to control how care is received and paid for.

There is no downside to understanding what the available solutions are, and there is no downside in having a conversation with your clients about it. There is however, a significant risk to being unprepared; a risk that could affect a person and their family financially and emotionally.

The statistics are what they are
Nearly 70 percent of Americans over the age of 65 will have a long-term care need before they die. Depending on the type of care needed, over an average 3-year period, the price of care in this country can cost upward of $300,000. Research shows most care is received at home and not in a facility. At $21 per hour, the cost of a home health aide providing part-time care could cost more than the price of care in a facility. These costs are based on today's rates and surely those rates will continue to rise in the future.

A significant part of retirement planning encompasses protecting and preserving wealth, income and legacy assets. With the costs and probability of care as high as they are, care insurance is an important component to retirement planning. Without it, most, if not all, expenses could be paid out-of-pocket. Clients need to hear the facts and understand the options. Empower your client to protect their retirement plan from the risk of long-term care.

Starting the conversation about care planning is simple!
Chances are your client knows someone who has either had a care need or has provided care to a loved one. If so, the thought of 'what will I do if I need care?' has already crossed their mind.

By simply asking your client if they have thought about care planning, you open the door to discussion. If they have, congratulate them and invite them for a consultation to review their options. If they have not, then you have an opportunity to raise awareness by sharing the facts and encouraging your client to put a plan in place. Either way, you help them protect all they have worked hard to build, not only for themselves but also for their families. Planning options will be unique to each family or individual, there is no cookie cutter approach. Solutions can include traditional or linked benefit insurance policies.

Traditional long-term care policies are usually funded with annual premiums and pay a benefit if there is a care need. These policies can provide a greater income stream later by paying smaller premiums today. Linked benefit policies go a step further. They not only cover the risk of long-term care but also serve as a legacy asset in the event care is not needed. Since most linked-benefit policies are tied to life insurance or annuities, they often pay a multiplied value of the death benefit or annuity for long-term care purposes. It is an investment approach to long-term care planning that has an asset base.

Deciding which option makes sense for a client can only be determined after discovering what is important to them.
Questions could include:
- How much of the potential care expense do they wish to cover?
- Importance of legacy assets?
- Health considerations?
- Sources of premium funding?

Responses will help determine key elements of the plan design. If the client seeks to cover the long-term care risk with minimal annual premiums and lowest impact to finances then traditional products could be a suitable fit. If the client identifies emergency money on the sideline, linked-benefit solutions provide a great way to leverage that money and multiply its value for long-term care.

I am often asked how to approach the subject of care planning with affluent clients who can afford to cover the cost of most care out-of-pocket. Care planning provides more than a financial reprieve; it also creates a plan to assist the family at time of claim. Many leading LTC insurers offer care planning services; a valuable resource that can take family members through next steps after benefits are triggered and can help to identify local care providers. Once we understand the client’s key considerations, we can find the right solution for the individual client, with choices made today for control and independence later on. Empower your clients to make an informed decision.

Taking action in care planning is where the rubber meets the road
It is one thing to have a good conversation, but engaging that client to take next steps is vital to putting a plan in place. Awareness is only step one. Reaffirming what the facts are so that it feels personal to the consumer is key. Asking questions is imperative to selecting the right concept and product choices.

There are some incredible products in the market today; for insurable clients one of them should be the right fit. Share the solution that makes sense and help the client to see the benefit and value of getting a plan in place. If the ultimate decision of the client is to self-insure, then do not hesitate to ask what the plan will be to cover the costs of care.

Being prepared and understanding the client's expectations will help to navigate the call that could come from a member of the client's family. The intention is to lead the planning discussion with the client from a positive place. It is about empowering them with knowledge to make an informed decision that is a critical part to retirement planning.

Over 45,000 Sign Up For Federal Long-Term Care Insurance Program

20 percent increase in enrollment brought the program to 270,000 total enrollees

September 22, 2011 - Los Angeles - More than 45,000 federal employees, spouses and same-sex domestic partners signed up for the Federal Long Term Care Insurance Program (FLTCIP) during the open season period earlier this year.

The open season period, which ran from April 4 to June 24, allowed eligible individuals to sign up for the long term care insurance coverage with abbreviated underwriting, which means they had to answer fewer health questions during the enrollment process.

The Office of Personnel Management, which runs the FLTCIP program, said today that the 20 percent increase in enrollment brought the program to 270,000 total enrollees. "The Federal program is the nation's largest group plan," explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance http://www.aaltci.org. "In addition to those enrolling in the plan, we estimate some 10,000 or more eligible individuals purchased private coverage directly as a result of all the promotion."

"We've seen strong support for the program in federal agencies, and ultimately in the number of people who applied and were accepted into the program," OPM Director John Berry said in a statement. "OPM is proud of the success of the FLTCIP - one of the most flexible, inclusive and affordable long term care insurance programs, designed to help employees plan for their needs as they age."

The open enrollment was the first major open season since OPM initiated the program and the first time eligibility was extended to same-sex domestic partners. OPM said it received more than 300 applications from same-sex domestic partners.

"We were receiving as many as 30 calls a day from consumers during the open enrollment period," Slome adds. "As a result, we expect overall industry sales for 2011 will be higher than 2010 a most welcome occurrence." John Hancock is the insurance company for the Federal LTCI Program.

CLASS Act flawed

American Association for Long Term Care Insurance Comments On Congressional Report

The U.S. House and Senate committee investigating the new Federal long term care insurance program issued a report yesterday detailing internal government communications concerned about the potential insolvency of what they refer to as a massive new entitlement program. Included in the new health care law is a new long-term care insurance program called the Community Living Assistance Services and Supports (CLASS) Act.

Documents obtained and included in the report reveal that the Obama Administration's Department of Health and Human Services (HHS) was acutely aware that the program was unsustainable and suppressed this information from Congressional leaders and the American people prior to the passage of the law, all in the effort to achieve phony savings to offset the bill’s massive spending and taxpayer-funded price tag.

The report was issued by the Repeal CLASS Working Group that is comprised of Republican leadership in both the House and Senate charged with overseeing implementation of the new health care law.

"The President and the Democrats are in an impossible situation," explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance, the national trade group. "If Democrats throw CLASS under the bus, it opens the door for attacks on other aspects of healthcare law. If they defend what they know is an unsustainable program, they are open to political attack as the party who never met an unsustainable entitlement program they didn't like."

According to the Working Group's key findings, senior Health and Human Services officials publicly pronounced the CLASS program solvent in the fall of 2009, even as their own employees were calling CLASS 'a recipe for disaster' in internal emails.

"This report is further confirmation that the Obama Administration willfully chose to ignore the fiscal insolvency of the CLASS program in order to achieve a political victory by pushing the president's health care bill through Congress," said Sen. John Thune (R-S.D.), co-chair of the Working Group. "The CLASS Act is a ticking time bomb that will place taxpayers' money at risk due to fatal flaws in the entitlement program's design and structure. The American people had a right to know the information revealed in our report before they were put on the hook to pay for this massive new entitlement program."

"The CLASS Act is billed as an insurance program for long-term care, but really it's just a huge and very costly government accounting trick," said Sen. Lindsey Graham (R-S.C.). "Remember Enron accounting? Well, I believe even Enron executives would be embarrassed by the accounting gimmicks created by the CLASS Act."

The Working Group's full report can be found here.

Fear and Hope Prevent Americans From Long Term Care Planning

Retirement Pulse survey: 'Shut your eyes and hope for the best'

WELLESLEY, Mass. - A poll released last week by Sun Life Financial Inc. (NYSE: SLF, TSX: SLF) suggests that discomfort over aging and hope of remaining independent through their golden years prevents many Americans from planning for long term care. Yet according to the Department of Health and Human Services, 70% of Americans age 65 and older will eventually need some form of assistance with daily living, such as with bathing, dressing, or eating.

The second in a series of retirement pulse polls by Sun Life Financial, Shut Your Eyes and Hope for The Best: American Attitudes Toward Long Term Care Planning, surveyed both mainstream and affluent Americans age 50 and older.

"Our survey shows that fear and wishful thinking paralyzes many people age 50 and older from making contingency plans that we believe can significantly enhance the quality of their final years and in many cases, conserve their finances," said Mike Shunney, President of Sun Life Financial Distributors Inc. "Long term care planning is easy to neglect, since some people will never need such assistance. But neglecting to plan can be expensive, given the rising cost of professional care. Instead of hoping for the best, we can all take steps aimed at securing the best possible lifestyle within our means, should we ever need long term care."

Key results include
Over half of Americans aged 50 and older worry about long-term care costs, and don't feel confident that they'll be able to meet those costs: Only 16% feel financially prepared to finance their long-term care.
Yet many respondents shirk from forecasting their chances of someday needing assistance with daily living activities. Of those willing to forecast, the majority don't think they'll need such assistance, which contradicts government projections that 70% of Americans age 65 and older will eventually need long term care.
Most people don't grasp the scale of rising costs. Median respondents don't realize that based on conservative historical inflation rates, the cost of nursing home care could rise in 2030 by more than double what they project.2 Conservative projections put long term facility costs (currently averaging $85,000) at $190,000 in 2030.
The depth of desire to receive long-term care at home is striking: Most Americans age 50 and older (83%) would rather survive 5 years at home than survive 10 years in a nursing home.
Over a third of respondents with a partner (32%) would have to be physically forced to enter a facility if their partner were living in a different facility.
Despite such strong preferences, many respondents who have decided where they want to receive long term care have not consulted key family members or advisors.
Download the full report here.

About Sun Life Financial
In June of 2011, Sun Life Financial introduced Sun Care Whole Life (WL), a single premium whole life insurance policy with a linked benefit that owners can apply to long-term care costs, including for in-home care, assisted living, and nursing home facilities. Sun Care Whole Life policies are issued by Sun Life Assurance Company of Canada (Wellesley Hills, MA). All guarantees are based on the claims-paying ability of the issuing company. Sun Care may not be available in all states and may vary depending on state laws and regulations.

Information can be found at www.sunlife.com/us.

What's driving the asset-based long-term care surge?

Combo products continue a trend of steady growth

by Michael Begley Jr.
Mr. Begley is regional sales director at the State Life Insurance Company

If recent sales results are any indication, an evolutionary shift is underway in the funding of long-term care. For producers wishing to offer a comprehensive array of options to serve their clients' financial needs throughout all phases of life, the emergence of asset-based long-term care products - also known as 'hybrid' or 'combo' products - should be a welcome occurrence and one worthy of further examination.

We watched sales of single-premium deferred annuities that clients can access for long-term care expenses rise 139 percent over 2009. My company's Asset-Care product saw a 76 percent increase in sales. These products use the structure of life insurance but, if needed, the death benefit can be accessed to pay for qualifying long-term care expenses.

And we're not alone. Others in the asset-based long-term care market are growing as well. New York Life and Lincoln National reported 2010 sales growth on life-based combo products of 92 and 62 percent, respectively.

There are a few key factors driving sales success with asset-based long-term care products. Chief among them is the barrier-busting approach the company's producers have taken on in recent years. Perhaps the biggest barrier for the long-term care market is human nature. This often leads to a defensive 'it won't happen to me' reaction from potential customers, which becomes the initial barrier to the marketing of long-term care products. Some potential customers also assume that family members will provide care if ever needed. Others believe long-term care coverage is simply too expensive.

To overcome these consumer barriers, we focus on two main advantages asset-based long-term care enjoys over its health-based counterparts: (1) a death benefit is paid to beneficiaries should the policyholder die and it has not been exhausted by long term care expenses, and (2) guaranteed premiums are available. Put simply, this is not use-it-or-lose-it coverage and it is not budget-busting coverage that could bring financial surprises in future years. This adds a great deal of value and peace of mind that customers may not see with other forms of long-term care coverage.

According to the National Clearinghouse for Long-Term Care Information, at least 70 percent of people over age 65 will require long-term care at some point in their lives. But earlier in life, funding options are often given too low a priority in the overall financial review process. If long-term care becomes an afterthought, the financial implications later in life can be devastating for a client, even one with a robust and complete retirement strategy.

As many insurance producers know full well, health-based long-term care insurance has been on uneven footing in the last several years. Some companies in this market are having to raise premiums to maintain profitability or, in some cases, are leaving the business altogether. By focusing on the natural advantages that asset-based products enjoy over health-based coverage, producers are able to use these products to offer real, lasting protection to their clients.

As the growth in sales indicates, producers of asset-based long-term care have found a willing and responsive customer base. These consumers are typically in their 60s or 70s, and are attracted primarily to the fact that the death benefit is not depleted if care is not needed. Products are commonly funded with a single premium that clients can reallocate from existing sources, like other annuities, CDs or even qualified money. And, as with health-based LTC insurance, inflation protection is available.

Another opportunity now available is with annuity contracts that can be used to provide qualifying long-term care expenses on a federal income tax-free basis. The Pension Protection Act was especially significant for annuities with long-term care benefits. Many consumers have purchased annuities over the years and, while some will use the income they can generate after retirement, many others will simply let them grow, year after year. The law allows withdrawals from certain annuities intended to pay for qualified long-term care expenses or insurance to be tax free. This means that while the annuity they purchased 5, 10 or more years ago may not have this unique tax advantage for long-term care expenses.

These market and legal factors are combining to help companies like State Life knock down another barrier, this one among producers themselves. Many see long-term care as too difficult to sell because of the 'use it or lose it' proposition - you have to use the policy to see any benefit from it.

The conversation-starting challenge can be more easily and productively met through the use of a simple question: if you needed long-term care today, where would the money come from to pay for it? If the client is able to identify an asset that is not needed for income and could be reallocated, then asset-based long term care products may be suitable.

Now is the time for financial professionals to take a fresh look at the long-term care market and understand how current events, economic factors and changes in the law make the process of helping clients prepare for long-term care needs even more important AND achievable. As more Baby Boomers hit retirement age, there will be more need for long-term care. Also, increasing life expectancies and medical achievements suggest long-term care may be needed for longer periods of time. Finally, the reality that health care cost trends are far outpacing inflation hint at the critical need to examine all options for the funding of long-term care.

Financial professionals understand that the 'long-term care discussion' must take place with their clients. Now, with life and annuity-based products, the context of that discussion can be one of reallocating existing assets instead of tapping into precious monthly income to pay for such protection.

Please note that the replacement of an existing life insurance or annuity must not be made unless all factors are weighed and it is documented as suitable for the client.

Most asset-based long term care purchasers are over age 65

Two Thirds Of New Single-Pay Life+LTC Policy Sales Are Over $100,000

The sale of asset-based long-term care insurance protection grew significantly according to research by th American Association for Long Term Care Insurance (AALTCI) the national trade organization. According to data gathered from the industry's leading insurers, premium in 2010 increased 79 percent compared to the prior year. The number of covered lives increased 83 percent.

"Asset based or linked products are experiencing growth as they are highly suitable for a very specific consumer," states Jesse Slome, AALTCI's executive director. "Financial planners and investment professionals who may not like the more complex nature of traditional long-term care insurance policies especially find them easier to sell."
According to the Association's annual study of new policy sales, more than half (55.7% Female - 51.5% Male) of new life+LTC policies were purchased by individuals age 65 or older. Just over a third (34.0% Female - 37.1% Male) were purchased by individuals between ages 55 and 64.
"One of the features of linked products that consumers find attractive is the principle that premiums are not 'lost' if the individual never has a qualifying long-term care need," Slome explains. "To make coverage meaningful however one needs to make a significant single premium contribution for each covered life." For 2010, the initial single premium face amount of policies purchased was $100,000 or greater for two thirds (66.2%) of new policies.

The Association study found that the vast majority (95.3%) of new Life+LTC policies issued did not include a benefit increase option that bumped up available benefits to keep pace with inflationary growth of costs. By comparison, the Association's study of 2010 traditional individual long-term care insurance policy sales, found that 94.5 percent included some form of growth option.

The complete findings are contained in the Association's 2011 Long-Term Care Insurance Sourcebook. Founded in 1998, the AALTCI s the national trade organization established to educate both consumers and financial professionals about the importance of long-term care planning.

Government Study Examines Long-Term Care Insurance Rate Increases

Only 1.6% Drop Coverage; 23% Actually Pay Less

August 10, 2011- A report released today by the U.S. Government Accountability Office (GAO) examines the impact of rate increases on long-term care insurance policyholders. Specifically, the report examines the Federal Long-Term Care Insurance Program (FLTCIP), the largest private long-term care insurance program in the nation.

"As a voluntary plan consisting of typical employees, this is a most representative group," states Jesse Slome, executive director of the American Association for Long-Term Care Insurance (www.aaltci.org), one of those interviewed by GAO staff preparing the study. "Instead of hyperbole, we now have facts to prove that the majority of consumers understand the value of their long-term care insurance protection and do not drop or reduce their coverage even when faced with a rate increase."

In 2009, some 146,415 participants in the Federal program, about two thirds of the enrollees at the time, were notified that their premiums were subject to an increase of up to 25 percent. All of these enrollees had selected a particular inflation protection option - the 5 percent automatic compound inflation option (ACIO).

The majority of FLTCIP enrollees facing the premium increase made no change to their benefits. Specifically, 46 percent or 67,511 individuals maintained their coverage with the 5 percent compound inflation option and elected to pay premium increases.

An equal percentage of individuals chose to reduce their future inflation growth protection benefits to 4 percent (ACIO) by either switching to the new FLTCIP II plan (26 percent) or retaining the original plan (20 percent). The new benefit plan provides enhanced coverage. For example, it covers 100 percent of the cost of home care and adult day care. The prior plan covered these costs up to 75 percent.

All plan enrollees who decreased their ACIO protection to 4 percent retained their (current) accrued daily benefit amount that would then increase at the reduced ACIO rate.

Only 1.6 percent of enrollees facing the premium increase, or 2,344 individuals lapsed their coverage and are no longer enrolled in the program. "We have long attempted to counter the perception that rate increases caused large numbers of people to drop coverage," Slome acknowledged. "People understand the risk they face when they purchase long-term care insurance and the protection becomes even more valuable as they age themselves."

