A Number of Proposed Legislations Aim to Encourage Consumers

Legislators are being pushed to deal with the issues related to LTC because these are not included in any health care reform proposals. Health care reform – without an LTC component – is considered by some as already a tough fight. Adding an LTC component, widely regarded as too expensive and too complicated, will further diminish its chances of being passed.

It is important for Congress to address the looming long-term care crisis now, said Rep. Earl Pomeroy, D-N.D., a sponsor of one of the LTC bills that seeks to increase consumers’ access to LTCi, help them pay for LTCi premiums and provide more people with coverage.

The Long-Term Care Affordability and Security Act of 2009 (SB 702) is the newest bill in the lot. It aims to amend the Internal Revenue Code of 1986 to allow long-term care insurance (LTCi) to be offered under cafeteria plans and flexible spending arrangements (FSA) and give employers the option of allowing tax-deferred long-term insurance premiums.

Under the current IRC Code of 1986 section 125(f) “any product which is advertised, marketed, or offered as long-term care insurance” is excluded from the definition of “qualified benefits” in Cafeteria Plans. In the proposed legislation the section will be amended by inserting the text in highlight:

For purposes of this section, the term “qualified benefit”… includes any group term life insurance which is includible in gross income only because it exceeds the dollar limitation of section 79 and such term includes any other benefit permitted under regulations. 

Such term shall not include any product which is advertised, marketed, or offered as long-term care insurance; except that such term shall include the payment of premiums for any qualified long-term care insurance contract (as defined in section 7702B) to the extent the amount of such payment does not exceed the eligible long-term care premiums (as defined in section 213(d)(10)) for such contract.

The Long-Term Care Affordability and Security Act of 2009 would also add a new subsection to Section 6041 of the tax code so that employees would be able to purchase LTCi through FSA dollars.

In addition to tweaking the tax code to permit workers to pay for LTC insurance through cafeteria plans and FSAs, S. 702 would adopt consumer protection standards using a model law approved by the National Association of Insurance Commissioners (NAIC).

The Long-Term Care Affordability and Security Act of 2009 is sponsored by Sen. Charles Grassley, R-Iowa, and co-sponsored by several Democrat and Republican senators. It was introduced in March 25 and has been referred to the Committee on Finance.

The Empowered at Home Act of 2009 (S. 3327) sponsored by Sens. John Kerry, D-Mass., and Grassley. Originally introduced in July 2004, the 2009 version amends title XIX (Medicaid) of the Social Security Act (SSA) to revise the income eligibility level for home and community-based (HCBS) services for elderly and disabled individuals.

Under the HCBS Option, states can expand community-based services without applying for a waiver and gives them the option to provide community services to individuals who do not meet an “institutional” level of care. S. 3327 seeks to improve the terms of the HCBS options because many states are hesitant to take it up.

It also amends the IRC to allow a tax deduction for premiums on qualified LTCi and provides a tax credit for certain caregivers taking care of individuals with LTC needs. The act would allow a deduction from gross income for the cost of LTCi premiums for the taxpayer and certain family members (25 percent of the cost of premiums in 2010 or 2011, 35 percent in 2012, 65 percent in 2013 and 100 percent in 2015 or thereafter). Meanwhile the tax credits will be phased in over five years, beginning with $1,000 in 2010, $1,500 in 2011, $2,000 in 2012, $2,500 in 2013 and $3,000 for 2014 or thereafter.

Two LTC legislative proposals introduced last year that could be re-introduced in the current session include:

The Comprehensive Long Term Care Support Act of 2008 (H.R. 7095) sponsored by Rep. Stephanie Sandlin, D-S.D., and introduced in September 2008. The act would amend the IRC to allow a deduction from gross income for the cost of LTCi premiums (50 percent of the cost of premiums in 2009, 75 percent in 2010, and 100 percent in 2011 or thereafter) for the taxpayer and certain family members. Other provisions include:

• Allow LTC insurance to be offered as a benefit under tax-qualified cafeteria plans and FSAs.
• Provide tax credit, phased in over five years, for caregivers of individuals needing LTC beginning with $1,000 in 2009, $1,500 in 2010, $2,000 in 2011, $2,500 in 2012 and $3,000 for 2013 or thereafter.

The Tax Relief for Long Term Care Act of 2008 (H.R. 6237) sponsored by Rep. Joe Courtney, D-Conn. Introduced in June 2008, H.R. 6237 amends the IRC of 1986 to provide for a credit for LTCi premiums and for taxpayers with LTC needs. The caregiver tax credit component is designed to reduce the costs of uncompensated LTC for a family member or dependent. Other provisions include:

• Provides for a caregiver tax credit of $1,000 in 2009 and gradually increases to $3,000 for 2013 and thereafter.
• The credit is reduced by $100 for ever $1,000 over the income threshold.
• The tax credit may be multiplied to reflect multiple care recipients.