Congress Weighs Allowing Pre-Tax Payment Of LTC Insurance Premiums
A bipartisan bill that would allow employers to offer workers the opportunity to purchase qualified long-term care insurance on a pre-tax basis was filed in the Senate on November 13, 2007, by Sens. Chuck Grassley (R-IA), Olympia Snowe (R-ME), Blanche Lincoln (D-AR), Debbie Stabenow (D-MI), and Gordon Smith (R-OR).
The Long-Term Care Affordability and Security Act of 2007 (S. 2337) would over-turn current law, which explicitly prohibits employees from paying for long-term care insurance using pre-tax dollars. Under the proposal, employers would be permitted to offer qualified long-term care insurance through Section 125 cafeteria plans and flexible spending arrangements (FSAs).
According to the bill’s sponsors, the legislation also updates consumer protections developed by the National Association of Insurance Commissioners (NAIC) and includes new protections to help ensure that the long-term care insurance policies receiving beneficial tax treatment meet certain quality standards.
The bill has been sent to the Senate Finance Committee, of which Sen. Grassley is the Ranking Member. A parallel measure, H.R. 3363, was introduced in the House of Representatives in August by Reps. Earl Pomeroy (D-ND), Jim Ramstad (R-MN), Allyson Schwartz (D-PA), and Kenny Hulshof (R-MO), along with 20 cosponsors, and it is currently under review by the House Ways and Means Committee.
Commenting on the proposed legislation, Sen. Grassley said, “As we deal with the realities of an aging America and rising costs of healthcare, it’s vital that we give workers a new option in planning for retirement security by making long-term care insurance policies more affordable for people of all ages. The added security provisions to these policies will help make sure we weed out the bad apple agents.”
Survey data recently released by national insurance trade association America’s Health Insurance Plans (AHIP) confirmed the legislators’ assertions that awareness of long-term care insurance remains low among baby boomers. Results of the AHIP survey showed that just one-quarter of baby boomers approaching retirement are very familiar with long-term care insurance, and around an equal percentage erroneously believe they are covered for long-term care expenses when, in fact, they are not.
According to Sen. Snowe, statistics indicate that nearly half of all seniors age 65 or older will need some form of long-term care at some point in their lives, but just 10% of seniors have taken out a long-term care insurance policy and only 7% of all private industry employees are offered long-term care insurance as a voluntary benefit.