"What may surprise many is that 23 percent of policyholders actually experienced up to a five percent decrease in their premium," Slome adds. Some 18 percent had a decrease between 0.1 percent and five percent.

The Federal Long-Term Care Insurance Program currently has 268,200 enrollees (as of June 30, 2011).   In 2009, a 7-year contract for the program was awarded to John Hancock Life Insurance Company.

Established in 1998, the American Association for Long-Term Care Insurance (http://www.aaltci.org/) is the national trade organization committed to increasing consumer awareness and support of insurance and financial professionals offering long-term care solutions. Comprehensive details of the GAO report will be made available to members of the organization.

Benefit Selection Of Federal Long-Term Care Insurance Program
Enrollees Facing Premium Increases

46.1%     No Change (FLTCIP 1.0 plan with 5% ACIO)
25.7%     FLTCIP 2.0 plan with 4% ACIO
20.0%     FLTCIP 1.0 plan with 4% ACIO
5.6%       FLTCIP 2.0 plan with 5% ACIO
1.6%       Lapse
0.5%       Other benefit changes (changing a benefit amount)
0.4%       No selection (many died or became claimants before rate increase took effect)

Premium Change

Decrease more than 5%            5%
Decrease 0.1% to 5%              18%
No change                                2%
Increase up to 5%                  17%
Increase 5.1% to 10%              6%
Increase 10.1% to 15%        2%
Increase 15.1% to 20%              1%
Increase 20.1% to 25%            43%
Increase more than 25%            6%

Parents' Retirement a Tough Act to Follow for Middle-Income Boomers

1 in 3 will have to support at least one adult in retirement

Chicago, IL., July 21, 2011 -Two out of three (67 percent) of America's middle-income Boomers expect that their retirement experience will be drastically different from that of their parents, according to a recent study released by the Bankers Life and Casualty Company Center for a Secure Retirement SM (CSR).

The study, Middle-Income Boomers, Financial Security and the New Retirement, which focused on 500 middle-income Americans between ages 47 and 65 with income between $25,000 and $75,000, found that the pensions and guaranteed income are what the majority (60 percent) of middle-income Baby Boomers envy most about the retirement of previous generations.

The ideas of being taken care of by family members, slowing down and moving to a retirement community, (activities commonly associated with the retirement of previous generations) are being replaced by keeping up with technology (77 percent), working (78 percent) and staying physically fit (81 percent).

The CSR's study reveals, nearly one in three (31 percent) Boomers anticipate having to financially support at least one adult person during retirement and 15 percent expect that person will be an adult child or children, rather than an elderly parent (only 9 percent).

There are several factors contributing to this change in retirement outlook. According to the study, retirement risk has been shifted from employers and the government to individuals with the demise of corporate pension plans in favor of 401(k) plans, discontinuation of many employer-paid retiree health benefits and the future of Social Security and Medicare.

Today, just over half (56 percent) of middle-income Boomers work for an employer that offers a retirement savings plan. This is less than the national average for all workers (72 percent). And of those who contribute to a retirement plan at work, one in four (24 percent) do not receive a match from their employer.

The report also cites one in seven have no pension or retirement accounts at all and 55 percent of middle-income Boomers have saved less than $100,000.

"The retirement of the Baby Boom generation will not only test the limits of government programs such as Medicare and Social Security, but also help shape the definition of retirement itself," said Scott Perry, president of Bankers Life and Casualty Company, a national life and health insurer. "Boomers may have to take more personal responsibility for their retirement financial security than was the case of their parents' generation and plan for the risks that may jeopardize this security, like long-term care, inflation and outliving their money."

Methodology
The Bankers Life and Casualty Company Center for a Secure Retirement's study Middle-Income Boomers, Financial Security and the New Retirement was conducted in March 2011 by the independent research firm The Blackstone Group. The complete report can be viewed here.

About the Center for a Secure Retirement
The Bankers Life and Casualty Company Center for a Secure Retirement is the Company's research and consumer education program. Its studies and consumer awareness campaigns provide insight and practical advice for how everyday Americans can achieve financial security during retirement.

Established in 1879 in Chicago, Bankers Life and Casualty Company focuses on the insurance needs of the retirement market. The nationwide company, a subsidiary of CNO Financial Group, Inc. (NYSE: CNO), offers a broad portfolio of life and health insurance retirement products designed especially for seniors.

Planning Tips For Working Caregivers

Research Shows Working American Caregivers Lose Lifetime Average of $304,000

in Wages, Pensions and Social Security Benefits

Free Resource Helps Americans Navigate Work and Caregiving Responsibilities

Westport, CT -July 12, 2011 -The MetLife Mature Market Institute has released a publication, "Planning Tips: Financial Considerations for Family Caregivers," to help the many Americans who lose a considerable amount of money when they take time from their jobs to care for their aging parents and also spend a good deal of their own funds to do so. A recent study, "The MetLife Study of Caregiving Costs to Working Caregivers: Double Jeopardy for Baby Boomers Caring for Their Parents," found that the 10 million employed caregivers in the U.S. lose an estimated $3 trillion in wages, pensions and social security benefits over a lifetime if they leave the workforce prematurely; the average losses are $304,000 per person. That does not include additional out-of-pocket expenses related to caregiving, such as travel costs, contributing to the parents' household and purchasing items needed by the care recipient.

"These tips were developed as a companion piece to the study to provide solutions for the legions of dedicated caregivers who are making not only emotional and physical sacrifices, but also financial sacrifices for their parents," said Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute. "There are steps people can take to mitigate the hidden costs of caregiving and there are programs employers can put into place to help support their employees."

Here is a synopsis of the tips:
-Think twice about leaving your job to provide care, as it will impact your lifetime wealth and future employment prospects - In addition to losing a paycheck, you could also be missing out on years of service required to become vested in a defined benefits pension plan, to receive matching 401(k) funds or to build Social Security benefits.

- Check with your employer to determine what benefits are offered, and how you would replace them, should you curtail your employment. Your employer may be able to provide workplace accommodations, such as flex-time or family and medical leave (FMLA), so you can stay in the workplace while caring for your relative.

- Take stock of what you have and your expenses for caregiving. Consider your current costs for travel, home care and any other items that you cover. Add up all your current out-of-pocket costs for caregiving and create a budget for these expenses.

- Look into public benefits. Community services may be available for low cost or no cost and can offset out-of-pocket expenses. The Web site, www.BenefitsCheckup.org, offers free, confidential service that can help older adults find programs to help pay for some of the costs associated with prescription drugs, health care, utilities and other essentials.

- Become knowledgeable about Medicare and Medicaid. Medicare is not all-inclusive and you will want to be aware of costs for premiums and deductibles. Some enrolled in Medicare may also qualify for Medicaid which covers a range of health and long-term care services.

- Calculate what it would cost to keep your loved one at home. There are many resources to enable an older person to age in place with additional services such as meals-on-wheels, adult day services and home modification.

- Consider enlisting a geriatric care manager. Geriatric care managers are usually social workers or nurses who assist with evaluation, referral and monitoring a plan of care for older persons.

- Be aware of possible elder financial abuse-Older individuals, especially those with physical or cognitive impairments can be vulnerable to exploitation which may deplete one's savings.

- Discuss your loved one's legal, financial, and medical wishes. Investigate Power of Attorney, Durable Power of Attorney and a Living Will.
Create a budget for your own future retirement expenses. Consider what portion of your income you'll need to maintain your current lifestyle after retirement; experts typically place it at about 80% of current income.

The Planning Tips publication also contains an annotated list of resources for caregivers to find help, including: BenefitsCheckUp.org, Administration on Aging (AOA), the Internal Revenue Service, the U.S. Department of Labor, Employee Benefits Security Administration (EBSA), Women's Institute for a Secure Retirement (WISER) and the Insurance Information Institute .

The MetLife Study of Caregiving Costs to Working Caregivers, produced in conjunction with the National Alliance for Caregiving and the Center for Long Term Care Research and Policy at New York Medical College, reports the percentage of adults providing care to adults over 50 has tripled since 1994 and now stands at nearly 10 million. The MetLife Mature Market Institute has a number of publications to help family caregivers.

Planning Tips: Financial Considerations for Family Caregivers and the other publications may be downloaded from www.MatureMarketInstitute.com. They can also be ordered through Contact Us on the MetLife Mature Market Institute Web site, by writing to: MetLife Mature Market Institute, 57 Greens Farms Road, Westport, CT 06880 or by emailing MatureMarketInstitute@metlife.com.

Protecting a Family's Assets from Devastating Nursing Home Costs

It's the conversation people don't have until they have to, but by then, it's too late.

The fact is that in 2010, more than 7,000 people turned 65 years old or older every single day, a figure that is predicted to rise in 2011. Further, an AARP survey revealed that only 4 in 10 of those people feel they will be financially secure for their golden years.

For many, that lack of financial stability will transform from being a worry to becoming a crisis if they discover they'll need any kind of assisted living. That's why Gabriel Heiser, an attorney with more than 25 years of experience in nursing home law, believes that people should start planning now, even if they aren't close to their 65th birthdays.

"The average monthly cost of a nursing home today is $6,917 per month, and a typical Alzheimer's patient will spend $395,000 for their nursing home care after diagnosis," said Heiser, author of How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets (www.MedicaidSecrets.com). "Those costs are only going to rise, so it's important to plan now. One important benefit to consider is Medicaid, which can help offset a good amount of those costs, but only if you know what it takes to qualify for those benefits."

The mistake a lot of people make is thinking that they can't qualify for Medicaid, according to Heiser.

"Many feel that because they own a home or have some assets that they can't qualify for Medicaid help with their nursing home and doctor’s bills," he said. "The truth is there are a variety of assets people can own and still qualify. It's just a matter of knowing the rules, and making a plan to meet those requirements."

Heiser listed the asset limits for those applying for Medicaid. They include:

- Cash: you can possess $2,000 cash that will not be counted as an asset in determining your Medicaid eligibility.

- Home: There is a $500,000 exclusion toward your home, meaning that if your home is valued at $500,000 or less at the time of your application, it is excluded as an asset. Some states use the higher permitted exemption of $750,000.

- Car: Up until recently, you could exclude only one car at a value of $4,500 or less, however that law has been changed. Now, one automobile of ANY current market value is excluded on your application.

- Funeral and Burial Funds: If you have a pre-planned funeral or memorial arrangement, the entire value of that plan is excluded. If you do not, a separate bank account that contains $1,500 toward funeral expenses can be excluded. If you have pre-purchased burial plots, you can exclude not only the costs of the plot for the applicant, but for the entire family, and still be eligible for Medicaid.
- Property: According to federal law, any real or personal property that is essential to self-support, regardless of value or rate of return, is excluded. That could include farms, rental properties and other real estate investments that generate income necessary for self-support. For rental income, however, the property must generate at least 6 percent of its value annually in order to qualify for the exclusion.

- Life Insurance: Only the cash value of a life insurance policy owned by the applicant is counted, thus, all term policies are ignored.

"There are so many other rules that can benefit those who aren't sure they'll have enough when the time comes," Heiser added. "The key is to plan now and act now. These laws exist for your protection, and avoiding the discussion and the planning necessary to take care of the potential complications just because it is an unpleasant topic will only result in a more unpleasant conversation when you realize you're not ready when the worst happens. That can be a very expensive dilemma. Peace of mind right now, however, won't cost a dime, and could save you hundreds of thousands of dimes later."

About Gabriel Heiser
K. Gabriel Heiser, J.D., has focused exclusively on estate planning and Medicaid eligibility planning, including trusts, estates, gifts, and related tax issues, since graduating from Boston University School of Law in 1983.

Combination Life Insurance Products Post Significant Growth in 2010

Consumer driven trend toward more affordable alternatives to stand-alone LTCi

WINDSOR, Conn., Following strong double-digit growth in 2009, new premium sales of individual life combination products jumped 62 percent in 2010, reaching $1.2 billion, according to LIMRA research.

"Overall sales of combination products in 2010 were remarkable, especially coming off the double-digit growth experienced in 2009," said Catherine Ho, LIMRA research actuary. "In addition to carriers boosting their marketing campaigns, consumers' growing desire for an alternative to stand-alone long term care insurance (LTCI) has driven sales of these products. For some buyers, combination products are a more affordable alternative to stand-alone LTCI."

New sales of combination products represent six percent of the individual life insurance market based on new premium. In addition, with more than 26,000 policies sold in 2010, policy count of combination products increased 69 percent over 2009 sales results.

Similar to the overall individual life insurance market, sales of whole life (WL) and universal life (UL) combination products increased in 2010 over 2009. However, UL combination products continue to be the biggest segment of this market, not just in premium but also in new policies and insurance sold. New premium rose 58 percent from 2009, representing 80 percent of the combination market. And policy count jumped 60 percent from 2009 sales results.

Sales of variable life products have been down the past two years, not yet recovering from lows hit during the financial crisis. However, new premium sales of variable universal life (VUL) combination products increased 44 percent and policy count improved 88 percent in 2010.

Over the past few years, most of the growth in the combination product market has come from linked benefit products. In 2010, linked benefit products grew 60 percent, representing 45 percent of policies sold. The linked benefit products provide LTC benefits above and beyond the life death benefit. The buyer decides on the life face amount, and then decides on the additional LTC benefit. These are mostly single premium and all-in-one packaged products.

Acceleration products experienced 76 percent growth in 2010. Sales growth of acceleration products exceeded linked benefit products in 2010 and now makes up 55 percent of the market by policies sold. Acceleration products provide LTC benefits up to the amount of the life death benefit and are more commonly riders that can be attached to many of the products in a carrier’s life product portfolio. When LTC benefits are needed, it draws down or accelerates the death benefit. These products typically have much higher face amounts, but the portion that can be accelerated for LTC may be capped.

LIMRA found that buyers in their 60s continue to be the biggest portion of in force policies. However, acceleration products are gaining traction in the younger market and with higher face amount policies. The overall trend in average face amount has steadily increased for acceleration products, but stayed level for linked benefit products.

According to the study, female policy owners account for almost 65 percent of in force policies, an increase of six percentage points from the 2009 survey. The biggest gap between genders occurs between issue ages 75 and 79.

Overall, career and independent agents are the most dominant in combination product sales with more than half of the premium being sold through these channels. In 2010, career and independent agents experienced 99 percent and 146 percent new premium growth respectively. Financial institutions and banks sold 32 percent more combination products based on premium in 2010 compared to 2009, while financial planners and advisors sold 33 percent more premium in 2010 than in 2009.

Individuals continue trend of more affordable LTCi

Slight Increase In Buyer Age Reverses Trend

Individuals who purchased long-term care insurance protection in 2010 continued to favor limited duration policies according to research by the American Association for Long-Term Care Insurance the national trade organization. According to data gathered on 153,000 new policies, over half (57.1%) of purchasers selected policies with a Benefit Period of 4-years or less.

"Limited duration policies continue to become the preferred choice of many consumers who benefit from their lower cost and are willing to assume some of the risk for a catastrophic long-term care event," states Jesse Slome, AALTCI's executive director. According to the Association's annual study of new policy sales, 52.2 percent of buyers opted for a Benefit Period of 4-years or less in 2008. Overall sales of long-term care insurance policies increased in 2010 according to the Association. "Given the economic uncertainty of the past few years, it is understandable that consumers favor ways to reduce the cost of coverage that while important is still a discretionary purchase," Slome notes. "In addition, newer product design features such as the "shared care" option allow couples to purchase more affordable limited-duration policies and still be protected if one spouse requires care for longer than provided by their own policy." According to the Association, over three-fourths of individual long-term care insurance policies are purchased by couples.

The Association research revealed a slight increase in the age of buyers, a reversal of the trend towards younger buyers. "The overall age of individual long-term care insurance buyers has increased compared to prior years," Slome states. In 2010, some 80.7 percent of buyers were under the age of 65 compared to 84 percent in 2008. "Consumers watching their budgets may be delaying purchase, though most individuals (56%) continue to purchase coverage between the ages of 55 and 64."
The complete findings will be published in the Association's 2011 Long-Term Care Insurance Sourcebook. Founded in 1998, the American Association for Long-Term Care Insurance (www.aaltci.org) is the national trade organization established to educate both consumers and financial professionals about the importance of long-term care planning.

Long-Term Care Educator Forms Alliance

with Florida's Largest Source of In-home Care

LTCFP is a Co-Founder of the '3 in 4 need more' LTCi campaign

Kirkland, WA., - LTC Financial Partners, LLC (LTCFP), which educates Americans on the need to plan for long-term care, has announce a strategic alliance with Caregiver Services Inc. (CSI), which provides in-home care so people don't have to leave their homes to receive care elsewhere. Working together, the two companies will address a big problem for many Floridians: ending up without the means to maintain their preferred lifestyle when care needs arise.

"When people of any age need long-term care," says Jonas Roeser of LTCFP, "they'd rather receive it in their own homes, so they can be with their loved ones and enjoy their familiar environment." But in-home care isn't free, and many Floridians have no choice but to move in with relatives or rely on Medicaid, which usually mandates moving into a nursing home. "My company will provide the education so this doesn't happen," says Roeser, "and CSI will provide the actual in-home care services." Roeser is LTCFP's Senior Vice President of Marketing & Operations.
Over the next two years, LTCFP plans to establish similar alliances with caregiving organizations across the nation. "We're now identifying the top supplier of care services, like CSI, in every state," says Roeser.
LTCFP's educational services -- offered nationally through corporate employers, associations, and other organizations -- make clear why families need to provide in advance for long-term care needs, just as they provide in advance for healthcare needs. "Not everyone requires long-term care insurance," says Roeser, "but everyone needs to plan for long-term care services that most families end up needing sooner or later."
LTCFP's educational offering is called the Long Term Care Outreach and Education Program (LTCOEP). LTCFP is also one of America's largest and most experienced long-term care insurance agencies, helping people choose among the many policy options offered by multiple insurance carriers.

