Although state long term care partnership insurance sales have been unremarkable since their inauguration in 1992, that may soon change, industry observers say.
The Deficit Reduction Act of 2005, enacted in February, allows states across the nation to make LTC partnership plans available to residents. Until it was enacted, only California, Connecticut, Indiana and New York had partnership programs.
The new law allows the expansion of partnership plans nationally by repealing 1993 legislation that effectively had closed the door on new programs.
DRA allows wider partnership policy choices to consumers than do the four states with existing programs. By allowing the sale of less costly products, the new partnerships significantly could increase LTC insurance sales, industry observers believe.
The questions no one seems to be able to answer, however, are: When will the first new partnership programs be up and running, and how many states will participate? The U.S. Department of Health and Human Services, through its Centers for Medicare & Medicaid Services, has yet to issue the state guidelines for Medicaid-qualified plans that DRA calls for. Without those rules, states may be reluctant to submit a plan for CMS approval, observers say.
The LTC partnership program is an alliance between states and private insurers. Individuals who buy LTC insurance designated by the state as a partnership policy and who eventually need LTC services first rely on benefits from their policy. When those benefits are exhausted, they can have access to Medicaid, if they meet income, asset and other requirements.
Normally, individuals must spend down or drain their assets to qualify for Medicaid. Partnership policies allow policyholders to protect their assets, up to the value of the policy, from Medicaid's spend-down requirements, if their income is below a certain level.
Under DRA, HHS must issue guidelines to the states governing such issues as reciprocity (allowing asset protection to continue if a person moves to another partnership state) and exchanges of existing nonpartnership policies for a partnership policy.
The DRA encourages but does not mandate reciprocity.
Partnership policies under the DRA also allow a number of provisions–including inflation protection–that are not as stringent as in the original four states.
The National Association of Health Underwriters reports that 16 states have passed legislation permitting partnership programs, while three others are studying the move.
A number of states are ready to introduce their plans. On May 15, Idaho Gov. Dirk Kempthorne signed enabling legislation that could make it the first state to offer a DRA-style partnership program. Virginia and Florida also are ready to jump in, according to officials in those states.
Companies in the industry are ready to launch partnership policies as soon as HHS and CMS start approving them–whenever that is.
"Your guess is as good as mine," says Brian Peterson, senior vice president of Allianz Life Insurance Company of North America, Minneapolis, and national sales manager for LTC.
When it does happen, though, Peterson feels confident the programs will give LTC sales a jump-start.
"Any time the federal government puts long term care into the spotlight, it will educate the population," he says. "I think individual plans outside the partnership program may grow just as much as partnership policies. It's going to be the shot in the arm the industry's been waiting for."
Sam Morgante, vice president, government relations, Genworth Financial Inc., Richmond, Va., says he believes more than half of the states want to play in the partnership game.
"We are keeping our fingers crossed but would be delighted to see the first programs start by the third quarter," Morgante says. "More likely, we think we'll see the floodgates open in the first or second quarter of 2007."
Like other executives, he believes the most important development of the partnership programs is the point they make to consumers.
