5/19/2015CLTC Partnership Training 1 NAIC Partnership Update 2009

5/19/2015 CLTC Partnership Training2 Agenda DRA 2005 & Impact Partnership defined NAIC / Partnership Training state requirements training solutions

5/19/2015 CLTC Partnership Training3 DRA 2005 Known for Medicaid eligibility changes Opened Partnership Programs to all states Requires new LTC agent training mandates

The Deficit Reduction Act of 2005 and its impact on Medicaid planning

The basics…  The look-back period has been increased from 3 to 5 years.  The start of the penalty for gifts made during the preceding 5 years begins on the date of application for benefits: there is no “credit” for the penalty which, under the old law started on the date the gift was made.  The use of Medicaid friendly annuities is still allowed but the state must be named the beneficiary.

Continued…  The state can deny eligibility if a home has more than either $500,000 or $750,000 in equity.  Entrance fees in CCRC’s may have to be spent on nursing home care before Medicaid will pay.  States can now receive Medicaid waiver to establish partnership programs

Winners & losers

Increasing the look-back period Winners  The state.  Nursing homes.  Long-term care insurance: If people want to protect assets they have to anticipate they will need nursing home care at least 5 years before they actually go in. That is next to impossible to determine.  Reverse mortgage companies: The family may decide to keep the person home longer and pay for it by taking equity out of the house.  Assisted living facilities: An ALF is cheaper than a nursing home. Losers  Medicaid planning attorneys. With a 3 year look-back they can likely make a fee by telling the family of an institutionalized loved one that they only have to pay for this period. A 5 year look-back basically bankrupts the family.  A Medicaid plan i.e. gifting assets must not take place 5 years before applying for benefits. It is unlikely the family will dispose of assets.

Changing the start of the penalty period Winners  The state  Nursing homes: No more half-a- loaf equals more private pay.  Long-term care insurance: It is now very difficult to protect assets if a person is near to or actually in a facility. There is a strong incentive to purchase the product likely now supported by elder law attorneys. Losers  Medicaid planning attorneys: a significant source of revenue was half-a-loaf. It’s now dead.

Medicaid friendly annuities Winners  The state. See a trend here?  Nursing homes: In theory there should be more private pay patients. (See “Losers”.  Long-term care insurance: Promoters of these schemes regularly bad mouthed the product. Less Medicaid planning options = more LTCi if sold correctly. Losers  Nursing homes: Making the state the beneficiary of the annuity does not help the facility; They still get the Medicaid rate.  Medicaid planning attorneys & annuity sales reps: annuities become less attractive if the state is the beneficiary

No eligibility based on equity Winners  The state.  Nursing homes.  Home equity conversion companies: The applicant will be forced to take money out of the house to reduce the equity to either $500,000 or $750,000 depending on the state  LTCI Losers  Families: They can’t hide assets in a home anymore.  Medicaid planning attorneys: Another significant source of fees is eliminated.  Real estate brokers. No house means no commission.

Entrance fees in CCRC’s Winners  The state.  CCRC’s: They can receive a private pay rate until the entrance fee is spent. See also “Losers:  LTCi. Losers  Children: No more inheritance.  Medicaid planning lawyers: Although not used often purchasing a CCRC’s was a way to shelter large amounts of money.

Partnership Winners  The states  Facilities and companies that provide long-term care services.  Families: LTCi protects the family not the individual and protects lifestyle. Both are devastated when Medicaid planning is employed. Losers  Individuals with substantial monthly income; partnership plans do not protect income

Long Term Care Partnership Plans  DRA’05 repealed the “Waxman Amendment” that mandated estate recovery. This undermined the core purpose of partnership.  States now routinely receive the necessary waiver to establish partnership programs

WHO ARE THE PARTNERS & WINNERS?  State It prevents those with assets from hiring Medicaid planning attorneys to help them transfer assets and becoming Medicaid eligible from day one  Consumer Gives consumers strong incentives not to get rid of their assets by offering protection if they purchase LTCi  Insurer/Agent State sponsorship & promotion translates into Increased production

WHO PAYS NOW? State governors’ concerns today focus on rising Medicaid costs  Medicaid: 49 %  Medicare: 20 %  Out-of-pocket: 18 %  Private LTC insurance: 8 %  Other: 5 % * Source: CMS, Georgetown Univ PIE Charts

How Partnership works…  Consumer buys private LTCI with a total benefit value of $250,000  Consumer needs care  Consumer uses LTCI first  If they exhaust $250,000 and apply for Medicaid the program will disregard the first $250,000

Example of Asset Disregard Partnership Policy Assets Plan Payout Medicaid Spend Down Example 1$ 50,000$ 50,000$0 Example 2$ 200,000$200,000$0 Example 3$1,000,000$500,000$500,000 Non-Partnership Policy Example 4 $200,000 $0$200,000

INFLATION SPECIFICS  Age 60 and under: Some form of compound inflation protection must be included  Age 61 – 75: Some form of inflation protection must be included  Age 76 +: Must offer inflation protection (but is not required for application)

5/19/2015 CLTC Partnership Training20 Partnership - NAIC Model Rules  Producers must complete this new training in order to sell LTC insurance  Even if already licensed in a Partnership plans state  Regardless of representing a Partnership policy

5/19/2015 CLTC Partnership Training21 NAIC Model Rules  The one-time training required shall be no less than eight (8) hours and  Ongoing training shall be no less than four (4) hours every 24 months

5/19/2015 CLTC Partnership Training22 States may modify these rules…  Each state has the right to adopt or modify the NAIC Model Regulation  Which creates normal chaos associated with a national program regulated by 50 Departments of Insurance

5/19/2015 CLTC Partnership Training23 Critical Issues  Interpretation of each state’s regulations  Understanding the options available to meet the training requirements  Having multiple training solutions  Answers:

5/19/2015 CLTC Partnership Training24 What’s the training solution? CLTC Partnership Training

Objectives  To develop and offer multiple training options that satisfy the state specific regulations that are: Simple Quick Effective  To educate producers how to: Present the subject of long-term care planning Establish a plan for long-term care Fund it, when appropriate, with LTCi

5/19/2015 CLTC Partnership Training26 Continuing Education Classroom  8 hours  Sign in/out  No Exam  Recorded 7-14 days Correspondence  Course/ On-line  Exam triggers CE  Proctor/Affidavit  Recorded 24 hours

5/19/2015 CLTC Partnership Training27 Training Options: Classroom  8 hrs CE : entire CLTC/Partnership course or  2 hrs Accelerated Prep Review (No CE) Prepares for On-Line course with Exam

5/19/2015 CLTC Partnership Training28 Training Options: Correspondence On-Line course with exam State specific material included 8 hours CE from passing exam

5/19/2015 CLTC Partnership Training29 Questions? Gene Pressley