"Once Florida residents have planned for their long-term care -- through insurance, savings, or an annuity -- CSI is an excellent place to get those services," says Roeser. "That's the reason we're teaming with them." He points out that CSI --

    - Maintains the largest registry of nurses and other care providers in Florida, with an active database of over 6,000 credentialed caregivers.

    - Provides millions of hours of service annually to frail, elderly and disabled Floridians (5 million hours in 2010).

     - Gives 24/7 service through its always-open call center.

    - Takes assignment of benefits on all long-term care policies.

    - Is licensed by Florida's Agency of Care Administration and Agency for Persons with Disabilities.

CSI maintains a toll-free number -- 800-540-6772 -- for inquiries and referrals throughout Florida. The company also currently offers qualifying individuals a VIP card that gives $150 off on CSI services paid for by long-term care insurance. More information about CSI is available at www.csicaregiver.com/

More information about LTCFP's Long Term Care Outreach and Education Program® is available at here. LTCFP is a co-founder and sponsor of the '3 in 4 Need More' campaign, which seeks to multiply the number of Americans protected by long-term care planning.

Americans worry about the need for long-term care but fail to prepare

Prudential study reveals gaps remain between knowledge and action

Newark, NJ -As retirement savings have taken a serious hit in the last few years, the cost of long-term care services has continued to rise, causing many Americans to doubt their ability to pay for the services they may need in the future. Prudential's recent study, Long-Term Care Insurance: A Piece of the Retirement & Estate Planning Puzzle, finds 71 percent of those surveyed are concerned about the possibility of needing extended care service. Yet, 63 percent do not have confidence in their ability to pay for this care.

"There's no question that as Baby Boomers age and approach retirement, one critical component to their financial plan, sometimes overlooked with dire consequences, is how to protect retirement savings, income, choice, and independence from the impact of a long-term illness or disability,"according to Malcolm Cheung, vice president, Prudential Long-Term Care Insurance.

Dealing with the potential for long-term care needs requires preparation, including proper retirement planning; understanding the costs of both long-term care services and insurance; and the willingness to discuss the available planning options.

Prudential's study points to a disturbing lack of knowledge regarding the cost and funding sources for long-term care services. On average, respondents estimated the average daily rate for a semi-private room in a nursing home at $450, more than double the actual average of $215. And, more than one-third believe that a combination of private health insurance, Medicare, and Medicaid will cover any future extended care costs, while in reality, consumers can expect minimal coverage from all but Medicaid. The cost of insurance to cover long-term care needs is equally misunderstood. While the cost of an individual policy varies significantly by age at time of purchase, 60 percent of those surveyed well overestimated the annual cost, even for the oldest of individuals. The remaining 40 percent were so unsure they couldn't venture a guess. Cheung believes these misperceptions about both the role of private insurance and government programs and the actual cost of care and insurance may contribute to a failure to act. Despite years of publicly and privately funded efforts to raise consumer awareness about the importance of planning for long-term care needs, Americans seem to understand almost all forms of insurance better than they do long-term care insurance. As a result, greater education is needed about the actual costs of long-term care and realistic funding options. The good news is that 77 percent of those surveyed in our study acknowledge they should know more.

Given that many Americans already feel challenged about saving enough money for retirement, the unexpected costs associated with future extended care needs can add to that concern as the cost of care could erode one's nest egg. Prudential's research shows that those who currently have long-term care insurance are twice as likely to be 'highly confident' about their ability to pay for future extended care services without depleting their personal assets or retirement savings. This finding points to the peace of mind achieved by incorporating long-term care insurance into a comprehensive retirement plan.

For more details concerning consumer attitudes, knowledge, and experience relative to long-term care services and insurance, download the report (PDF). In addition, Prudential offers an interactive consumer cost of care mapping tool on its website, designed to provide in-depth, state-specific costs of care to help consumers with their planning needs.

With over 20 years of long-term care insurance experience, Prudential is a leading long-term care insurance carrier serving individuals, associations, and employers. Superior service and product expertise allows Prudential's insurance professionals to work easily and seamlessly across product lines, including long-term care insurance, life insurance, and annuities.

The Increasing Role of LTC Riders

An effective way to overcome Long Term care objections

by Josh O'Gara

Josh O'Gara is a brokerage manager at First American Insurance Underwriters, Inc., in Needham, MA. He can be contacted at jogara@faiu.com or 800-444-8715.

Adding riders to enhance the features of a base life insurance policy has been popular since the early days of the industry. Whether it’s one that doubles the death benefit in the case of an accidental death or waives the premium in the event of the insured becoming disabled, both insurance companies and agents have found that adding these riders can greatly increase the marketability of insurance contracts by customizing the life insurance policies to address specific concerns of an individual client.

For example, a guaranteed insurability rider can be added to a life insurance policy that will guarantee the client the ability to purchase a specific amount of insurance at certain points in time in the future. This type of rider is often favorable for a client who is starting a family and is anticipating the need for additional insurance upon the birth of children.The accelerated benefit rider is another example of one that has been very popular in the past. It’s often triggered by a terminal illness or permanent disability. It’s particularly appealing since it creates a “living benefit” for the client in addition to the basic death benefit from the policy by paying the client up to 100% of the death benefit for a qualifying event.A new twist to this type of rider allows clients access to their death benefit in the event they are in a nursing home or long-term care facility. This new twist on an old idea has substantial client appeal since it provides an effective argument to counter many of the objections to purchasing a traditional Long-Term Care (LTC) plan.

How it works
While there are several types of LTC “hybrid” products that are currently on the market both on life and annuity contracts, the focus here is on those that can be added to life insurance contracts.The most common structure of these riders is in the form of an “accelerated benefit” that provides the client with a specified percentage of the death benefit each month that can be accessed to offset the cost of long-term care.
Assume, for example, that a female client needs $300,000 of permanent life insurance. Along with the life insurance protection, a needs analysis reveals that the client can benefit from LTC protection of $200/day in the event of being admitted to a nursing home. To address the need, a 2% LTC rider will be added to the policy so the client can access up to $6000/month of the total death benefit for LTC payments.

To qualify for benefits, the rider’s requirements are the same as a normal LTC plan in that the client needs assistance with two out of the six ADLs (Activities of Daily Living). After the waiting period (90-days on most riders), a client can begin collecting benefits each month until the death benefit is exhausted. Some riders currently on the market have an “enhanced” benefit feature that doubles the benefit pool for LTC purposes.Most of these plans pay on a reimbursement basis. The client submits the LTC bills and is subsequently reimbursed accordingly for LTC facilities, home health care or nursing home care. If the client does not use the full benefit each month, the unused portion remains in the pool for later use. If the rider is never used, however, the client’s beneficiaries will be paid the full death benefit.

The need
A U.S. Department of Heath and Human Services study found that at least 70% of those over the age of 65 will require some form of LTC at some point in their lives. This is an overwhelming statistic for most people and demonstrates the clear need that most Americans face for long-term care coverage. When the high probability of needing care is combined with the cost statistics for average nursing home care, the numbers become staggering.According to most estimates, the average nursing home costs about $200/day and the average stay is about 2 ½ yrs. When the costs are added up, on “average” about 70% of people will incur a bill of more than $180,000 (this figure can be significantly higher in metropolitan areas).Even with all the data, many consumers choose not to purchase LTC policies. Given this often-daunting situation, a producer must look at every possible solution and that’s where the LTC rider can provide an attractive alternative to a traditional LTC plan.

An alternative solution
There are many objections that clients come up with to justify delaying or completely dismissing the purchase of LTC. However, most of these fall into three main concerns, which an advisor should be prepared to address simply and clearly. Here they are:

1. Cost is the most common objection to purchasing an individual LTC plan. If we look at a typical individual plan with the same parameters for the same 65-year old female client ($6,000/month for five years), the policy would cost about $3,000/year. However, adding the LTC rider to the $300K insurance policy costs only $400/year. At a time when most Americans admit to being underinsured, this rider can provide added motivation to obtain adequate insurance to cover both the life insurance need and LTC coverage gap.

2. The second reason consumers give for not purchasing LTC is the possibility that they may never use the benefits. Some life carriers attempt to mitigate these concerns through return-of-premium LTC plans. However, this adds significant costs to already expensive plans.

Presenting the LTC rider to a client can successfully overcome this objection. Because the rider is added to an underlying insurance contract, there will always be a death benefit paid to the client’s beneficiaries if the rider is never used. When the rider is added to a life insurance plan with cash value, there is the added flexibility so the client can access the cash for supplemental retirement or emergency income needs.

3. The third objection is expressed by the client with sufficient assets that mitigate the need for an LTC policy. Based on our example, a client would need at least $300,000 of liquid assets set aside for LTC.

These so-called “lazy assets” are typically held in very low yield, low risk securities such as money market funds or CD’s. However, if the client takes less than one-third of this emergency fund (about $85,000 in this case) and purchases a single pay life insurance policy that includes an LTC rider they can obtain the same $300,000 benefit pool. Along with the leverage this gives the client, there is the added benefit of an additional $300,000 of life insurance, which can then be used to offset estate taxes or to create a legacy.

The sale
In a highly competitive market where products are constantly changing and information is easily available to consumers, it is vital that advisors be prepared with a level of knowledge to benefit their clients. Long-Term Care riders can provide an intriguing solution to the complexities surrounding the sale of traditional LTC plans. The concept can be used to either open the door to a new client or to provide a compelling reason to revisit the insurance needs of current clients. This new twist on an old idea should prove to be a beneficial source of revenue as people increasingly try to get the most value out of their insurance policies in the tight monetary environment.

Long-Term Care Insurance in 2011... and Beyond

Between Affordable Care Legislation, the CLASS Act and a reshuffling of the dominant players, the LTCi market is certainly in transition, Yet, the market seems poised for growth

by Henrik Larsen, MBA, CLTC

Mr. Larsen is vice-president of marketing for Advanced Resources Marketing, a national distributor of Long-Term Care insurance based in Boston, Mass. He can be reached at 800.269.2622 or hlarsen@armltc.com

For the long-term care insurance [LTCi] industry, 2010 was marked by an increase in sales and three significant events two of which fall in the same category. The conclusion from these events holds much promise for the continued sales growth within the industry.

The first event was the passing of The Patient Protection and Affordable Care Act [PPACA] signed by President Obama on March 23, 2010. As many of you will know, part of PPACA is the Community Living Assistance Services and Supports [CLASS] ACT scheduled to take effect on January 1, 2014. The CLASS Act establishes a Government administered voluntary long-term care insurance program in which employees can enroll if their employer elects to participate. This program will not compete with individual insurance but most likely complement it. An abridged comparison between the CLASS Act and individual insurance will follow later in the article.

The other two major events of 2010 involved two of the major carriers in the industry. In September, John Hancock announced that effective almost immediately, they would, and did, cease accepting all limited underwriting applications. This affected the issuance of both group as well as multi-life policies. And in early November, MetLife, another prominent issuer of group and multi-life policies, announced that affective December 31, 2010, they would leave the LTCi industry entirely.

So what prompted these two major carriers to take such drastic actions? With respect to John Hancock, they state as their primary reason significant adverse selection in their limited underwriting business. MetLife state that the capital requirements of staying in the industry are higher than they feel comfortable undertaking at this point in time.

These two actions are to be seen against the backdrop of most carriers having significantly raised new business premiums as well as having increased premiums of in-force policies in recent years. Those actions were predominantly the result of insufficiently pricing for lower interest rates and less-than 1% lapse rates.

So, let’s take a look at how CLASS may alleviate some of these inherent problems in the LTCi industry. CLASS allows for participants to enroll in the program without evidence of insurability. So, knowing what the carriers know, what makes the Government [through CLASS] think they can do better? One answer is that they don’t have to pay for the sins-of-the-past; interest rates and lapse assumptions i.e. An obvious follow-up question is, “How will individual insurance be able to compete with CLASS. Well, let’s take a look at the differences between CLASS and individual insurance[1]:

The above comparison strongly suggests that CLASS will provide a somewhat limited benefit [$50-$75/day] at a relatively high cost. So, it appears CLASS is a bad deal. Nothing could be farther from the truth!

CLASS is an excellent guaranteed acceptance program for those whose health prevent them from obtaining coverage through private insurance; and as we just learned this past year, the field of insurance companies who offer underwriting concessions is shrinking. As a side note, those insurance companies, who still offer underwriting concessions to employer groups, are placing added restrictions on purely voluntary plans by either limiting the maximum benefits available or increasing participation requirements or both. In those cases where the employer contributes financially to a base plan for all employees and/or full blown coverage for executives, significant underwriting concessions are still available from numerous carriers.What are the carriers afraid of? The combination of adverse selection and early claims! There is no doubt that the CLASS Act program will be heavily adverse selected against – especially with the projected benefits and corresponding premiums – but, the claims will not be early. Any participant will have to pay into the program for at least five years before any benefits would be payable. This places significant restrictions on benefit eligibility. Just consider the following two scenarios:

· Will employees participate if they know they will probably retire within the next 5 years?

· Will employees participate if they are contemplating changing jobs? What if they move from an employer who elected to participate in the CLASS Act program to one who doesn’t?

The answers to these questions are probably “No.” Unless, these employees’ health issues are such, that coverage under the CLASS Act program become their only option. In that case, they may even choose to postpone retirement if possible and stay with their existing employer.

These are the restrictions that are designed to make the CLASS Act program actuarially sound and self-sustaining. Why don’t the carriers do the same? They are not allowed to. For starters, no state allows for an elimination period [deductible] of more than two years, and many states will not approved policies with elimination periods in excess of 90 days. More importantly, an insurance carrier can obviously not have as loose a definition of actual benefits as is the case of the CLASS Act program.So to the same extent that the CLASS Act program is a great program for those otherwise uninsurable, it is similarly a great program for the insurance carriers. It allows the carriers to underwrite a little more restrictively but at the same time leaving those who are uninsurable with an alternative: coverage under the CLASS Act program. Granted, CLASS coverage is limited and premiums may be high, but the alternative is no coverage whatsoever.

The final advantage of the CLASS Act program is the collective message being sent from the Government to employees through their respective employers.

Long-term care is a big deal! It could significantly impact your retirement financially, physically and emotionally!You need to plan for it!This is the type of industry campaign we as agents, brokers, advisors, and distributors have requested from the carriers for many years. The CLASS Act will, if nothing else, create a heightened level of interest in long-term care insurance from both employers and employees. We have seen it already! Any employer deciding to endorse the CLASS Act program will most likely also offer an individual program and for this very reason, I believe other carriers will [re]enter the LTCi industry over the next couple of years.

Not Making Those LTC Sales?

Maybe It’s Time For A Paradigm Shift

By Brian O’Connell, CLTC

Brian O'Connell is affiliated with NY/National Long-Term Care Brokers. He can be reached at 800-695-8224 Ext 132 or boconnell@nyltcb.com.

Ten years ago we were selling “Cadillac” LTC policies…daily benefits that covered the full cost of care, 5% compound inflation protection and lifetime benefit periods. We could do that because policies were reasonably priced. Since then premiums have increased considerably resulting in the major objection to the purchase of a policy, “it’s too expensive.” While we as LTC and financial professionals would likely agree that, even at today’s higher than historic premiums it often remains a prudent planning strategy, that raw dollar amount remains a stumbling block for many clients.
Yet, we continue to show our clients loaded up plans; but when we do, all we do is create “sticker shock” and reinforce what our clients already believe, “it’s too expensive.” At this point you probably have lost them - end of discussion. One of the first paradigm shifts you may need to make is to “some protection is better than none.” Most of your clients will have some level of assets that would allow them to self-insure some of the costs related to long-term care. Whatever affordable plan you develop for them, that pool of money created is direct asset protection. Stress that even a small amount of coverage provides a degree of protection for their family…protection that the family may not be forced to be the primary caregivers and they will have a support system to help take care of you when care is needed.

A second paradigm shift you may need to make is “it’s ok to show a plan with minimum benefits and build up.” This is important because you want to show them an initial plan that is affordable to dispel their major objection that “it’s too expensive.” Then you can work to build up the plan with their affordability criteria. Let’s look at a typical quoting scenario. You have a 55 year-old couple interested in getting information on long-term care insurance. You look up the cost of care in the area the clients live. The average daily cost is $250. You quote a benefit period factor of 3 years. You quote a 30-day elimination period because you like shorter elimination periods and you quote 5% compound inflation because that’s what’s been engrained in you to do. The combined annual premium is $5,457. Then you slip the quote across the table to your clients and say, “Mr and Mrs Smith, your annual premium for a $250 daily benefit is $5,457.” Do you think that might create “sticker shock?” Here’s a suggestion - start low and build up. Quote $150 a day, the 3-year benefit period factor, something less the 5% compound inflation protection (perhaps GPO or 3% compound inflation), a 90-day elimination period and consider quoting a monthly premium. The combined monthly premium, using 3% compound inflation protection, in this case is $172. How about that sticker shock now? Then, consider that, in 25 years, about the average age they may need care, they both will have a pool of money of $344,000 or a total of $688,000.

Which of the following scenarios do you think has a better chance of keeping the conversation going:
1. Mr and Mrs Smith, your annual premium for a $250 daily benefit is $5,457.
2. Mr and Mrs Smith, for $172 a month you can purchase $688,000 of insurance.

A third paradigm shift you may need to make may be “offer them what people are buying, not what you want to sell them.” The fact of the matter is generally, people are not buying the “Cadillac.” As reported in the American Association for Long-Term Care Insurance in their 2010 Sourcebook, this is what people are buying:
Sales By Issue Age 77% Between the ages 45-64
Sales By Daily Benefit Amount 72% Between $50-$199 / 28% $200 or more
Sales By Benefit Period 76% Between 2-5 years / 24% 6 years or more
Sales By Elimination Period 83% From 90-100 days / 7% From 20-30 days
Sales By Inflation Factor 40% 5% Compound / 60% Less than 5% Compound
Average Annual Premium Age 45-54 $1,760 / Age 55-64 $2,120 / Age 65-74 $2,875

This, coupled with the “start low and build up” strategy, may help you make more LTCI sales. Or, considered another way, it may help you make some sales you are otherwise LOSING. More importantly, you’ll be providing your clients some level of protection they might not otherwise have.

