Long Term Care
Our Pillar team closely monitors the Washington Cares Fund legislative program. We will provide regular updates on this webpage as to the status of this program.
What is long term care insurance today?
Long term care insurance is designed to cover services and supports for people who suffer an extended, disabling health event. Benefits are triggered on a long term care policy when an individual needs help with their activities of daily living (bathing, dressing, eating, toileting, transferring, continence) or suffer from a cognitive impairment.
How common is the need for long term care?
Over 70 percent of people over the age of 65 need long term care during their lifetime. More than 40 percent will spend time in a nursing home (US Administration on Aging 9.21.18).
What does long term care insurance provide?
Long term care policies offer monthly benefits to the insured once they are disabled as determined by their personal physician. Benefits can reimburse actual costs incurred or be distributed in a monthly amount regardless of actual cost.
Where can I receive care?
The policy will allow the insured to receive at home or in a community-based or private facility. Licensed care providers may be chosen by the insured and family.
Do these policies just provide money?
Today’s long term care insurance carriers provide much more. Trained specialist help the insured and their family develop a plan of care with their doctor; arrange for in-home assessments; helps to find the best qualified care providers; and monitors the delivery of services. Some policies even provide care giver training for family members as well as respite care benefits for family members helping the insureds.
Doesn’t Medicare pay for long term care services?
Medicare Part A covers up to 100 days of care in a nursing facility only after a prolonged hospital stay. Medicare does not pay for custodial care which accounts for 80% of long term care administered (US Administration on Aging 9.21.18).
I have enough assets to pay care, why should I insure?
Today’s long term care policies have cash value as well as a death benefit so the insured is merely repositioning an asset on the balance sheet. If long term care is never needed, the death benefit is always equal to or more than the premium paid. Long term care carriers also provide families with concierge care coordinators that help navigate and monitor ongoing claims.
Can I pay for a loved one’s policy?
Absolutely. Payments to a long term care policy may be flexible as well. Single premium plans as well as those paid up in 10 years or at age 65 are available in addition to traditional life-pay scenarios.
EMPLOYER-SPONSORED LONG TERM CARE
Potential Tax-Free Benefit
Within the array of employer-provided benefits, very few are perfectly leveraged from a tax standpoint. The first benefit that would come to mind is medical insurance. The employer pays the premium on behalf on an employee, the premium is not included in the employee’s income, and the benefit is received tax-free. The same dynamic holds true for the first $50,000 of group life insurance benefits. Long term care benefits, purchased on behalf of an employee (and C-corporation owner/employees), are also deductible as a regular business expense and the benefits are received free of tax. Unlike group medical and most life insurance, employer-provided long term care contracts are portable for the employee and retain the discounted cost.
Advantages
What are the advantages of providing long term care at the workplace? The answer varies based upon employer contribution and the size of the group. At a minimum, policy discounts begin at as few as two lives. Additionally, almost all employer sponsored plans offer unisex rates. For women, that results in nearly a 30% savings before the group discount. With 10 or more participating lives, underwriting concessions are available. Typically, a carrier will reduce the number of medical questions when compared to an “individual” application. At times, employee physician statements may be ordered to elucidate medical history, but the carrier never requires a medical exam or detailed phone interview. Group sponsored long term care underwriting yields a 92 % acceptance rate compared to 70% for individually marketed applicants*. If true “guaranteed issue” policies are sought after, the number of participants required increases to 100.
52% of Americans turning 65 today can expect to incur $138,000 or more in long term care costs**. And, as more and more employees are turning to their employer-sponsored options for insurance protection, it is no wonder that long term care insurance is one of the fastest growing benefit plans. We are happy to help you develop a program that rewards valuable employees with a tool to protect their retirement savings.
WASHINGTON LONG TERM CARE UPDATES
- March 2024 Long Term Care Coverage becomes portable Click here to learn more
- March 2023 Click here to read article written by Pillar Thought Leaders Karen Dacek, Connie Carroll (Seattle) and Shannon Hahn (Chicago) and published in Puget Sound Business Journal.
- February 2022 Washington Legislative Update: Exemptions will be made available to groups who did not previously qualify, including workers who live outside of Washington, military spouses, workers holding non-immigrant visas, and certain veterans with disabilities. Exemption applications for newly eligible groups will become available January 1, 2023.
- January 2022 Washington State Legislation signed into law: On January 27, 2022, Governor Inslee signed into law legislation which delays the Washington Cares payroll tax for 18 months. This reprieve will allow legislators to better define participation, benefit eligibility, and class exemptions. The law does not eliminate the Washington Cares Fund nor its public payroll tax revenue.
CLIENT IMPACT: For those who secured private long term care coverage through Pillar on preferential terms dated prior to November 1, 2021, Washington State has not changed the effective date requirement. Not only do you have long term care protection that is far superior to the state’s option, but also the means by which you may confidently apply for and maintain a tax-exempt status.
BACKGROUND: In 2019, Washington state’s Long Term Care Services and Supports Act (Second Substitute House Bill 1087, or “LTC Payroll Tax Law”) became effective. The LTC Trust Act is intended to provide qualifying Washington residents with a maximum of $36,500 in long term care benefit payments. The state plan benefit duration is one year.
The state plan, called Washington Cares, will be funded via a mandatory payroll tax of .58% (with no income limitations) on W-2 income of Washington residents beginning January 2022.
Please reach out to your Pillar Benefits Professional for questions, concerns or additional details.
The Pillar team is available to answer questions or to discuss benefit needs. Please feel free to contact us directly:
