New Policy undermines LTC Partnership Insurance Benefits

Foolish me. I got excited about the implementation of a long term care insurance partnership program in Michigan, and have written about it here several times.

As previously discussed, the law, which was finally implemented just this spring, provided two benefits to those who purchased and used a LTC partnership policy: (1) an increased asset protection at the time of application, and (2) an equivalent protection of those assets at death from Michigan’s estate recovery program. For a simple example, if a single person purchased a partnership policy which paid out $300,000 in benefits to that individual, that individual could apply for Medicaid and be eligible when they had countable assets of less than $302,000 ($2,000 as the usual asset limit, plus $300,000 as a benefit of having purchased the insurance).  Likewise, at death, this individual would have an “asset disregard” of $300,000 from the estate recovery program.  The concept is to incentivize people to buy LTC insurance and in return the State would provide them with greater asset protections if they exhaust their resources and turn to Medicaid for assistance.

Seemed reasonable and even creative. But apparently state policy-makers thought the deal was too sweet for the consumer.  Hence they are changing in the definition of “estate” as it appears in the State Medicaid Plan so that the asset disregard related to estate recovery is essentially negated.  Specifically the new policy will change the definition of an “estate” to be as follows:

… If a decedent received (or is entitled to receive) benefits under a long-term care insurance policy and had assets or resources disregarded, pursuant to 42 USC 1396p(b)(4)(B) “estate” includes all real and personal property and other assets in which the decedent had any legal tittle or interest immediately before or at the time of death to the extent of that interest, including but not limited to, assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, transfer-on-death deed, payable on death contact, promissory note or other arrangement.

This means that the exempt assets, including one’s house, would be considered as part of the asset disregard for estate recovery, and that the value of the home would be counted even if it passed to others at death by ladybird deed or otherwise in a manner which would avoid estate recovery under current rules.

The long term care Medicaid application now includes matching language. It says:

If you have received an asset disregard due to a long-term care partnership policy, Estate Recovery applies to all assets whether they are subject to probate administration or not.

After all is said and done it looks like the energy that so many put into making the concept of a long term care insurance partnership meaningful in Michigan will not be realized thanks to the efforts of the state bureaucrats who seem obsessed with the perception that the people of Michigan, and especially their planners and counselors, are all part of a conspiracy to rip off their system.

Thanks much to my colleague David Shaltz for ferreting out this development.

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Four Companies Approved to Sell LTCI Partnership Policies

Topic: The Long Term Care Insurance Partnership Program.

Background: This topic was previously addressed in these posts: LTC Insurance Partnership Shows Signs of Life (posted March 29, 2015); and LTCI Partnership Update (posted August 19, 2015).

What’s New?

Public Act 198 of 2015 which implemented the Long Term Care Insurance Partnership Program in Michigan took effect February 22, 2016. Along with the implementation date came a deadline for insurance companies interested in issuing policies that will qualify as partnership policies.  The four companies that applied and have been approved to issue partnership policies are:

Bankers Life and Casualty Company

John Hancock Life Insurance Company

Thrivent Financial for Lutherans

Massachusetts Mutual Life Insurance Company (approval pending)

These four companies are the only companies obtaining approval at this time. It is possible other companies will seek approval in the future.  These companies are presumably ready to sell these policies now or in the very near future.  Expect to start hearing about them.

Conversion policies

Be on the lookout for people who purchased LTCI insurance policies after January 1, 2008. The law allows individuals who purchased LTCI insurance policies after that date to “convert” their policies to partnership policies.  However, for this to occur, they would have to have purchased policies from one of the companies identified above who are authorized to issue partnership policies in Michigan, and those companies would have to agree to the conversion.  People who have such policies should consider contacting their agents and exploring their options with respect to conversion.

Friends in High Places

As mentioned in prior posts, implementation of the LTCI Partnership Program has been a priority of State Rep. Kevin Cotter, elder law attorney, now Speaker of the State House. As a result of Rep. Cotter’s interest in the subject and in educating his colleagues and the public about this topic, I was granted a very nice meeting yesterday with several people from DHHS, the Speaker’s office, and the State House Republican Policy Office.  Very generous of them to spend time answering questions.  Thanks all.

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LTCI Partnership Update

With respect to the status of the long term care insurance partnership program, which has been the subject of at least one prior post (see below); in a conversation with those working on this issue in state government, I was able to glean the following information:

• This is a priority of the Speaker of the House, Rep. Kevin Cotter.
• The prior enabling legislation has been deemed incomplete, and it has been determined that additional legislation is required before the sale of partnership policies can occur in Michigan.  New legislation is expected to be introduced this week.
• They are looking at passage in the House as early as September.  The Senate will presumably follow, although the time frame for Senate passage will be at the discretion of the leadership of that body.
• The legislation is permissive in nature, meaning it will not include the “nuts and bolts” of how the program will work.
• Once law is in place, the Department of Health and Human Services and Department of Insurance and Financial Regulation develop policy which will provide the details in terms of how the program actually works.
• There are insurance companies interested in writing such policies in Michigan.

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LTC Insurance Partnership Shows Signs of Life

This week, seemingly out of nowhere, the long awaited first blip of life for the long term care insurance public-private partnership appeared in the attached DHS memo. Click here.

The memo seems to say that soon we will have a LTC insurance partnership program up and running in Michigan.

The history is that several years ago Michigan applied for, and was granted, the opportunity to participate in the partnership which has been active in several other states for decades. Notwithstanding the initial approval, the program was shelved in Michigan purportedly pending the implementation of an estate recovery program. Michigan has had an estate recovery program for at least 4 years now. What prompted the State to act at this moment is unknown, but certainly welcome.

A state that has a public–private partnership allows persons applying for long term care Medicaid benefits to exclude an amount in excess of the normal exclusions, which amount is the amount of coverage that the applicant has through an approved long term care insurance product. The protection will apply at the time of application (thereby increasing the asset allowance for eligibility) and with respect to estate recovery (protecting assets that would otherwise be subject to recovery). As the memo states, it will not be required that all of the benefits be paid out before the Medicaid beneficiary dies or leaves the Medicaid program, in order for the protections to be triggered.

Still unknown are what an insurance policy will need to include for it to meet the requirements to provide this protection. Still unknown is how the policy will be worded – question like: Will this protected amount be in addition to the amount allowed under the eligibility rules as they currently exist, or instead of?

Stay tuned. More to come.

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