A few suggestion or things to think about when building up:

Elimination Period
You may want to start with this first as it may be the most significant cost impact to your client. You need to make them aware of the potential out of pocket expense 10, 20 or more years down the road for those additional days versus the added cost for the lower elimination period. Let them make that decision. On average, it’s about 10% to 15% more in premium to go from 90 to 30 days.

Inflation Protection
Keep in mind that this carries the biggest hit to the premium. Going from GPO to 5% Simple is about a 110% increase and to 5% Compound, a 235% increase. If this creates “sticker shock,” you may be back at square one. However, if GPO is in their affordability range, you may want see how much more they can afford in daily benefit to at least partially make up for the ultimately lower benefit pool.

Benefit Period

A 3-year benefit period will be adequate in most cases. Based on current data, 13.1% of LTCI claims exceed 3 years, 7.6% exceed 4 years and only 4.5% exceed 5 years. However, if in your fact-finding there is family history of long duration long-term care events, you should explore that with your clients.

A NEW WEALTH CONSERVATION STRATEGY
FOR INVESTMENT ADVISORS

5 Reasons to Recommend Long Term Care Insurance to your Affluent Clients

by Phil Davis

Philip Davis is President and Founder of Corporate Compensation Plans and WealthSecure®,located in Danbury, CT. He can be reached at ptdavis@corpcompinc.com

At first glance recommending long term care insurance to a client worth, say, $15,000,000
might seem laughable – after all, the prevailing wisdom is that affluent people don’t need long term care insurance.
But there are five solid reasons why investment advisors should recommend that their affluent clients give serious consideration to buying long term care insurance:

Reason 1:
There is little or no cost to an individual’s estate if long term health care is NOT needed
A properly designed long term care insurance plan will cost your clients’ estates very little, if anything, if they die without ever needing extended health care. There are three reasons for this “almost too good to be true” value proposition:
1. If the client dies without needing care, 100% of his or her premiums will be
refunded to the estate or to personal beneficiaries. This means that the maximum
cost of the insurance is not the premiums paid, but the opportunity cost of money.
2. In many cases Federal tax savings and state tax credits will significantly reduce
the premium outlays.
3. In situations where the estate tax is applicable, the premiums will be effectively
discounted by the estate tax rate because the premiums are reducing the taxable
estate.
This means that advisors can now focus on the advantages that long term care insurance can provide their clients rather than dismissing it because it “costs too much”.

Reason 2:
Long term care insurance preserves assets
70% of all Americans over age 65 will need some kind of long term health care(1). For some the costs will be inconsequential. For others costs can run into the millions of dollars as the result of serious injuries and strokes, or from illnesses such as Parkinson’s, Multiple Sclerosis, Diabetes, and Alzheimer’s. For example, the current cost of 24/7 home care is $175,000(2).
Over eight years – the average length of Alzheimer’s(3) – the cost would be $1,400,000. But there are two other costs to consider:

1. Extended health care costs have been increasing each year because of the
inflation in medical care expenses.
2. The opportunity cost of money on the dollars removed from the investment
portfolio to pay extended care costs.
Therefore, if we add to the $1,400,000 of direct costs a 5% inflation rate and a 4% after tax investment yield, we would get a cost equation that looks like this:
Care begins in 2011 Care begins in 2031
1. First year cost of care $ 175,000 $ 464,327
2. 8-year costs without inflation $1,400,000 $3,714,616
3. 8-year costs with 5% inflation $1,671,094 $4,443,910
4. Loss of investment earnings@ 4% $ 310,638 $ 814,215
5. Total loss of assets to family (3 + 4) $1,981,732 $5,258,125
Of course the client – or his or her spouse – may never need extended health care. And if they do, the costs could be far less than in our example.
But the question you, as the advisor, should be asking is this: “What happens if my client does need extended health care and what would be the impact of it on the family’s assets?”
(1) U.S. Department of Health and Human Services. Also see What Can Current Retirees Expect. Research by Peter Kemper,
Ph.D., Department of Health Policy, Pennsylvania State University, June 2006 LTCI Sales Strategies Magazine.
(2) See 2010 MetLife Mature Market Study on the cost of long term health care.
(3) The average length of Alzheimer's is 8 years. (See "Losing a Million Minds: Confronting the Tragedy of Alzheimer's and
other Dementias: U.S. Congress Office of Technology Assessment" U.S. Government Printing Office). Also see Alzheimer's Association at www.alz.org.

Reason 3:
Long term care insurance can eliminate the need to liquidate assets
Every one of your clients has a long term care insurance program. Some have it with insurance companies; the rest have self-insured it with their own money.
Self-insurance may be a sound strategy, but very few individuals who self-insure have asked themselves this very important question: If I – or my spouse – need health care for an extended period of time, where is the money going to come from to pay for it?
If the client has loads of cash or cash equivalents the answer is easy – he or she will reach into their bank account and write a check to pay the care cost bill.
But what if most of their assets are in investment accounts, qualified retirement plans, IRAs, or nonqualified deferred compensation plans?
For example, to pay $175,000 of extended health care costs from investment profits will require $218,750 assuming a 20% capital gains rate. Even worse, it would require a $291,667 distribution from a qualified retirement plan account or an IRA in a 40% marginal tax bracket.
Therefore if it is necessary to liquidate assets to pay health care costs, the real cost can be significantly higher than the care cost itself.
Finally, clients need to determine if they would have to sell off assets at an economic loss to pay the costs of extended health care. If this is a possibility, the purchase of long term care insurance should be considered to guarantee that a forced liquidation of assets would not be necessary.

Reason 4:
It is possible that long term care insurance can be used to reduce estate taxes and
transfer assets on a tax-advantaged basis

Some tax authorities believe that combining long term care insurance with an irrevocable trust can create significant tax savings.

Here is how the strategy might work:
Your client creates an irrevocable trust and funds it with gifts or loans. He plans to pay the costs of long term health care – should he need it – from his liquid assets. These payments will reduce the value of his taxable estate and, in turn, his estate taxes.
At the same time, the insurance company will be making payments into his irrevocable trust to be invested for the benefit of his family. Further – according to the premise of this strategy – those payments will be income tax-free and the trust corpus will be estate tax-exempt.

Finally, if the donor dies without needing long term health care, the insurance company will refund all of the premiums to the trust. It goes without saying that this strategy should not be implemented unless your client’s professional tax advisors believe it has merit – but it certainly has the potential to generate
significant tax savings and to transfer wealth.

Reason 5:
Reason 5 is untitled because it has nothing to do with your clients and everything to do with you as the clients’ investment advisor.
Ignoring the fact that a great many of your clients are going to need long term health care – or passing it off with the statement that if they do, they have enough money to pay for it – may not be a prudent course of action for the following reasons:
• Your job as an investment advisor is not just to grow assets – it is also to protect
them. Therefore you don’t want to be in the position of allowing your clients’
assets to be at risk without bringing that risk to their attention.
• You have an obligation to bring to the attention of your clients new ideas and
concepts that can help them conserve their assets and transfer their wealth (and if
you don’t perform that function someone else may do it for you!).
• If your clients need extended health care, long term care insurance will preserve
their assets under management and, by extension, your revenue from those assets.
It will also help you to maintain inter-generational client relationships.
• The sale of long term care can generate significant revenue for you – and if you
work strictly on a fee basis it might be possible to redirect that revenue to reduce
your client’s costs.
Since long term care insurance is fairly complicated (because of the insurance company’s
insistence on making it complicated) it is certainly understandable if you don’t want to talk to
your clients about a subject you know little about. But there are two options to deal with this
issue:
• Hire a long term care insurance specialist.
• Partner with a long term care insurance professional that you will feel comfortable working with as part of your advisor team.

Linked Benefit LTCi

A powerful tool for clients who self insure

by Peter Cross

Peter J. Cross serves as Managing Director of Ash Brokerage's Long Term Care Sales, Eatontown, N.J. He can be reached at peter.cross@ashbrokerage.com.

Linked benefit life and annuity products, also known as "hybrid" or "asset-based" long term care policies, are enjoying unprecedented popularity. Self insurers view them as a powerful tool to leverage the benefit value of idle cash that is held in CDs and money funds.

Today's linked benefit sales explosion comes from three drivers:

Growing interest in long term care coverage among clients with portfolio losses;
Record low interest rates on emergency funds; and,
Pension Protection Act's recognition of linked benefit policies with tax-qualified long term care riders.

Clients usually buy linked benefit policies with a single premium. Most policies guarantee or allow access to cash value, so clients know that their emergency money remains under their control. If they withdraw funds, benefits are reduced proportionately.

Linked benefit policies have built in tax qualified long term care riders. Benefit triggers are the same as traditional long term care insurance: loss of two out of six activities of daily living or severe cognitive impairment.

Linked benefit products provide an answer to the most common objection to traditional long term care insurance: I have to lose in order to win. If care is never needed, linked benefit life insurance pays a tax-free death benefit to named beneficiaries. Linked benefit annuities allow beneficiaries to access the residual value of the remaining tax-deferred assets.

Linked benefit policies cover life's twin risks: living long enough to require covered care services, or dying without ever needing care.

How They Work

Linked benefit policies have two tax-qualified riders. The first is usually called the accelerated benefit rider. It prepays the life insurance death benefit or the annuity cash value as covered expenses are incurred.

The second, often called the extension of benefits rider, continues long term care benefits after the life insurance death benefit or the annuity cash value is exhausted. It is pure long term care insurance supplementing the accelerated life insurance or annuity benefit value.

The combined riders reimburse up to a specified daily or monthly amount for a pre-defined period of time, just like traditional long term care insurance. If the death benefit or annuity cash value is not exhausted, the remaining amount goes to beneficiaries.

Linked benefit policies pay benefits, even if care services are never needed.

Two important tax benefits apply to linked benefit life insurance. First, automatic withdrawals of cash value gains to fund the long term care riders are income tax-free. Second, tax-qualified long term care benefits paid by the riders are also income tax-free. Both distributions are tax-free, no matter whether the insured receives the long term care benefits or named beneficiaries receive the life insurance death benefit.

Linked benefit life insurance policies cover life's twin risks: living long enough to require care services...or dying "too soon," never needing care.

Optional riders vary by company and one rider is inflation protection. When added to a policy, inflation protection riders substantially reduce initial benefits from a pre-defined premium deposit. However, most policies are sold without inflation protection. Here's why.

Client discussions usually identify a specific amount of emergency cash to fund these policies, and benefit values are directly related to that single premium. This is called a "money purchase" approach to long term care funding. It is different from the �premium solve for benefit� approach typically used with traditional long term care insurance.

Most linked benefit buyers are older than traditional insurance buyers and they have chosen to rely on their own funds if they ever need care services. Linked benefit insurance provides a way to leverage a portion of their emergency cash, so they seek to maximize initial benefit values.

Inflation protection riders significantly reduce those benefit values. Therefore, the "self insurers" view linked benefit policies as tools to leverage just their emergency cash. They plan to use their equity securities to provide a hedge to cover inflation.

Linked Benefit Annuities

Linked benefit annuities leverage the benefit value of annuities to reimburse covered care expenses. Those tax qualified distributions become income tax free. When the cash value is exhausted, an extension of benefit rider continues care expense reimbursement payments. Many linked benefit annuities can triple the benefit value of the annuity's cash to reimburse care expenses.

The primary advantage of linked benefit annuities is that they are simple to understand and may be suitable for 1035 exchanges if the present annuity is non-qualified, not subject to surrender charges and not needed for retirement income.

Generally speaking, linked benefit annuities are easier to underwrite than linked benefit life insurance because there is less risk to the insurer. There is no life insurance benefit, and the morbidity risk is delayed until the cash value has been entirely used for care services. However, if the client has been declined for traditional long term care, it may be difficult to get them underwritten for a linked benefit annuity.

Linked benefit life insurance generally provides more leverage than linked benefit annuities. The reason is simple: linked benefit life policies first prepay the death benefit, not the just the cash value. Then the extension of benefit rider multiplies the value of the death benefit to reimburse care expenses.

When in doubt, ask for side-by-side illustrations and recommendations. Also ask about long term care CE requirements in the state where your client resides.

A dollar of cash moved to linked benefit life insurance is likely to purchase more long term care benefits than will a dollar moved to a linked benefit annuity.

Underwriting Choices

Most linked benefit products are tele-underwritten or offer simplified underwriting. The two processes should not be confused. Tele-underwriting involves an extensive phone interview administered by trained professionals. It is important to pre-screen clients for potential underwriting problems and prepare them for the cognitive and memory tests that come with the tele-interview process. Ask your general agency for help preparing your client for the interview.

Other linked benefit insurers use formal applications and traditional underwriting processes. If there are likely to be underwriting issues on a case, ask your general agent for carrier recommendations. A case consult before application submission can be a wise decision as it minimizes the risk of an unexpected decline or rating.

Your Client Conversations

People who purchase linked benefit policies are generally older than traditional long term care insurance buyers. My experience, which goes back to 1988, has been that linked benefit buyers tend to be in their early to mid-60s, while traditional long term care buyers are at least 10 years younger.

Both buyer groups are comprised of Baby Boomers and they should never be called senior citizens. They are mature Americans who have years of mixed experience with financial products. Most mature market buyers do not react well to a product pitch, no matter how enticing it may seem.

Productive client conversations are discussions about choice. They start with one question: �Do you have an income (or asset) replacement plan for your retirement?� Clients who are still accumulating retirement savings will relate to an income replacement discussion. Retired clients are often more responsive to questions about asset protection.

Ask if they had a plan to fund their children's education. According to the College Board, one year's tuition in a private four-year college in 2009 was about $33,000. Chances are, they did have a plan.

Now shift to the future. MetLife's 2009 Mature Market Study showed that a home health aide costs about $21 hourly. Eight hours of daily services results in an annual cost of $61,320. Do your clients have a plan to replace that lost income?

One option is to take a modest amount of current income and redirect it to pay for traditional long term care insurance. But there are two valid objections: cumulative premiums can be expensive and the premiums are lost if care is never needed.

That leads many clients to rely on their own money to pay for care. Ask which assets they would liquidate first if care expenses arise and they will identify emergency cash. Remind affluent clients that assets lost to care expenses are dollars lost to their children. Now your conversation shifts to asset protection.

Suggest a way to leverage the value of their emergency cash, whether or not care is ever needed. Linked benefit policies can provide cash liquidity, leverage for care expenses and a benefit to beneficiaries if care is never needed.

Call your general agency for linked product recommendations and personalized illustrations. Ask for point of sale assistance during your first presentations, as it will help you to respond immediately to client questions.

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LTC: Family issue that falls on women

by Shawn Britt, CLU

Shawn Britt, CLU, is director of advanced sales with Nationwide Financial Services in Columbus, Ohio. She can be reached at britts@nationwide.com.

Long term care (LTC) is definitively a women's issue. While men will indeed be part of the long term care story, they usually participate as the cared for. Women on the other hand often start out as the care taker, but need care themselves in the end. If you look at the following statistics, this picture becomes clearer.

At age 75, 74 percent of men are still married, while only 38 percent or women have a spouse. Women comprise 75 percent of the unpaid caretakers force, and without a spouse to provide care, the caretaker usually becomes the daughter or daughter-in-law.

While adult children and parents should have discussions about potential LTC needs that could arise, these conversations too often take place at the eleventh hour. By then, the parent is either uninsurable, or delay in taking action puts the parent at an age where premiums are too high to be palatable.

Issues the family faces

Unfortunately, families attempting to save money often think they can handle care themselves. Mom cares for dad, and then the adult children care for mom. Sounds good on paper, but there are many issues families should consider, which include:

Overestimating how much quality care the family can actually provide.
Family dissention when care falls primarily on one or two family members, usually the females.
Uprooting the parent from their community if care must be given by out of town children.
Physical and emotional stress on the caretaker as they try to juggle caretaking duties with keeping their own household in order.
As parent's money runs out, siblings may not agree on what is fair in regard to splitting expenses to pay for the parent's care.
When one adult child has power of attorney, other siblings may not agree with how the parent's finances are being handled.

True (and typical) story

Yvonne has been a caretaker for years, and it has definitely affected her life. Though she has three brothers, she is the only daughter. Several years ago, Yvonne's unmarried brother had a long terminal illness for which she was the primary caretaker. Her retired mother helped a lot at first, but the stress had an impact on mom's health, leaving Yvonne to do the major care-taking duties. Yvonne tried hard to juggle work and her brother's doctor appointments and treatments, but ultimately, Yvonne had to give up her career. After this brother passed away, another brother moved in with her mother to help take care of her. That worked for a while, but now, he too is ill with serious heart problems. Yvonne is now caring for her mom and brother. The third healthy brother offers to help but lives over an hour away, and he is not skilled at cooking, laundry, or cleaning, so Yvonne has to take care of her mom's household as well as her own. Yvonne changed careers to one with more flexible hours, but lost precious time and money in building her career, college savings for her two kids and retirement assets when she lost her previous job. Being a caretaker has affected Yvonne emotionally and financially.

This family story and its consequences are all too common.

Women who provide care for a chronically ill spouse are six times more likely to suffer symptoms of depression and if care duties are more than nine hours per week, the increased risk for coronary heart disease doubles.

Women may lose out financially as well when balancing work with care-giving of family members. Loses average $565,000 in lifetime earnings, plus loss of Social Security and pension benefits.

Solutions

Traditional LTC policies, familiar to most clients, focus on long term care only. While these policies offer an array of features, most policies are a "use it or lose it" proposition, which leaves many consumers cold.

Long term care riders on life insurance and annuities offer an alternative asset based solution.

Annuities/LTC combos vary among companies, but essentially double or triple guaranteed income benefits from assets that have accrued if qualifying LTC needs occur. These products may be a good choice for clients who must stretch what they have to last a lifetime and will pay either income or LTC benefit.

