LTC Bullet:  Life Insurance for LTC

Friday, January 30, 2015

LTC Comment:  As the importance of private-pay funding for long-term care grows in the eyes of families and law makers, Chris Orestis shares his ideas for applying life insurance to the problem in today’s guest column after the ***news.***

*** ILTCI CONFERENCE.  The 15th annual Intercompany Long-Term Care Insurance Conference will convene March 22-25, 2015 at The Broadmoor resort in Colorado Springs, CO.  Get all the details and register here Captain Mark Kelly will keynote the event.  An American astronaut, decorated naval aviator, retired US Navy Captain, bestselling author and cancer survivor, Kelly gained international attention after the January 2011 assassination attempt on his wife, former US Congresswoman Gabrielle Giffords.  In between the opening and closing general sessions, you can expect the usual high caliber presentations, peerless networking, and excellent food and drink.  This is a convocation not to be missed if you can manage it.  Damon and I will be there to cover the program and report on it.  Say hello if you attend and, if you don’t (rue the thought), then watch for our “LTC Embed” accounts of the action. ***

*** CLTCR Premium Membership  --  Center for Long-Term Care Reform premium members receive our full suite of individual membership benefits including:  our LTC Bullets and E-Alerts; access to our Members-Only Zone website and Almanac of Long-Term Care; subscription to our Clipping Service; and email/phone access to Steve Moses for 24-hour turnaround queries.  Our Premium Membership is designed to give you a competitive advantage in your long-term care profession. Your increased knowledge of the critical issues and challenges we face in the field of long-term care service delivery and financing equals improved professional success for you and better LTC services for your clients and for those who have no choice but to rely on scarce public resources.  Premium Membership is $250 per year, paid up front or monthly by automatically recurring credit card payments.  Contact Damon at 206-283-7036 / to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month. ***



LTC Comment:  For decades qualifying for Medicaid LTC benefits has been an open invitation to terrible financial planning.  Only to get those benefits would people do otherwise idiotic things like giving away all their wealth years in advance of needing care.  Or setting up a trust with the sole purpose of self-impoverishment.  Or buying a half million dollar home just to hide money that would otherwise have been disqualifying. 

Disposing of life insurance is another one of the stupid things people have been doing just to get Medicaid to pay for their LTC.  Why cash out or lapse?  Life insurance with a cash value counts against Medicaid’s low countable asset limit.  So Medicaid policy encourages people to take the cash value and buy an exempt new car or otherwise shelter the assets.  At the age of people likely to want Medicaid to pay for their LTC, few still have term insurance which has no cash value anyway.  Still many would lapse term policies, even though they’re exempt for Medicaid regardless of benefit amount.

In the following essay, Chris Orestis proposes an alternative to wasting the value of life insurance and dumping the cost of people’s LTC on tax payers prematurely.  State Medicaid programs and tax payers are likely to favor his solution.  Insurance carriers, not so much.  Life insurance policies that would otherwise have been cashed out or lapsed that end up paying in full are less profitable.  The result could be the future need to recalculate premium rates toward the upside to compensate for this added cost.

So there’s room for reasonable people to disagree.  But we invite you to read what Mr. Orestis has to say and form your own opinions.


Life Insurance for Long-Term Care
Chris Orestis


Seniors have an overwhelming desire to remain independent, and do not want to become a burden on their family or a ward of the state by entering Medicaid.  Unfortunately, the current system to fund long term care has evolved into one that encourages seniors to impoverish themselves and move towards Medicaid as quickly as possible.  For the wealthy, long term care costs can be absorbed.  For the poor and disabled, government subsidized care is available.  But what about the majority of middle class Americans that need access to long term care today? New approaches to fund long term care must be encouraged, and converting life insurance policies into a Long Term Care Benefit Plan is an option that has grown into a mainstream and accepted financial solution.

Can a massive pool of in-force life insurance policies be part of the solution?

According to the National Association of Insurance Commissioners (NAIC), there is $27.2 trillion of in-force life insurance in the hands of 152 million Americans.  Too few of these policy owners understand their legal rights of ownership and do not possess the knowledge of how insurance works.  When their original need for a policy has run its course, the vast majority of owners simply walk away from what may be one of the most valuable assets they own—for nothing in return.  Life insurance is legally recognized as personal property and the owners have the right to use their assets in a number of ways including converting their policies into tax-exempt Long Term Care Benefit Plans while still alive.

A policy owner’s legal right to convert an existing life insurance policy into a long term care benefit plan is not to be confused with a long term care insurance policy, accelerated death benefit (ADB) rider, annuity, a hybrid life/LTCi product, or a loan.  This conversion option allows for the private, secondary market exchange of a life insurance policy for a Long Term Care Benefit Plan at the time that care is needed.  The benefit plan is a private market long term care funding option and is not issued by a carrier, not restricted to life policies that contain a conversion or accelerated death benefit rider, and conversion options for the owner are not restricted to only the issuing carrier.

A Long Term Care Benefit Plan converts a life insurance policy’s death benefit into a “living benefit” that will allow them to remain private pay and choose the form of care that they want.  The Long Term Care Benefit Plan pays out the present day value of a policy and protects the funds in an irrevocable, FDIC insured Benefit Account that makes monthly payments directly to the care provider.  Because the funds are protected and only used for care, it is a tax-exempt, Medicaid and VA qualified spend-down of an asset that far too many seniors abandon as they move towards long term care.

This option, by design, extends the time a person would remain private pay and delays their entry onto Medicaid.  It is a unique, tax-advantaged financial option to pay for care because all health conditions are accepted, and there are no wait periods, no care limitations, no costs to apply, no requirement to be terminally ill, and there are no premium payments. Any type of life insurance policy can be used to cover any form of senior care the policy owner wants: Homecare, Assisted Living, Nursing Home, Memory Care, and Hospice.

Legislative Attention turns to Private Pay and the Long Term Care Benefit Plan

States are under tremendous budget pressure to keep pace with exploding demand to cover long term care needs with tax payer money.  They are quickly realizing the savings that can be found for their beleaguered budgets by delaying entry onto Medicaid through the use of life insurance policy conversions into Long Term Care Benefit Plans. State legislative leaders across the country are taking action with consumer protection disclosure laws and legislation to encourage consumers to convert their life insurance to pay for long term care as an alternative to abandoning their policies. Policy owners are being encouraged to use their legal right to convert an in-force life insurance policy into a Long Term Care Benefit Plan and direct payments to cover their senior housing and long term care costs. 

In 2009, Conning and Company analyzed the emerging use of life insurance policies to pay for long term care as part of their Strategic Research Series.  In the paper they surmised:

Both state governments and the long term care industry are working to find a solution to the budgetary threat to Medicaid created as aging Baby Boomers impoverish themselves in order to have the state pay for long term care.  What is new is the concerted effort to integrate life insurance policies and long term care providers.  This new source of funds represents a potential alignment of long term care providers and state governments.

The next year, the National Conference of Insurance Legislators (NCOIL) understood the implications of billions of dollars of life insurance policies in the hands of seniors being discarded when they unanimously passed the Life Insurance Consumer Disclosure Model Act in November, 2010.  This consumer protection law requires that life insurance companies inform policy holders above the age of 60, or with a terminal or chronic condition, of approved alternatives to the lapse or surrender of a life insurance policy including “conversion to a Long Term Care Benefit Plan.”

From there, consumer protection disclosure legislation specifically endorsing the Long Term Care Benefit Plan has been introduced in the legislatures of twelve states through 2014: CA, FL, KY, LA, MA, MD, ME, NJ, NY, PA, TX, and WA.  This consumer protection disclosure bill has now been passed into law in KY and TX.


Long Term Care providers, insurance agents, financial planners and elder law experts are all on the same page with political leaders about this issue.  It makes no sense that seniors in need of long term care would abandon life insurance policies when the option to convert those policies into a monthly long term care benefit stream is readily available.  The owner of a life insurance policy with an immediate need for senior care services of any form (Homecare, Assisted Living, Memory Care, Nursing Home, Hospice) can now turn a death benefit into a “living benefit” that will keep someone private pay and delay their need for Medicaid.

Chris Orestis, CEO of Life Care Funding, is an 18-year veteran of both the insurance and long-term care industries.  A former Washington DC lobbyist, he is a nationally known senior care advocate and author of the Amazon best-seller book “Help on the Way,” a legislative expert, featured speaker, columnist and contributor to a number of insurance and long term care industry publications. His blog on senior living issues can be found at He can be reached at or 888-670-7773 x 6623.