Life insurance/LTC combos work differently. A smaller amount of dollars paid today in the form of premium creates a larger amount of money that can be used as death benefit and/or long term care benefits. This pool of money, usually a multiple of dollars paid in, is available as soon the policy is issued. A solution of this type may be better suited to clients who have enough income to live on, but are looking for a LTC solution that can fit in with legacy planning. The death benefit becomes available while the client is living to pay qualifying LTC expenses, and any unused death benefit is paid to the beneficiary, upon the death of the insured.

Benefit pay-out options � indemnity vs. reimbursement

Benefit options may be just as important a consideration when thinking about the stress and time required from family members to coordinate the collection of a parent's benefit.

Reimbursement plans are sometimes less expensive to purchase, but require more work. The benefit will be the lesser of the maximum qualifying benefit or actual LTC costs incurred. Any costs on the bill not specific to long term care may not be covered. In addition, bills and receipts must be submitted each month to the company, then, qualifying costs are reimbursed, either to the facility or to the contract owner for bills already paid. This monthly administrative duty is likely to fall with the daughter or daughter-in-law.

Indemnity plans, while sometimes more expensive, provides a much simpler policy on which to collect. This option will simply provide a check each month for the full amount for which the client qualifies, whether they need it all or not. No bills or receipts need to be submitted and any excess benefits may be used for any other expenses, offering more flexibility of use. The client needs to qualify before LTC benefits are paid out and HIPPA plays a role as to how much LTC benefit can be paid out.

All family members can benefit from proper LTC planning, women in particular. When funds are available to provide professional care, the patient gets better quality care, and the wife or daughter are better able to maintain their own physical and financial health to live a longer more quality life.

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Long Term Care's great false start

It will solve the longevity risk and protect a client's nest egg,
so why are so few buying it?

by Terry L. Truesdell

Terry L. Truesdell is president and CEO of the National Long Term Care Network, an alliance independent brokerage agencies specializing in LTCi. He can be reached at 913-385-7899 or at terrytruesdell@nltc.com .

Long term care insurance (LTCi) is a product many insurance industry leaders believed would become an exciting new frontier for the insurance industry. As Baby Boomers began experiencing their parents' long term care needs and realized the realities of paying for that care privately, it seemed only logical that consumers would readily embrace LTCi as a part of their financial plan for retirement. Year after year insurance carriers and their distribution channels have gone through an annual planning ritual, assuring each other "this is the year" LTCi sales will really take off. But the excitement and anticipation of great things to come has yet to perform to anyone's expectation. Sales stalled even before the economic downturn.

How is this situation possible? Even as many Baby Boomers have dealt with their parents and grandparents long term care needs first hand, only a small percentage (under 10 percent) of those who should have long term care insurance have actually purchased it. Last year the U.S. Department of Health and Human Services estimated that about 70 percent of individuals over age 65 will require at least some type of long term care services during their lifetime. It would appear LTCi sales would be increasing at a record pace, but that is not the case. In the last several years, sales have dropped more years than they have risen. Although some distributors and producers have figured out how to get a bigger piece of the LTC insurance sales pie, the real problem is that the LTCi industry continues to share a smaller pie.

I'm struck by how some of the challenges associated with health care reform contain lessons for the long term care insurance industry.

One of the impediments to both health care reform and growing a larger potential LTC insurance pie is our all-or-none approach. One of the pillars of health care reform is the belief that total coverage should be a "right" of everyone living in the United States and that health insurance should cover everyone for everything. As a society we love things that are black and white andgray, not so much. Of course, if everyone has a right to it, and it has to cover everything, that's perhaps the most expensive way to proceed.

Again, America's approach to solving things often pursues a be-all, end-all solution. Health care reform and long term care insurance are no exception. As we considered health care reform and health care insurance with a black or white approach, either a nationalized system or keeping the status quo, we soon realized that the discussion need to focus on the many solutions in between. The greater good indeed fell into that gray area. The same can be said for the purchase of private long term care insurance. Purchasing a modest policy today with plans to purchase another policy in the future may be the most realistic way to get sales back on track.

Within this context, we must ask what will happen when CLASS (Community Living Assistance Services and Supports) is implemented. With only a small percentage of eligible Americans estimated to participate, most question if CLASS is being included as a solution for covering future LTC costs or being used as a $73 billion cost savings off-set for the health care reform bill. Few would disagree that the Feds track record for running any type of cost effective social program has been anywhere close its original cost and future affordability. Consider that CLASS' financial problems will be compounded by this fact: other government-run programs don't give working citizens the right to opt-out of paying. As proposed, CLASS will.

Some argue that CLASS will make private long term care insurance sales more difficult. I don't agree. Other lines of insurance have had to deal with the issue of government plans for decades. Do people not purchase disability insurance because Social Security has their own program for disabled workers? Do people not buy life insurance because of Social Security's family survivorship benefits, or not buy Medicare supplements because of Medicare? When the dust settles and we know how CLASS will work, our industry may have an unprecedented opportunity.

How you age, where you will live, the options available to you in your retirement years are by nature "gray" topics. So is the inflation rate for increases for future home or facility care. What's not gray is the fact that a large majority of us will need care and the money necessary to pay the costs. This financial liability, which always comes at the time when most Americans cannot pay it, will become a family challenge for many. Buying long term care insurance makes a lot of sense... that everyone agrees on. At claim time, any amount of money provided by LTCi is better than not having bought the policy.

As new versions of traditional LTCi policies enter the market at higher price points, producers continue to exit the market; their "home run or back to the dugout" approach has become even more difficult. I also believe one possible reason long-term care insurance sales haven't taken off is the "selling down" strategy most producers embrace. We start by offering the richest policy design and, if that doesn't sell, something less expensive is offered. In contrast, most sales trainers in other industries teach the technique of showing entry-level products or benefits, then selling up. With products entering the market priced to focus on less-expensive base benefits, some with pools of money rather than benefit periods, multiple sales or using future purchase options might be a solution whose time has come.

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What you need to know about the Pension Protection Act
and navigating the new LTC rules

by Tom Riekse Jr., CEBS, ChFC

Tom Riekse Jr., CEBS, ChFC is managing principal at LTCI Partners, a brokerage general agency specializing in long term care insurance. He can be reached at tom.rieksejr@ltcipartners.com .

Long term care (LTC) planning is quietly evolving into an established, mature part of the financial planning and advice process. An often overlooked provision of the 2006 Pension Protection Act (PPA) will make sure this trend continues and accelerates.

The part of the PPA that impacts LTC relates to "hybrid" long term care insurance (LTCi) policies and 1035 exchanges. We'll discuss those details later in this article.

More important than the tax details, however, is the impact the PPA may have on how advisors approach LTC planning and LTCi. It should help to expand the market beyond the current buyer, who is typically someone who has had personal experience with LTC and understands first-hand the devastating financial and emotional impact it has on individuals and families.

Marketing LTCi in the past

Most people who currently have LTCi bought traditional health insurance-based LTC products, often sold by specialists. The specialists knew that traditional LTCi paid excellent renewal rates and anticipated building a nice career from selling these plans. The products sold were annual pay policies, with many moving pieces and riders that could be customized. But many of the plans sold from the 1980s through the early part of the 2000s were also subject to rate increases, and newer product series were much more expensive. In addition, health underwriting meant many consumers were declined, and since sales were often made to couples, both applicants would typically be lost when that happened. Advisors who didn't specialize in LTC became frustrated with the long application process as well. The result, stagnant sales in a market that should have been growing.

At the same time, a parallel market of so-called linked or asset-based LTCi products developed. With these products, clients purchased a single-premium life/LTC insurance policy, with a typical initial premium of $50,000 to $100,000. If they needed LTC, they could access the policy value through the accelerated benefit feature. For an extended LTC need, an extension of the benefits rider helped leverage the initial policy value by increasing the LTC benefit to $150,000 or $200,000, for example.

On the other hand, if the client died, there was a death benefit and if they changed their mind, a return of premium feature. These products appealed to banks and wirehouses who knew there was a need for LTCi, but were put off by the complexity and low first year compensation of individual products. Because they were familiar with their clients' financial picture, they could recommend a reposition of cash into a combination product.

However, there were problems related to this approach as well. For one, many clients were entering a period in their life when they needed less life insurance, not more. Also, the LTC premiums embedded in the linked products required an annual 1099 for the premium value. Finally, because minimal up-front health underwriting was typically done, the underwriting success ratio was problematic as well.

Limited pay traditional LTCi plans constituted yet another option.

Pension Protection Act

With the implementation of the PPA, three major changes took place. First, the treatment of qualified LTCi within a life/LTC product changed. Second, the rules for annuity/LTC products became more favorable. Finally, 1035 rules changed. Here is a breakdown of these three changes:

Life/LTC changes: Effective January 1, 2010, the premium charges inside a life/LTC product are no longer considered a taxable distribution. Instead, the premium charges simply reduce the cost basis in the contract. The tax-qualified LTC rider can pay out benefits tax free. On the other hand, the related premiums cannot be deducted as a medical expense, something that can be done with health-based LTC coverage.
Annuity/LTC products With the passage of the act, people with a non-qualified deferred annuity can receive benefits on a tax-free basis for the first time. In this case, plans with a qualified LTC rider can take out benefits tax-free. Again, the premium charges reduce the cost basis. There is still some clarification needed on how benefits paid out from the annuity contract affect the cost basis.
1035 exchanges: The PPA allows for 1035 exchanges into traditional and combination products. First, an exchange from a life product to a traditional LTC product is allowed. That can be either a partial exchange or a full exchange to a single premium product. Similarly, a non-qualified deferred annuity can be partially or fully exchanged to a LTC product. A deferred annuity can also be exchanged to a combination annuity/LTC product. However, as was the case before January 1, an annuity to life exchange is not allowed.

Although these new exchanges are allowed, it may be some time before the infrastructure at the carrier level is built to accept them. Also, many advisors have suitability and compliance issues with their broker-dealer with which they must contend.

Once the products and exchange capabilities become commonplace, it will be more likely that consumers and advisors will consider both traditional and linked-products when looking at LTC.

For example, let's assume that the annual pay level premium with a leading carrier for a 55-year old single person buying $200 per day coverage for a three-year benefit period with three percent compound inflation is $1,935. Sounds reasonable for $200,000 of LTC protection that inflates over time, but there are other ways to pay as well:

20-year pay: Pay $3,831 annually for 20 years - and then no more premiums.
10-year pay: Pay $5,785 for 10 years - then no more premiums.
Single pay LTCI: Pay $50,563.83 as a lump sum with no more premiums.
Graded premium until age 65: Pay $1,724 at an increasing annual premium rate until age 65 and then pay level premiums of $2,317.
Single premium life/LTC: Pay a single premium deposit of $94,216. Receive a total of $216,000 in LTC or life insurance benefits, or get your money back at any time.

As you can see, there are many ways to pay premiums. With that in mind, a few questions might come up. When might one method be better than another? Well, if the client is concerned about future rate increases, the single pay and 10-pay plans will lower or eliminate the chance of that happening. Are they a C-Corporation business owner? They might want to consider running the 10-pay or 20-pay premiums through their business and deducting the total premium. Do they have a life insurance or annuity they no longer have use for? Perhaps a 1035 exchange into a single premium LTC plan is the way to go. Are they planning on self-insuring for LTC and want a safe place for that money? The single premium life/LTC plans offer that flexibility plus leverage money for LTC needs. Does the client still have children in college? They may want to consider the graded premium so that premiums are more affordable now and hit a level premium amount at age 65.

All-in-all, the Pension Protection Act creates more options for people wanting to plan ahead for LTC. With more ways to fund LTCi, and expanded tax-free payouts, advisors have more ways to structure attractive LTCi options for their clients.

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Don't let clients get blind-sided by unexpected LTC costs

by Malcolm Cheung

Malcolm Cheung is vice president of Long Term Care for Prudential. He can be reached at malcolm.cheung@prudential.com

The hit movie "The Blind Side" dwelled on the key role left tackles play in protecting the quarterback in football. But what if the player who lines up opposite the tackle is bigger than expected? You better have a Plan B.

Retirement savings are critical for providing protection and peace of mind, with stakes that are a lot higher than a simple win or loss on a football Sunday. Are your clients' financial assets substantial enough to do the job? The answer depends on the kind of

expenses they will face, and one of the biggest wild cards is long term health care costs. How can insurance advisors help? When it comes to retirement security, your customers can't afford a blind spot. Start with a blunt discussion of risk.

A recent study commissioned by Prudential Financial found that average out-of-pocket health care costs for a typical couple from age 65 until death came to $197,000 (on a present value basis), or $260,000 with nursing home costs included. But the study, conducted by the Center for Retirement Research at Boston College, also found there is a five percent chance that couple will pay $311,000 or $570,000, respectively. The problem: most households haven't accumulated that much in total assets as they head into retirement, let alone adequate set-asides for health care.

Of course, nobody can say for certain what one particular client's care costs will be, but savvy financial professionals can drill down on an individual's health, family history, financial position and risk tolerance to help come up with the best plan to meet future expenses.

Clients, for example, should know that married couples age 65 and over spent an average $7,600 in Medicare premiums and co-payments in 2007. But they should also be aware that such averages mean little when it comes to their particular exposure to exceptionally high expenses. And nowhere is that volatility more pronounced than with long term care, which can run the gamut from part-time assistance provided by a health aide in the home to time spent in an assisted living facility or nursing home.

Consider the biggest "x-factor" in long term care costs: nursing home care. The average annual expense for a private room in 2008 was $79,205, or almost four times the cost of part-time care in the home, according to a 2008 Prudential long term care cost study. Furthermore, there is substantial variation in private room costs from state to state: Alaska topped the list at $183,595 a year, while Texas was lowest at $60,590.

These costs are only going to increase as Baby Boomers age and demand for facilities grow. In 30 years, the American Council of Life Insurers estimates, the annual cost of a nursing home stay could exceed $270,000. Obviously, extended time requiring this kind of care could quickly exhaust a client's retirement savings.

When employee benefit plan participants were surveyed last year, one in three workers said they either didn't expect to require long term care or didn't have a plan to offset the costs. This is a bigger gamble than you might think. About one-third of the people who turn 65 this year will need at least three months of nursing home care in retirement, 24 percent will need more than a year and nine percent more than five years, according to the Center for Retirement Research study.

Of course, the balance of uninsured health care costs declines with age. But the CRR study found that such costs remain substantial even at advanced ages. At age 85, for example, couples face an average remaining lifetime cost of $140,000 (on a present value basis), or $203,000 with nursing home care included. There is a five percent chance, however, that those numbers could exceed $266,000 and $477,000, respectively.

How do clients plan to pay for this care? Many workers expect Medicare to pick up the tab, but nursing home coverage is limited to 100 days or less under this program, and coverage is usually only provided if there is a prior hospitalization for an acute medical condition. Medicaid does cover almost half of the cost of nursing home care, but coverage is subject to stringent income and asset tests. Most clients will have to deplete their financial resources to qualify, which is not a palatable option for those who want to retain control of spending decisions or pass on assets to their family.

So, in your role as a financial professional, you've discussed long term care exposure and coverage limits with your clients. What now? The earlier you present options to your customers before they approach retirement, the better. Identifying and building assets while a client still has earning power is critical.

Workers can consider the creation of retirement medical saving accounts, which offer tax advantages for legitimate health care expenditures. Another option is a variable annuity, which provides guaranteed income and, in some instances, permits access to the underlying funds for medical emergencies or other unanticipated costs. Advisors should also discuss long term care insurance, which is more affordable the younger you are at policy purchase. If offered by an employer, workers can typically apply for group long term care coverage with no, or limited, medical underwriting.

Your clients don't know what life is going to throw at them in retirement. But you can help allay some of their concerns if you give them the facts about long term care, tailor a plan that suits their financial resources and risk tolerance, and help make adjustments on the fly if their situation changes. That's a winning game plan for a secure retirement.

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Skip CLASS, enroll in LTCi instead

by Jay Drucker

Jay Drucker is Vice President at American General Life Companies. He can be reached at jay.drucker@americangeneral.com .

My 77-year-old mother still works 40 hours a week; she loves her job and interactions with students. If we're lucky, my wife and I will be around as long as my mom and continue to enjoy our independence well into our 80s. Americans are living longer than ever, so chances are good. In fact, there's a 39 percent chance that at least one member of a 65-year-old couple will live to age 90. But will we be able to maintain our independence? That's where the statistics don't play in our favor.

A 2005 study found that close to 70 percent of people turning 65 years of age will need some long term care before they die. And women will need this care more than men. An estimated 79 percent of women currently turning 65 will need long term care, compared to 58 percent of men.

The recently signed national health care legislation includes Title VIII: Community Living Services and Support (CLASS) Act. "Establishing a Voluntary, Self-Funding Long-Term Insurance Choice for American Families," as the legislative description runs, promises to provide clients a shiny new option to take care of themselves and enjoy the flexibility of being able to receive that care at home.

The bottom-line promise of the CLASS Act is to help enable elderly and disabled people to stay out of nursing homes. As a Baby Boomer, I can vouch that the concept of staying independent as we grow older is incredibly powerful for millions of Americans, including your potential clients.

They don't want their only option for assistance to be a nursing home. They don't want to be a burden to their children or healthier spouse.They want the right amount of assistance to help them take care of themselves, preferably in their own homes.

But will the CLASS Act work? If I opt-in to CLASS and keep working long enough to receive benefits, what will I receive, and will it be enough for my needs? No one's sure. The details of CLASS, the benefits and premiums, are yet to be determined, and no one can tell us what the program will look like. In addition, CLASS only covers people who are actively employed. What about my wife? She volunteers 30 hours a week in the community, but is not actively employed, and therefore unable to participate in CLASS. What about those whose retirement horizon is only a few years away? They may not be in the workforce long enough to qualify for CLASS.

It's a disservice to let our clients be lulled into waiting for the CLASS Act before they begin contributing to an LTC plan. We need to position our potentially long-lived clients for successful, independent futures with their own LTC insurance.

Here are five points I believe will be most successful in helping our clients understand the significance of obtaining LTC now.

AGING IN PLACE

The most robust and attractive features in LTC policies are the ones that allow people to stay at home as long as possible. Cash benefits provide flexibility in terms of making it possible for a loved one to care for you. Stay-at-home support benefits, which help pay for home modifications, durable medical equipment and caregiver training, make the home a safe alternative for prolonged independence.

Showing your clients how they can prepare for an extended retirement period and potentially stay in their own home is very powerful.

THE GAP YEARS

The CLASS act is a big unknown. We won't know plan designs and costs until 2012, and that's an estimated date. People are frozen in a "gap mode" waiting for CLASS to start, and while they're waiting they're uncovered. And actually, it's a seven year gap, since CLASS benefits won't kick in until after five years into the program. Seven years without coverage is seven years too long. Clients should act now and not wait.

RISING COSTS

As traditional health care costs go up, plus the costs of specialized care needed by the increasing "oldest of the old" population, people are making decisions about where their disposable income will go. It behooves our clients to invest some of their disposable income into an LTC policy, thereby guarding their nest eggs or future income streams.

And speaking of costs, we don't know what CLASS premiums will cost. We only know that premiums will be determined by the Secretary of the Department of Health and Human Services to preserve the program's solvency for 75 years.

If you needed a car, would it make sense to say: "I'm not going to choose a car now; I'm going to wait until 2012. I have no idea how much the 2012 car will cost or even what it will do, plus I won't be able to drive it until 2017. But still, that's the car for me!"? No, that wouldn't make sense. Waiting to commit to CLASS as the LTC policy of choice doesn't make sense, either.

"BOTH" VS. "EITHER/OR"

It's a false choice to think of CLASS and privately funded LTC insurance as "either/or." If your clients are genuinely and strongly interested in opting into CLASS, they should exercise the "both" scenario and obtain their own private LTC insurance policy now and possibly add CLASS to their portfolio when it's available. While CLASS provisions are still being molded, private plans will return benefits whether or not your client has a public plan.

MOTIVATIONS FOR INSURING WHAT WE VALUE

LTC insurance is like everything else. Do your clients insure their lives, their cars and their homes? How do we put a price on peace of mind? Not only is insurance a personal safety net, we usually buy it because we don't want our spouses and children to have to worry about us or about their futures. Insurance brings the comfort of knowing we're protected, and our loved ones are protected, and that can be worth more than what we spend to acquire it.

Longevity is having a significant impact on us, from the massive Baby Boomer population, to the "sandwich generation" of adults caring for aging parents while still raising children. The laws of supply and demand indicate that with more aging people needing care, and fewer workforce caregivers available, costs and quality are going to be issues.

We need to help our clients understand none of us should depend solely on a well-meaning legislation with "details to be determined" to provide for our long term care. We need to "insure" that our long term care is provided for us � by us.

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MISSED OPPORTUNITY

91 percent of Americans say financial professionals don't discuss LTCi

While the vast majority of Americans acknowledge the importance of planning for their retirement and long term care, only nine percent say their advisor has actually discussed the issue with them.

In fact, according to a recent Age Wave/Harris Interactive survey, sponsored by Genworth Financial companies (Genworth), America Talks: Protecting Our Families' Financial Futures, 91 percent said their financial professional has not broached the topic of how to fund potential long term care costs.

Although this issue is currently top of mind with the American public, many are still not engaging in open conversations, even with their own families, about the kind of long term care they would prefer, or could afford, if they needed it in the future. According to the survey, 65 percent say that fear of upsetting family members is the biggest barrier to talking about long term care plans.

"Discussions about long term care represent a major tipping point for advisors," said Colleen Goldhammer, Senior Vice President of Sales and Distribution for Genworth. "Yet many are missing a tremendous opportunity to talk to their existing clients, and strengthen relationships, by facilitating these difficult family conversations," she added.

Conversation Starters

To help get this emotional and sometimes difficult conversation started, there are three key topics advisors should suggest, to help their clients engage in these family discussions:

Preferred options/costs of care (in-home care vs. nursing home)
Roles and responsibilities of family members overseeing that care
Funding: How long term care will be paid

In addition, the survey found that 92 percent of spouses, or partners, had not discussed all three of these long term care topics with each other; 95 percent of parents had not discussed them with their adult children, and 96 percent have not had these talks with their parents.

Candid discussions about long term care planning can play an important role in mitigating the financial and emotional risks an unexpected illness can impose on families. Unfortunately, many people are caught by surprise when faced with decisions about the care of a relative, when time is short, and long term care options are limited. It's likely that advisors have already spoken to their clients about the many key risks to retirement income, like market volatility and rising healthcare expenses. Now they have the opportunity to educate them about the options for protecting their nest egg from the threat of the rising cost of care.

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Age up for employer sponsored group LTCi

Purchasers of true group long term care insurance tended to be slightly older in 2009 and an increasing number selected less costly policy features according to the American Association for Long-Term Care Insurance (AALTCI) annual study of group (employer sponsored) long term care insurance. The organization's research was based on an analysis of nearly 66,000 new purchasers.

"Costs for health insurance and other employee benefit programs increased dramatically last year so it's not surprising that employees were older and more cost-conscious when it came to long term care coverage," says Jesse Slome, executive director of AALTCI, the long term care insurance industry organization. According to the annual study, over a third (37.2 percent) of new group buyers were age 55 or older compared to 28 percent for the prior year (2008). "Younger employees likely decided they could postpone the decision," Slome suggests.

Nearly half (45.4 percent) of new enrollees selected daily benefit levels of $149 or less, about an eight percent increase compared to the prior year. "While there was an increase among those selecting less costly options, there was a slight increase in those selecting more costly plans offering daily benefits of $200 or more," Slome adds. "In addition, there was a slight increase in the number of new enrollees selecting longer benefit periods, which are more costly."

According to the Association study, the most common benefit period selected remains five years. Some 66.1 percent of buyers selected coverage designed to pay benefits for at least five years (up from 61.0 percent the prior year). Unlike individual long term care insurance policies where nearly half of buyers (64.5 percent) purchased a five percent annual inflation growth option, only 15.4 percent selected this option with the vast majority (83.6 percent) selecting an option enabling them to increase benefit levels periodically in future years.

The Association study also examined new claims beginning during the year. Some 6.4 percent of new claims were initiated by individuals age 59 or younger. Only 1.8 percent of claims made against individual LTC insurance policies were by individuals age 59 or less. Nearly half (49 percent) of benefit dollars paid for new group policy claimants were for home care with only 30 percent for nursing home care.

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Can anyone really ignore LTCi anymore?

by Phyllis Shelton

Phyllis Shelton is President of LTC Consultants, Hendersonville, Tenn. She can be reached at 888-400-1118 or at phyllis@ltcconsultants.com .

What does it say about a person whose favorite photo collection right now is the AARP magazine covers? Kevin Costner, Richard Gere, Clint Eastwood, Sally Field, Ron Howard...with this list, I don't mind telling you the person is me. I also don't mind telling you that I just watched It's Complicated, and cheered for 60 year old Meryl Streep cast as the same age as Alec Baldwin, who is only 51. And believe it, Tina Turner still has those legs at age 71! Let's face it, many Baby Boomers today just look a lot better than our counterparts a generation ago.

While the improved physical aspects of the Baby Boomer may cause us to smile gratefully, what about the rest of our existence? Are we better off spiritually, mentally, emotionally and financially?

Research from McKinsey & Co. finds that the average American family will face a savings gap of $250,000 at the time of retirement. Even with payments from Social Security and pensions, as well as personal savings in 401(k) and other retirement plans, the average family will have only about two-thirds of the income it will need.

And this from Terry Savage, Chicago Sun-Times financial columnist in her 2009 book:

What's the greatest risk in your financial plan? We've seen how a stock market crash can devastate retirement plans. But the greatest risk is not the longevity of this bear market, or even another bear market. It's the devastating cost of long term care.

As Baby Boomers transition from the accumulation phase to the distribution phase, advisors are in demand to construct an income stream that will last 20 or 30 years and even longer. Is there enough in the proverbial nest egg? Can a financial plan that guarantees one won't outlive her money be constructed for people who spend more years in retirement than they work?

The answer is absolutely not, if the need to plan for long term care is ignored. Let's take the gloves off. Do we care about our clients or not? Do we care about the person we see at the grocery store, sit next to at church, or see at PTA meetings and ball games? Our neighbors, our friends, and yes, our family? Are we talking about how essential it is to have this need taken care in order to enjoy retirement? Because planning for an income to last 30 years means you don't want to have a bump in the road.

Here's a news flash. Long term care isn't a bump in the road. It's an earthquake. The resulting crater will swallow the best-laid retirement plan.

I agree 100 percent with Harley Gordon that long term care insurance is really income protection, not asset protection. The person with $3,000,000 who plans to earn five percent in retirement income of $150,000 had better have a great plan if $75,000 has to pay for caregivers, starting next month because he or she had a severe stroke. If the growth rate over the last 20 years continues, long term care costs will triple in the next 20 years. Will your client's income triple in the next 20 years?

When your client denies that anything will ever happen, try asking when the last time was that his nightly news reported on a non-celebrity having a massive stroke? Not exactly news, since at least 700,000 people in the United States have a stroke every year, with one out of four being under age 65.

My favorite cousin while I was growing up was Carolyn. I loved it when she baby sat me because she would show me her beautiful dance dresses. She had every color and was the best dancer I'd ever seen. Her brown eyes sparkled with happiness when she danced and she always had her most beautiful smile for me. She had a massive stroke at age 61 and has been paralyzed on the right side of her body and without speech for eight years. Her mind is fine. I know she remembers those dancing days.

What about the client who has $5 million dollars and can self-insure? Since when has any financial planner ever told a client to forget about homeowner's insurance and pay full price for replacing a home? For hospital and doctor costs? For real estate, art, jewelry, and to be sure and pay top dollar for the new swimming pool?

I think there is a misconception about just how many Americans have several million dollars. According to a 2009 report from the Financial Research Corporation, only about 10 percent of households 45 to 74 have over $500,000 in investable assets. Less than five percent have over $1 million.

That means that most people need our help and it's our job to be sure they understand they need our help. Since when do we wait for people to walk up to us and say they need life insurance, disability income insurance or retirement planning services? The difference here is that long term care insurance can be much easier to prospect for because if you are a Baby Boomer, you will find that most of your peers are experiencing it with a family member and have learned the hard way that it isn't covered by anything else except Medicaid, which brings a plethora of limitations.

I continue to believe that long term care is the real health care crisis in America and we only have a few years to get it to the masses in time to make a difference. Here are three ways it can be done:

Worksite LTCi

In 2008, 51 percent of the long term care insurance policies were bought at work. That's a combination of true group and multi-life, but multi-life is driving the bus with a growth rate of 47 percent from 2007 to 2008. Network with employee benefit specialists to break into this market. Since most employees are now going through LTC with a family member, they are hungry for the great news that there is a way their own children don't have to go through it with them. And amazingly, most employees aren't complaining about the economy. They are just appreciative that their employer cared enough to make LTCi available. The secret to participation rates of 20 percent or more is a six to eight week pre-education program that gets the employees to the employee meetings, then offering personal consultations for employees and family members after the meetings.

Partnership LTCI

Using the Partnership as an additional incentive will increase worksite LTCi sales. Network with other professionals to increase individual sales by doing retirement planning town hall meetings in your area and working in the Partnership message that families can protect assets and avoid estate recovery. Titles like "Don't Bet the Farm - Is Your Family Protected?" are effective in rural areas as many families have no clue that a farm that has been in the family for generations can be jeopardized by estate recovery.

Combo Annuity/LTC products

Now Americans can exchange older non-qualified annuities for these combo products and pull the gain out tax-free for qualified long-term care expenses. Network with annuity marketers to get into this market and to help the annuity marketer learn how to be sure the LTCi benefits are meaningful.

When AHIP tells us that 57 percent of people over 50 report they've never been approached to buy long term care insurance, I know we can do a better job, and the best news of all is there's never been a better time or more needed time to talk about planning for long term care.

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Making the case for LTCi

by Joseph Catalano

Joseph Catalano is senior vice president, Distribution & Marketing, John Hancock Long Term Care Insurance. He can be reached at jcatalano@jhancock.com.

I don't think that many of us were sorry to see 2009 end, with its market turbulence and record unemployment. Staggering 401k losses made for an uncertain future and left all of us feeling jittery. But as bad as the year may have been, it did lay the groundwork for what is sure to be strong growth in the long term care (LTC) insurance market.

The Matter of Need

First, there is the simple matter of need. The distribution branch of the industry, including the most respected broker dealers and wire houses, has long recognized the financial risks posed by a long term care event. We all know that the cost of care is high, with current nursing home confinements averaging almost $75,000 annually and even home health care estimated at about $55,000 a year. The annual cost of nursing home care in 30 years is projected to be $250,000. It's probably safe to say that that few clients are in a position to meet these costs without a significant impact on their estates, particularly when the Medicaid loopholes were significantly reduced with the passage of the Deficit Reduction Act in 2006.

Finally, the social fabric that once supported care has frayed, with family members often living miles apart. Many sons and daughters are busy with careers or childrearing responsibilities, sometimes both. In any case, most people are unwilling to burden their children with having to provide for their care.

As a result, not only do the most respected distributors believe LTC insurance as a "must-have" in any comprehensive financial plan, they actually view its introduction as part of their fiduciary responsibility to their clients. There are some in the industry that take it a step further and view the failure to recommend LTC insurance as a potential malpractice risk. They fear that an individual whose estate has been consumed by long term care expenses could hold the producer liable for these losses, with the courts deciding that they did not perform appropriate due diligence during the estate planning process. But the real reason to sell LTC insurance is not to avoid litigation, it's about responsibility, trust, and growing your book of business by capitalizing on the opportunities.

The Baby Boomers Wake Up

I'm talking about the 78.2 million baby boomers who may need care within the next 20 years. The first wave celebrated their 60th birthdays in 2006 and nearly 8,000 reach that milestone every day. This is the group that benefited from a stock market that didn't seem to have a ceiling. They were living the good life and had every reason to think that the future would be bright. Unfortunately, the world changed in October 2008, when the Dow lost 1,800 points in the first week and started a dive that would take many boomer nest eggs with it.

Today, many of the boomers are being forced to reassess their financial plans and are taking a second look at LTC insurance. Before the crisis of the financial markets in 2008/2009, they may have been able to self-insure against a long term care risk. Now, they're looking at ways to protect their remaining assets from a possible long term care event. That's what makes LTC insurance an ideal part of a comprehensive retirement plan. It's insurance protection that can be counted on to help provide for their long term care needs, regardless of the ups and downs of the market.

The Flight to Quality

The boomers aren't the only ones who've changed. The LTC insurance industry itself has evolved over the years. Some companies departed after having incorrectly priced their product lines. Their departure left many producers frustrated and embarrassed since they were the ones recommending these companies in the first place. Even worse, those consumers who had been paying premiums for years wondered if they would be left high and dry at claims time.

Then if you add in the concerns surrounding the financial crisis, you can understand why we've experienced a flight to quality unlike any seen before in this industry, with producers choosing to work with carriers that have the ability to demonstrate the highest level of financial strength and stability. So the companies that were uncommitted, or who got into the market for a quick profit have mostly exited, leaving behind a more consolidated and dedicated carrier group to meet the long term care needs of the American public. That's good news for producers and their clients, alike.

The Message from Washington

There are other positive developments that should boost LTC insurance sales, courtesy of the federal government. The first is The Pension Protection Act (PPA), which is broad legislation that includes provisions to encourage individuals to purchase LTC insurance, by introducing certain tax advantages involving Life/LTC and Annuity/LTC combination products and 1035 exchanges. The PPA signals the government's recognition that LTC coverage represents important and solid consumer value.

The other piece of legislation that may have an even greater impact in the long run is the passage of The Community Living Assistance Services and Supports (CLASS) Act of 2009. Currently included in both the Senate and House versions of the pending health care legislation, the CLASS Act is sure to raise awareness among all Americans of the many issues surrounding long term care.

Although the coverage is limited and is mainly intended to provide a minimal home care benefit to the working disabled, it still sends a powerful message about the importance of long term care preparedness. We will simply need to educate the public on what it does, and more importantly, does not provide. If the health care bill is ultimately passed and continues to include the CLASS Act, it will be one more way to start the LTC insurance conversation with your clients.

The Multilife Opportunity

Now that we've entered a new year, it might be a good time for you to consider reinvigorating your practice. A great way to do that is to consider the sale of multilife LTC insurance to employers with fewer than 1,000 employees. LTC insurance has been very popular with large employers, but the small to mid-size market remains mostly untapped. A recent John Hancock survey of small business owners revealed that although they are interested in LTC insurance as an employee benefit, only 57 percent have been approached by their broker or consultant about this topic.

If you haven't thought about entering the small to mid-size employer market, there are some good reasons to consider it. Once you sell an employer on LTC insurance, you gain access to the entire employee population and their eligible family members as well. Think of it as one sale leading to many, without the constraints of the Do Not Call legislation and the barriers that apply to one-on-one sales in the individual market. You'll find that employers will be very receptive to the product once they learn that the product has advantages for them and their employees.

Looking Ahead

All good sales people are tuned into their clients' needs. The most successful make their mark by staying ahead of the competition. This means being committed to developing an expertise in products they know their clients will value. LTC insurance is one of those products.

LTC insurance addresses the issues of an aging population by providing protection to cover a risk that few can self-insure, while providing an affordable way to help your clients protect their assets and preserve their independence, especially if they decide to purchase it during their working years. On top of that, the government continues to send signals that the purchase of private LTC insurance is a prudent way to prepare for a possible long term care event.

So if you're looking for the next big thing, look no further, and consider adding LTC insurance to your portfolio of products. If you already sell LTC insurance, my suggestion is to get ready for the ride ahead and keep an eye out for new opportunities, like the small business market, and get your message out to those who need to hear it.

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Planning for longer lives: LTCi and the longevity challenge

by Nancy P. Morith, CLU, CASL

Nancy P. Morith, CLU, CASL, LTCP, heads the Princeton, N.J. based firm of NP Morith, Inc., and serves as an adjunct faculty member of The American College in Bryn Mawr, Penn. She is an Associate Editor for the Journal of Financial Service Professionals and can be reached at Nancy.Morith@TheAmericanCollege.edu.

As if planning for a successful retirement after the recent economic meltdown weren't hard enough! As financial advisors we need to help our clients regroup and stretch those resources that remain and help rebuild the asset levels for those still actively at work. Well, not to be a total spoil sport here, but� there's more to deal with than just currently reduced circumstances.

Increased longevity

Because of advances in medicine, people are living longer. The average life expectancy in 1900 was 47 years; in 2000 it reached 76.9 years. More significantly, in 2000 a woman who attained the age of 75 could expect to live another 12 years and an 85-year-old woman that year could expect to live another six and a half years. Men had slightly shorter life expectancies.

People are afraid of outliving their money. Adequate cash flow for living expenses must be maintained for a longer period of time than previously thought necessary. Also, assets must be prioritized for liquidation should additional financial resources be required.

Link between age and the need for long term care

The greatest single predictor of the need for long term care is advancing age. Approximately one-fifth of Americans over age 65 need assistance with every day activities but this climbs to more than half of the population when you look at those 85 and older.

Long term care is very costly (average annual nursing home cost in 2008 is almost $80,000 for a private room.) With the number of people requiring long term care services projected to double by 2030, we can expect some inflationary pressure on all long-term care costs.

Since neither Medicare nor private medical expense insurance covers custodial care services, there is a need for advisors to create a plan for financing these costs, should they arise. Without a good financing plan, the need for long term care could effectively torpedo a client's retirement and estate plans.

The difficulty with putting a long term care plan in place

Here's the problem with long term care planning, however. While planning for retirement is a pleasant thing for most clients to entertain, planning for frailty and old age is not. Even death is easier for most people to contemplate since it is a certainty and no one has yet escaped the Grim Reaper. Frailty and the need for daily assistance, however, is not something people like to think about, let alone plan for. And since there exists a statistical probability that they might escape the need for care (no matter how abysmal the probability is), many people will collapse into a state of denial and not do any planning. By the time a person's body starts to give signs that just maybe this once-young body will start to age after all, it may be too late or too expensive to obtain insurance coverage.

Additional risks for the aging Boomers

There is a close link between advancing age and the need for not only long term care services but also acute and chronic skilled medical care services. In 2006, per capita health expenditures were about $6,800 in our country. But if we separate out those 65 and over, per capita health expenditures for the elderly were over $18,000 in that year. Fidelity Investments does a health care cost estimate every year and for a 65-year-old couple retiring in 2009 they are estimating out-of-pocket retirement health care costs of about $240,000. This figure does not include long term care and does assume that they have Medicare coverage. The figure includes Medicare premiums, cost-sharing items and deductibles, as well as services not covered by Medicare and dental expenses. Part B Medicare premiums are already much higher than just a few years ago and are now based on the Medicare beneficiary's income, the higher the income, the higher the premium.

It is estimated that by the year 2030 the over-65 population will more than double, largely due to the aging of the baby boomers. Even if there were no further advances in expensive medical technology, the boomer population bulge by itself would cause an enormous increase in the amount of medical dollars spent on the elderly. Both Medicare and Social Security are already facing some very severe solvency issues. Changes to either or both of these programs, which seem likely, could significantly affect planned retirement cash flow and also increase medical expense obligations. This could bring about a double whammy, reduced income and increased expenses.

And yet, another cloud looms on the horizon, increased taxes. There's also be the possibility that the government may have to increase its revenue, as well as decrease its spending in some areas in order to try to get back to a balanced budget. The main revenue source for our federal government is the income tax. Is there any more "stretch" in the client's retirement plan budget?

The planning challenges

It seems clear that there are several factors converging to make retirement planning more challenging.

Clients need to plan for more years of life in retirement. Their income source(s) must be able to last longer. Alternately, they must stay in the workforce longer.
Clients may need to plan for a higher amount of savings and/or income to be prepared for higher medical expenses, possibly higher taxes and possibly lower Social Security.
Client income and assets need to be protected from the catastrophically high cost of long term care, as well as increasing acute medical care costs.

Protection from long term care costs

Although retirement planning clients may find it difficult to contemplate ever needing assistance with daily activities or being cognitively impaired to the point of needing supervision, it is essential that their accumulated resources be protected from what would be a very rapid erosion if long term care services were needed and no funding plan existed. Just as we consider several sources, both public and private, to put together the total required for retirement income needs (Social Security, pension, personal savings, etc), perhaps we should do the same for long term care funding needs.

Several long term care financing sources are shown below. The ultimate long term care plan might be any of the following or a combination of several.

Medicare for short-term skilled services
Private long term care insurance
Reverse mortgage
Annuity/LTC or life/LTC combination policy
Cash from life insurance via a senior settlement, viatical settlement or living benefits option
Medicaid back-up to a private long term care partnership policy
Personal savings
Financial or hands-on help from family or friends

There is no rule that states that any one of these sources must be the one and only option chosen. Several sources might have to be chosen to come into play sequentially or simultaneously.

The bottom line is that in order to enjoy our later lives, we're all going to need "more" and it's going to have to last longer than we may originally have planned.

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Americans lack realistic LTC plan

Confusion, misinformation often prevail

by Debra Newman, CLU, ChFC, LTCP

Deb Newman, is the founder Minnesota-based Newman Long Term Care in Richfield, Minn. She is secretary of the LIFE Foundation's board of directors. She can be reached at DebN@newmanltc.com.

Sitting in their offices day in and day out, most people are dreaming of those days in the future when they will be free to take off to Paris on a whim, spend their afternoons honing their golf swing or painting the next Mona Lisa. But they not only dream, they save money to make sure these dreams will be realized during these go-go years of retirement. But few people want to think about, and not enough Americans hear from their agents about, the need to plan for the slow-go and no-go years of retirement.

A new survey recently released from the Life and Health Insurance Foundation for Education (LIFE) brings this to light. Even though seven in 10 people will need long term care once they are over the age of 65, LIFE found nine in 10 Americans don't have a realistic plan to pay for these expenses.

One-fourth of the survey respondents say they will rely on family and friends, while others mistakenly believe their health insurance or government programs such as Medicare will pay their long term care costs.

These results illustrate that most people are confused about how they will pay for long term care services and underscores what I hear so often in my own practice. Recently, I was speaking to a group of 50-year-olds and asked them to raise their hands if they believe they will live to 65. Every hand in the room went up. I then asked, "Now if you live to 65, what is the chance you will need long term care in your life?" Very few knew they are facing a 70 percent chance. My next question to them was, "So what is your plan?"

Their plan is to rely on family to take care of them. That's when I ask them to consider this scenario: They are age 85, need long term care, and they have decided that their kids are their long term care "plan." And I ask, "What will your family look like then?" Your kids will now be 65. And guess what? They are planning on retiring and enjoying those work-free years.

That's when they come to understand, I need a realistic plan. Long term care insurance doesn't replace your family because they will be part of your plan, but it gives them some tools to help you receive the type of care you want without worrying about how to pay for it. The consequences of not planning for long term care is similar to not having life insurance, not planning will hurt your family the most.

Using the Power of Stories to Overcome Objections

When speaking with clients, I never argue objections. Instead, I use the power of a true story to help bring home the point.

Objection #1: I don't need it because my family will take care of me.

Sure, your family will go to extreme measures to take good care of you, but think about how you are uprooting and changing their lives because you didn't plan. Then, I tell them a story.

I recently read a local newspaper article about an affluent, well-known family in my community. Mom and dad were in their 80s and wintered in Florida. Dad was the sole caregiver for his wife who had Alzheimer's disease. After six years of caring for her, the dad shot and killed her and then himself in Florida. I read the article, and thought he must have felt isolated, weary, depressed, and for whatever reasons he didn't seek help.

When someone has a long term illness, it is an emotional journey, not just a financial one. You can get sucked into the caring process and not even realize how your life has gradually changed. The outcome for this couple would have been different if they had established a plan together before she became ill. This may have allowed him to obtain the best care available for her and permitted him to continue to have a life separate from her illness, without guilt.

Not only does long term care insurance give everybody the peace of mind to know that you have a plan, but it also says, "I give you permission to hire someone else to help me."

Objection #2: I have enough assets to pay for LTCi should I need it.

It's true, you may have enough money to pay for long term care should you need it, but it reminds me of a story. I had a client with $10 million in assets who told me she wanted long term care insurance. I asked her why she felt she needed it. She said, she wanted to make sure if she could no longer make decisions for herself because she had a disease like dementia, she wanted to make sure she would have the highest quality of care available without her heirs worrying about how they were spending their inheritance on her care.

Objection #3: I don't need long term care insurance yet.

I often tell clients with this objection that they're right, not many people buy it at age 40 or 50, but that it reminds me of a story. I use one of the LIFE Foundation's realLIFEstories. It is about real-estate executive, Barry Shore, 55, who was vacationing abroad when he began to experience severe flu-like symptoms. Five days after returning home, he began to feel extremely weak and could barely hold a book in his hand. Within hours he had lost all movement in his body. Barry was diagnosed with Guillain-Barr� syndrome, a nervous system disorder that strikes suddenly and ruthlessly, though many patients make a full recovery within months.

In Barry's case, it has been several years and he still struggles to walk and has been unable to return to the workforce. Throughout the ordeal, one thing Barry and his wife, Naomi, haven't worried about is money. With the help of their insurance agent, they had put in place a smart insurance plan. Disability insurance payments now replace more than half of Barry's previous income. His long term care insurance provides more than enough to pay for 12 hours a day of in-home care as well as physical, occupational and water therapy not covered by his medical insurance. And a provision his insurance agent added to Barry's life insurance policy waived his premium payments once he became disabled, saving him thousands of dollars.

Agents need to understand it is not just their responsibility to discuss with their clients their plans for the go-go years of retirement, but even more importantly, the slow-go and no-go years. It takes courage to talk about their plans for these tougher times in their life, but with the power of realLIFEstories you can overcome this challenge.

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Tax-favored 1035-Exchange long term care insurance premium payments?

Not Yet!

by Henrik Larsen, MBA, CLTC

Henrik Larsen, MBA, CLTC, is VP, Marketing of Advanced Resources Marketing, a national distributor of Long Term Care insurance based in Boston, Mass. He can be reached at 800.269.2622 or at hlarsen@armltc.com.

The Pension Protection Act (PL 109-280) [PPA], signed by, then, President Bush on August 17, 2006, includes very important provisions regarding qualified long term care insurance [LTCi]. These provisions took effect on January 1, 2010 and they could potentially revolutionize the LTCi industry by creating a tax-favored funding mechanism for this type of insurance.

However, despite the intent of the PPA of 2006, many questions still remain and most [disturbingly, not all] insurance companies are so concerned that they have opted to await further clarification from the Internal Revenue Service [IRS] before embarking on the large marketing and sales opportunities presented by the PPA.

So what are these important provisions of the PPA?

As of January 1, 2010, PPA established the tax-free 1035 exchanges (Internal Revenue Code (IRC) section 1035 exchanges) of life insurance, endowment, and annuity contracts for LTCi policies.

Further, most insurance companies believe this to include partial 1035 exchanges to pay the premium for new or existing LTCi policies.

Prior to January 1, 2010, the IRC did not allow tax-free 1035 exchanges for LTCi policies.

In other words, these provisions would not only allow for the tax-favored treatment of funding LTCi policies; they allow funding from already established funds amounting to trillions of dollars. Insurance companies welcomed these provisions as they saw an opportunity to recoup [by means of LTCi premiums] a significant portion of the distributions from life insurance, endowment, and annuity contracts.

Shortly after the enactment of the PPA, the insurance companies contacted the IRS for clarification on a number of issues but since these provisions were not to take effect until January 1, 2010, there was plenty of time on both the IRS' as well as the insurance companies' part. We are now three weeks into January, 2010 and the clarifications glare by their absence.

For the purpose of this article, I will exclusively describe the remaining issues surrounding the 1035 exchange from annuity contracts to LTCi policies since this particular transaction has been paid the most attention. The issues and concerns that need clarification can be categorized into three:

Partial 1035 Exchange

Mr. Jones owns a deferred annuity contract from insurance company ABC. He wants to buy an LTCi policy from company XYZ and fund the premium by partial 1035 exchange from his annuity contract.

The first problem is that a 1035 exchange must be initiated for every premium that is due. For practical reasons, this excludes the option of paying the premium monthly and it will represent problems for quarterly, semi-annual and even annual premiums

The root of the problem is that insurance company ABC has no incentive to expedite the process and many annuity contracts allow for a 60-day period of the insurance company to release the funds.

If Mr. Jones is underwritten and approved for LTCi coverage, but the funds are missing, the policy cannot take effect and Mr. Jones will have to be re-underwritten once the funds are made available. Of course, Mr. Jones can just pay the premium from his regular checking account, but that somewhat defeats the whole purpose.

Assuming we somehow resolve these issues, we now find ourselves one year later, and the renewal premium is due. The process starts all over. The one difference is that instead of risking that the policy does not take effect, Mr. Jones now faces the potential of the policy lapsing if the premium is not made; remember, somebody needs to initiate each 1035 exchange. Who?

The insurance companies need to establish a process whereby partial exchanges can flow in an orderly manner. Such a clearing mechanism has not been established as the IRS has ruled neither for nor against proposed suggested guidelines put forth by the insurance industry.

[Full] 1035 Exchange directly to an LTCi Policy

Mr. Jones owns a deferred annuity contract from insurance company ABC. He wants to buy an LTCi policy from company XYZ and fund the premium by 1035 exchanging his annuity contract to the LTCi policy.

Initially, the easiest way to accomplish this is to 1035 exchange to a single-pay LTCi policy. Only a few insurance companies have such an option, and those who do, are conscious to make sure that such payment options only constitute a small portion of their portfolio. In other words, if a significant portion of LTCi sales represent single-pay policies such options will vanish.

Alternatively, this type of arrangement could be set up as a "period certain" or "for life" with or with out survivorship. These types of annuitizations would correspond to 10-pay or life-pay LTCi policies respectively. The problems surrounding these types of arrangements are to be found in the non-cancelable nature of LTCi policies. Specifically:

What happens if Mr. Jones wants to increase his coverage or if his policy is subject to a rate increase?

The increased premium needs to be split-billed as the distribution from the annuity only covers the original benefit. How does the LTCi insurance company account for [to the IRS] which portion of the premium originates from the annuity insurance company and which portion originates from the insured?

Currently, no LTCi insurance company provides for split-billing of individual LTCi policies.

What happens if Mr. Jones gets married and his premium is reduced due to the application of a spousal/marital/partner discount?

The annuity company is now distributing funds in excess of the LTCi premium due. To whom is that distribution paid and how is it taxed? If the excess distribution is made to the LTCi company how do they account for the "excess premium" and how do they "refund" the excess premium to the insured? Most importantly, how does Mr. Jones make sure that he files his tax-return appropriately to make sure he is taxed on the excess distribution?

Full 1035 Exchange to an LTCi policy by means of a SPIA

Mr. Jones 1035 exchanges his deferred annuity from insurance company ABC to a Single Premium Immediate Annuity [SPIA] with insurance company XYZ. The distribution from the SPIA funds the LTCi premium also issued by insurance company XYZ. This arrangement potentially alleviates many, if not most, of the issues previously listed. However, this "dual 1035 exchange arrangement" is still pending IRS guidance.

This type of arrangement using a SPIA as a conduit is heavily promoted by in particular one LTCi company, however most larger insurance companies have taken the prudent approach of awaiting IRS guidance despite the obvious marketing and sales opportunities.

In conclusion, the PPA allowed for significant tax-favored ways whereby annuity owners could funds LTCi premiums. However, before we recommend they do so, let's make sure we cross all the "Ts" as in Tax-advantages, and dot all the "Is" as LTC"I". These advantages will come soon enough to benefit us all, but until the IRS release their guidelines, let's not make our clients famous. "All good things come to he who waits."

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Most Americans have no plan to pay for LTCi

Even as the average annual cost of a home health aide now tops more than $40,000 and private nursing home care is approaching an average cost of $75,000 a year, a survey by the LIFE Foundation finds nine out of 10 Americans do not have a realistic plan to pay for these expenses. Nearly one in four say they will rely on family and friends, while others mistakenly believe their health insurance coverage or government programs such as Medicare will help pay their long term care costs.

Released to coincide with Long Term Care Insurance Awareness Month in November, the LIFE survey asked Americans what they would rely on most to help pay for long term care services if they found themselves in need of assistance with the basic tasks of daily living, such as bathing, eating and dressing. Here's how Americans responded:

Family and Friends - 23%
Health Insurance - 20%
Medicare - 16%
Savings - 13%
Social Security Benefits - 11%
Long Term Care Insurance - 10%
Medicaid - 7%

"These survey results illustrate that most people are confused about how they will pay for long term care services, which is a scary thought considering 70 percent of Americans who reach age 65 will need such care at some point in their life," says Deb Newman, CLU, ChFC, LTCP, president of Newman Long Term Care and a LIFE Foundation Board Member. "Health insurance will not cover long term care services and government programs like Medicare and Medicaid have many limitations."

To help increase awareness of the important role of long term care insurance, LIFE reviews some of the common misconceptions people have regarding funding sources for long term care:

Health Insurance - Typically only provides coverage for medical care and does not pay for custodial services for people who can no longer take basic care of themselves.

Medicare - A government-sponsored health insurance program for older Americans. It does not pay for most forms of long term care; it only covers short-term rehabilitation after you have been hospitalized for at least three days, are homebound under a physician's care or are eligible for Hospice services.

Medicaid - Pays for long term care services, but only for those with very limited assets who fall within their state's determined poverty level.

Social Security - The monthly benefit for the average retiree stands at $1,153, which is a fraction of what most long term care services cost.

Savings - Though the savings rate has begun to improve, the majority of Americans likely do not have an adequate amount of savings to cover the high cost of long term care services.

To help people start thinking about long term care insurance, the LIFE Foundation answers five basic coverage questions:

How much coverage do you need and for how long? It's important to determine how much the policy will pay for covered service. To determine an adequate amount, start by assessing the average cost for long term care services in your area by using LIFE's Cost Estimator at: www.lifehappens.org/longtermcarecost.

How long are you willing to wait for coverage to kick in? The longer you are willing to wait before benefits begin to be paid out, called an elimination period, the more affordable your policy's premiums. Typical elimination periods are 30, 60 or 90 days.

What types of services are important to you? Most of today's policies will cover any number of care preferences and settings, whether services are provided at home by a health aide, offered in an assisted-living facility or nursing home. Find a policy that will be as flexible as possible so that any type of care will be available to you when you need it.

How important is it to have a policy that keeps up with inflation? Inflation protection is one of the most critical components of a long term care insurance plan because it helps your coverage keep pace with the rising cost of care.

Does your policy qualify for a new state-run long term care Partnership Program? Recently, federal and state governments have begun cooperating on long term care insurance Partnership Programs. These programs offer asset protection to policyholders with Partnership- qualified long term care policies.

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LTCi being purchased by younger clients

Eight million Americans now own long term care insurance according to a study released by the American Association for Long Term Care Insurance to mark the occasion of Long Term Care Awareness Week in November.

The study reported that the average age of buyers dropped below 60 for the first time. "The average age of Americans purchasing individual long term care insurance protection is now 58," states Jesse Slome, the Association's Executive Director. "That's a significant change from as recently as 2000 when the average age was 67." Increased public understanding of the importance of planning prior to retirement and lower costs available at younger ages are factors impacting the trend.

A significant finding of the study, which compiled data from leading long term care insurers, was that women accounted for slightly over two-thirds (66.3 percent) of individuals currently receiving benefits under a long term care insurance policy. "Insurers pay over $3.3 billion in yearly long term care insurance benefits and 68.7 percent of these payments benefit women," Slome added. "Long term care planning is especially important for women who are single, married, divorced or widowed because they are far more likely to need long term care (than men) and, as the study now reveals, far more likely to benefit from their insurance protection."

Key results of study:

58 is the average age of purchaser (individual long term care insurance policy).
14.3 percent of purchasers were under age 50, 46.0 percent were between 50 and 60, and 39.7 percent were over age 60.
$154 is the average daily benefit for long term care insurance protection purchased.
9.4 percent purchased less than $100 per-day, 39.4 percent purchased between $100 and $150 per-day, and 51.2 percent purchased over $150 per-day.
66.3 percent of claimants receiving benefits from their long term care insurance policy are women.
68.7 percent of total benefit dollars are paid to women (2006 benefits paid).

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LTCi better understood, but myths persist

by Sandra Timmermann, Ed.D.

Sandra Timmermann, Ed.D. is Director, MetLife Mature Market Institute. She can be reached at stimmermann@metlife.com.

Five years ago, the MetLife Mature Market Institute used a nationally representative survey to measure public awareness and knowledge of long term care. We decided to do it again in 2009, making the assumption that five years later, Americans would be better informed about these issues than they were in the past. The oldest baby boomers are now in their 60s, more and more people are providing care for elderly parents or other loved ones, and the debate about health care is in the news on a daily basis. Surprisingly, respondents to the survey didn't do as well as anticipated.

While Americans have increased their understanding of some long term care issues over the past five years, only 21 percent scored 70 percent or higher on the quiz. On average, the respondents correctly answered just over half of the 10 quiz questions, unchanged from 2004. Also, based on attitudinal questions which we added to this year's survey, most are not taking appropriate steps to protect themselves from potentially catastrophic expenses.

What People Know and Don't Know About Long Term Care

On the bright side, we found that many respondents understand what long term care is, and how much it costs. They recognize that long term care could be the result of a variety of causes such as Alzheimer's disease, an accident, or a chronic or disabling condition. Not surprisingly, older people (over age 60) are more knowledgeable about long term care than younger people (age 40 to 49). Caregivers also are more aware of some long term care issues than non-caregivers, which makes sense since they have confronted the realities of providing care themselves, choosing care options, and figuring out how to pay for services if needed.

Most of the results, however, were not as positive. Denial may be mixed with a lack of knowledge because only one in three individuals (35 percent) indicated that they believe they will need long term care in the future when the data suggests that 60 to 70 percent of 65 year-olds will need assistance at some point in their lives. Just over one-third know that most long term care services are received in one's home. While the number of respondents (37 percent) who do know this has increased since the 2004 survey (18 percent), there continues to be a very low overall awareness.

Paying for Long Term Care

There continue to be misconceptions about long term care insurance, although we found that there is a good understanding of what a policy covers. Almost nine in 10 (87 percent) of respondents were aware that a comprehensive long term care policy covers home, assisted living and nursing home care. What might be considered a major finding in regard to LTCi, however, is that the respondents did not understand that rates are based primarily on age. When asked "Long term care rates are primarily based on:", only 18 percent correctly answered "age". Nine percent said "income," one percent said "family history" and 71 percent said "all of the above."

Clearly, the need for more education about how rates are calculated is an important implication of this survey. Perhaps if more people had a better understanding of rates overall, and that the younger you are, the less expensive a policy is, they would have more of an incentive to purchase LTCi when younger. In fact, in the attitudinal questions, we found that two-thirds (67 percent) of those who do not plan to purchase long term care insurance state that the reason is that a policy is too expensive. This may be due in part to the fact that only a small percentage of people truly understand that rates are lower when policies are purchased at younger ages.

In addition, we found that people are still unable to identify which government programs or insurance pay for long term care. We asked: "In the event that you need extended care due to an accident or to a chronic illness, whether in you own home, in an assisted living facility or in a nursing home, what type of insurance would pay for your expenses?" Thirty-three percent said "Medicare/Medicare Supplement (Medigap)," 19 percent said "disability insurance," and 14 percent said "health insurance." Thirty-four percent said "none of the above," the correct answer. Again, this calls for continued education about financing long term care services. We did find that about six in 10 (64 percent) are aware that the immediate transfer of financial assets to your family would not allow you to qualify for Medicaid payment of long term care.

The Call to Action

Despite awareness of some key long term care issues, there still appears to be a lack of action to obtain coverage. Only nine percent indicate that they have a long term care policy, and of those who don't, only nine percent are planning to purchase one at some point. This is despite the fact that 35 percent say they believe they will need long term care services for themselves in the future.

Many of those surveyed (38 percent) responded that their spouse would provide for their primary long term care needs and 17 percent named their adult children. Thirty-five percent named a professional caregiver as their primary provider. While we didn't ask, one might conclude that those who indicated that family members will provide the care may find that their spouse or children will be unable to do so without help from a professional. Those who answered that a professional caregiver would provide the primary care may not have calculated the costs involved and how caregiving services would be paid.

Recognizing that this is simply a quiz and a quick test of some basics, what are the main implications that we can draw from the findings and what can financial service professionals do? In this economic environment, it may seem more difficult to convince customers and prospects that they need to protect their assets by purchasing long term care insurance. Yet several studies are indicating that consumers are looking for certainty in a volatile marketplace. This especially makes sense for those who are in mid-life and are closer to retirement. One way they can feel more secure is to know that unexpected expenses won't derail their financial plans.

Long term care insurance should be considered an integral part of any plan, but as this survey indicates, it is still misunderstood. With simplified products, a more holistic approach to planning, more government attention to the health care system, and with more awareness about long term care needs and LTCi, perhaps we will see more progress when we repeat this quiz again in a few years. Meanwhile, we hope that people will take the test on their own to see where they stand,and in doing so, they may increase their knowledge and take action to protect themselves and their families.

Readers can download a copy of the MetLife Long Term Care IQ: Removing Myths, Reinforcing Realities, as well as the LTC IQ: Questions and Answers and a consumer guide entitled Long Term Care Insurance: The Essentials, by going to the website of the MetLife Mature Market Institute, maturemarketinstitute@ metlife.com or writing to the MMI at 57 Greens Farms Road, Westport, CT 06880.

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2009 LTCi price index announced

A 55-year-old individual considering long term care insurance protection can expect to pay $723-per-year for a base level of protection if they are married or $1,060 if they are single, according to the 2009 Long Term Care Insurance Price Index published by the American Association for Long Term Care Insurance (AALTCI). Across various age groups, costs for coverage increased about two percent from the prior year.

The annual index measures costs for top selling long term care insurance policies that offer consumers approximately $115,000 in current benefits, with protection increasing yearly as the individual ages.

"A solid base plan of protection will grow in value to over $305,000 of protection 20 years from now," said Jesse Slome, AALTCI Executive Director. The study compares costs for different levels of plans that provide long term care benefits for three years or longer with a compound inflation option that increases the available insurance benefits by five percent compounded each year.

"For some age bands the cost of long term care insurance actually declined," Slome said. "What we did see is a far wider range of prices between insurers offering basically the same coverage."

According to the Association study, costs can vary by as much as 100 percent. This could reflect different benefits or simply the individual insurer's pricing assumptions. Consumers should compare policies or work with a knowledgeable insurance professional who can analyze for them, Slome said.

Lower interest rates impact costs

The cost for long term care insurance is closely related to interest rates that have significantly declined in recent years. Investment income comprises between 40 and 60 percent of the dollars used to pay eventual long term care claims. Premiums paid by policyholders make up the other portion and as interest rates have declined, insurers have found it necessary to raise premiums for protection. The industry paid out $5.8 billion in claims in 2008 to some 180,000 policyholders.

The cost of long term care insurance is directly related to how much protection you purchase, the age you first apply and your health at the time of application. Over half of all individual applicants are between ages 55 and 64, and one third purchase a daily benefit of between $100 and $149. The daily benefit amount equals either a cash benefit or a pool of money that the policyholder can access. Most insurers offer significant discounts when both spouses apply for coverage.

The survey compared costs for individuals age 55 with those age 65. A married individual purchasing $172,000 in current protection will pay about $20 a week ($1,084 per year) by qualifying for available good health discounts. By waiting until they are age 65, they'll likely pay $63 a week because they will need to buy more coverage to keep pace with inflation and will likely no longer qualify for the good health savings.

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Linked benefits

A two word strategy for protecting your client's future

by Scott L. Goldberg

Scott L. Goldberg is Vice President of Strategy & Marketing for Bankers Life and Casualty Company, Chicago, Ill. He can be reached at s.goldberg@banklife.com.

As a company specializing in serving the insurance needs of the retirement market, we've learned that two of the top concerns of our clients are: having adequate retirement savings and protecting their income and assets from the high cost of long term care.

Changes being brought about by the Pension Protection Act of 2006, and the desire to reach clients who are hesitant to buy stand-alone long term care policies, led to our developing a product that addresses both of those concerns.

The solution is to develop a linked benefit product, one that provides the benefits of a tax-deferred fixed annuity and a comprehensive, tax-qualified long term care policy in one product.

Coverage that's right for the times

Long term care insurance is a vital part of a complete financial plan. With the average cost of one year in a nursing home topping $76,000, according to the National Clearinghouse for Long Term Care Information, long term care costs can quickly drain a client's savings.

While clients are becoming increasingly aware of the need for long term care protection, they still are hesitant to purchase it, most often because of the cost and the possibility of never needing to use it.

Linked benefit products that combine long term care coverage with an annuity eliminate those barriers, because clients can still enjoy all the benefits of an annuity, including tax-deferred growth and the ability to withdraw money as needed, if they don't need long term care.

In the same vein, the linked benefit product works well for clients who are skeptical of purchasing stand-alone annuities. Annuities can help them accumulate assets for retirement. However, if the annuity policyholder needs long term care, they may face restrictions on how much they can withdraw from the policy without incurring a penalty.

Our design was crafted to maximize a client's long term care dollar with a company-paid benefit. When the client goes on claim for long term care, benefits are first paid from the annuity account value. Just like a deductible, this helps to hold down the cost of the product.

Once the account value has been exhausted paying for care, the company pays additional benefits according to the benefit structure selected by the client. The company-paid benefit can match (or double) the money paid out from the annuity account value to pay for long-term care services.

The company-paid benefit increases the appeal of the product, especially as a way to fund future long term care needs.

Products growing in popularity

Linked benefit products are becoming increasingly popular in the marketplace. Clients like the simplicity and the potential savings of having one policy to address multiple needs.

According to a series of focus groups facilitated by LIMRA International, consumers repeatedly mentioned the fact that combination plans would allow them to �get something for their premiums,� regardless of how events unfold.

The Pension Protection Act of 2006 included provisions that provide tax advantages to qualified long term care riders that are attached to nonqualified annuity products. Starting in 2010, the long term care rider charges will be deducted first from the annuity cost basis and, therefore, will not usually be considered taxable distributions to policyholders.

In addition, because the long term care rider is tax qualified, long term care benefit payments are tax-free.

These tax benefits give the linked long term care and annuity product a distinct advantage over other methods used to fund long term care insurance.

Identifying prospects for the product

This type of strategy is not only a win for the consumer, but for the advisor as well, providing a new way to approach long term care sales. In addition, they're now able to address our market's two top concerns with one sale. That, in turn, can simplify the buying experience for the customer who no longer has to grapple with understanding two separate products.

We expect that this concept will appeal to a number of prospects, including those who:

want to set aside retirement funds to pay for long term care, but desire greater asset growth than offered by a savings account or CD. These individuals will be drawn to the product because it allows their annuity funds to grow at current interest rates with tax deferral for faster asset accumulation.
are concerned about the cost of purchasing a stand-alone long term care insurance policy. For this segment, the product provides an attractive way to fund the premium for long-term care benefits. And if long term care services are not needed, the annuity portion of the product could still be available for other uses.
want to supplement existing long term care or annuity coverage, or savings from a CD. Since the annuity portion of the coverage funds the long term care coverage, their benefits increase as their annuity value grows.

Long term care market penetration in the U.S. is under 10 percent according to a 2008 study by Conning Research & Consulting, and market potential is approximately $95 billion in premium. Products that link long term care coverage with life or annuity benefits give us a whole new way to reach this market.

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LTCi NOTES AND NEWS

Individual LTCi continues to drop in Q1

For the second consecutive quarter, individual long term care insurance premium experience double-digit declines, falling 34 percent in the first quarter, according to LIMRA's Individual Long Term Care Sales survey.

"Early indications suggest that individual LTCI sales have been hit harder by the recession than other insurance products," said Karen Fisherkeller, LIMRA associate analyst, Group and LTC Product Research. "A difficult product to sell under the most favorable circumstances, the majority of the companies experienced declines 10 percent or greater, as consumers feeling the economic crunch, tighten their belts."

Sales of new policies dropped 32 percent in the first quarter, totaling 48,438. This drop follows a 24 percent decline in fourth quarter of 2008.

In addition to fewer policies being sold, the average cost of coverage has declined in the first quarter of 2009. The average individual buyer in the first three months of 2009 is paying $2,129 during the first year of coverage, three percent less than the average first-year premium from the same period last year.

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Linked Benefit LTCi

A powerful tool for clients who self insure

How They Work

Linked Benefit Annuities

Underwriting Choices

Your Client Conversations

LTC: Family issue that falls on women

Issues the family faces

True (and typical) story

Solutions

Benefit pay-out options � indemnity vs. reimbursement

Long Term Care's great false start

It will solve the longevity risk and protect a client's nest egg, so why are so few buying it?

What you need to know about the Pension Protection Act and navigating the new LTC rules

Marketing LTCi in the past

Pension Protection Act

Don't let clients get blind-sided by unexpected LTC costs

Skip CLASS, enroll in LTCi instead

AGING IN PLACE

THE GAP YEARS

RISING COSTS

"BOTH" VS. "EITHER/OR"

MOTIVATIONS FOR INSURING WHAT WE VALUE

MISSED OPPORTUNITY

91 percent of Americans say financial professionals don't discuss LTCi

Conversation Starters

Age up for employer sponsored group LTCi

Can anyone really ignore LTCi anymore?

Worksite LTCi

Partnership LTCI

Combo Annuity/LTC products

Making the case for LTCi

The Matter of Need

The Baby Boomers Wake Up

The Flight to Quality

The Message from Washington

The Multilife Opportunity

Looking Ahead

Planning for longer lives: LTCi and the longevity challenge

Increased longevity

Link between age and the need for long term care

The difficulty with putting a long term care plan in place

Additional risks for the aging Boomers

The planning challenges

Protection from long term care costs

Americans lack realistic LTC plan

Confusion, misinformation often prevail

Using the Power of Stories to Overcome Objections

Objection #1: I don't need it because my family will take care of me.

Objection #2: I have enough assets to pay for LTCi should I need it.

Objection #3: I don't need long term care insurance yet.

Tax-favored 1035-Exchange long term care insurance premium payments?

Not Yet!

Partial 1035 Exchange

[Full] 1035 Exchange directly to an LTCi Policy

Full 1035 Exchange to an LTCi policy by means of a SPIA

Most Americans have no plan to pay for LTCi

LTCi being purchased by younger clients

LTCi better understood, but myths persist

What People Know and Don't Know About Long Term Care

Paying for Long Term Care

The Call to Action

2009 LTCi price index announced

Lower interest rates impact costs

Linked benefits

A two word strategy for protecting your client's future

Coverage that's right for the times

Products growing in popularity

Identifying prospects for the product

LTCi NOTES AND NEWS

Individual LTCi continues to drop in Q1

It will solve the longevity risk and protect a client's nest egg,
so why are so few buying it?

What you need to know about the Pension Protection Act
and navigating the new LTC rules